Source: U. of Cambridge website, 2017
Bitcoin began operatng in January 2009 and is the first decentralised cryptocurrency, with the second cryptocurrency, Namecoin, not emerging untl more than two years later in April 2011. Today, there are hundreds of cryptocurrencies with market value that are being traded, and thousands of cryptocurrencies that have existed at some point.1
The common element of these diferent cryptocurrency systems is the public ledger (‘blockchain’) that is shared between network partcipants and the use of natve tokens as a way to incentvise partcipants for running the network in the absence of a central authority. However, there are signifcant differences between some cryptocurrencies with regards to the level of innovaton displayed (Figure 1).
The majority of cryptocurrencies are largely clones of bitcoin or other cryptocurrencies and simply feature different parameter values (e.g., diferent block tme, currency supply, and issuance scheme). These cryptocurrencies show little to no innovaton and are ofen referred to as ‘altcoins’. Examples include Dogecoin and Ethereum Classic.2
In contrast, a number of cryptocurrencies have emerged that, while borrowing some concepts from Bitcoin, provide novel and innovatve features that offer substantive differences.
These can include the introducton of new consensus mechanisms (e.g., proof-of-stake) as well as decentralised computng platorms with ‘smart contract’ capabilites that provide substantally diferent functonality and enable nonmonetary use cases.
These ‘cryptocurrency and blockchain innovatons’ can be grouped into two categories: new (public) blockchain systems that feature their own blockchain (e.g., Ethereum, Peercoin, Zcash), and dApps/Other that exist on additional layers built on top of existng blockchain systems (e.g., Counterparty, Augur).4