Cryptocurrency investing fundamentals - Top 5 Altcoins to buy under $1
All you need to know about the top 5 cryptocurrencies
CNBC outlines the differences between the top five cryptocurrencies by market capitalization or value: bitcoin, ether, bitcoin cash, ripple, and litecoin
Alternative coins such as litecoin and ether have seen huge rallies in price this year
Here's what you need to know about the top 5 cryptocurrencies
. And you may also have read about other cryptocurrencies, such as
But there are over 1,300 cryptocurrencies in existence. And while bitcoin dominates the market, several other digital currencies are making waves.
CNBC has created a brief guide on how the top five cryptocurrencies by market capitalization, or value in the world, have performed so far this year, and what the differences are between each of them.
All market cap and year-to-date rise figures are accurate as of December 14.
, invented in 2009 Cryptocoin Comparison Ltd , is the largest cryptocurrency by value. A whitepaper was released bySatoshi Nakamoto,
, outlining the aim of the project. The original document stated that bitcoin is a "peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution."
Digital currency technology could change the way we deal with money: MIT's Neha Narula
It runs on a technology known as blockchain, which is a digital ledger of activity that cannot be tampered with. It's decentralized because there is no central authority governing bitcoin. Instead, a network of so-called "miners" with high-powered computers work together to verify transactions through complex cryptography.
But because of the frenzy around bitcoin, transaction times have spiked, which could go against the original aims of the cryptocurrency. While Nakamoto referred to bitcoin as electronic cash, many
. But there is little evidence of widespread use of bitcoin for payments.
Ethereum is the name of a blockchain company that has created the digital token ether. But Ethereum and ether are now used interchangeably to refer to the cryptocurrency.
Ether is backed by a blockchain, much like bitcoin, but the technology is slightly different and aimed at a specific use case: smart contracts.
Take a trade finance deal, for example. This relies on each party in the deal having a paper or digital copy of the contract and needing to update it individually. It's arduous and prone to error.
But a smart contract is one that is written in code into a blockchain. Once the terms of the contract are met by each party, a deal will be executed.
Many major organizations are experimenting with Ethereum's blockchain. A consortium called the
, which includes companies like Microsoft and JPMorgan, is developing uses for the Ethereum blockchain.
The cryptocurrency ether is required by developers who want to build apps on the Ethereum blockchain and by users who want access to interact with the smart contracts on the platform.
Rise since it was created in July 2017: 229.6 percent
Those who owned bitcoin at the time received free bitcoin cash tokens. The rally in bitcoin cash hasn't been as dramatic as the other cryptocurrencies.
Many developers were concerned about the high transaction times on the bitcoin network. As a result, they proposed a solution that would increase the size of each transaction and therefore boost the speed. But not all in the community agreed with the proposal, resulting in the split.
The group behind bitcoin cash say transaction times are faster than the original bitcoin.
Ripple markets itself as a cross-border payments solution for large financial institutions based on blockchain technology.
At the moment, an international payment may take a few days to make with a very high cost. A headache for banks is high-volume, but low-value, transactions — the kind that Facebook might pay out to app makers, for example. These can often be expensive and unprofitable for the banks because it takes a lot of effort to move the money and the percentage cut won't be as high as for a larger transaction.
Ripple is trying to solve this problem via its technology. The start-up has been conducting
The Ripple digital currency, known as XRP, can be used by enterprise to get instant liquidity needed in a high-value transaction, can be used by enterprise to get instant liquidity needed in a high-value transaction Cryptocoin Comparison Ltd
XRP acts as a bridge between fiat currencies during a transaction. Ripple said transactions in XRP
Litecoin is probably bitcoin's closest rival in terms of the use case. Founder Charlie Lee has, on numerous occasions, said the cryptocurrency can be used for payments because it's faster than bitcoin.
Litecoin transactions take just over two minutes to go through, compared to an average of around nearly 300 minutes for bitcoin.
There is a limited supply of 84 million litecoins, compared to 21 million bitcoin. Currently, 54,293,533 litecoin and 16,740,175 bitcoin are in circulation.
"Litecoin is very similar to bitcoin except it has four times as many coins. It's also four times faster," Lee told CNBC in a TV interview earlier this week.
"I think litecoin is targeted more towards payments, faster transactions and lower fees."
WATCH: Bitcoin could be the biggest bubble in history – here's how
Bitcoin could be the biggest bubble in history – here's how
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