First created by Satoshi Nakamoto, blockchain and cryptocurrencies have come a long from what he envisioned more than a decade back. From its peer to peer decentralized payment transfer concept, cryptocurrencies and its blockchain technology has penetrated every conceivable industry and sector. DeFi, NFTs, smart contracts, each innovation has opened up new avenues and made it possible for us to use cryptos in ways never thought possible.
Today, experts classify cryptos and blockchain in three distinct generations, each one offering something more than its predecessor. Let’s see how this is done.
1st Generation Cryptos
The simplest form of application, first generation cryptocurrencies fulfil the basic requirements of a digital, peer to peer currency. Bitcoin, being the first of all cryptos, is a perfect example.
Where centralized monetary systems use single authority that has the power to transfer, validate and hold transactions, Bitcoin did away with it. Miners act as validators on the network who authorize transactions and it is written down on a shared ledger. Since there are more than one validators, there is no central power figure to run the system. It becomes free from censorship and the best part is, the money is now in total control of the actual owner.
2nd Generation Cryptos
Where 1st generation cryptocurrencies have all about being digital versions of currencies, 2nd gen cryptos are complete ecosystems for ownership and exchange of digital assets. Using the network as a backbone, any firm or person can build their own platform that runs off the main chain with the whole decentralized system acting as one large distributed computer.
Ethereum, Binance Smart Chain and TRON are considered 2nd generation blockchain network with their coins (ETH, BNB and TRX) being 2nd generation cryptos. By deploying the use of smart contracts, these systems offer complicated automated agreements where there is no need of an escrow service. Using 2nd generation cryptos and their blockchains, you can run smart contracts to make trust funds, bonds and even run security tokens where firms can digitally offer shares in the business.
DeFi, or decentralized finance, is perhaps the most famous application of this generation at the moment. For example, DeFi allows one party to take out loans from another, pay up the interest and return the principle, without the lender ever worrying about borrower defaulting as the collateral is locked in the contract and can even be liquidated to cover loaned amount if the borrower is unable to pay.
3rd Generation Cryptos
This is where things start getting interesting. Though there is no consensus on what makes a 3rd generation cryptocurrency, there are thoughts on what they might be and what current ones have the potential to become it.
The top 5 cryptocurrencies that are true successors to current cryptocurrencies and that you should really check out in 2021 are:
HBAR is the native crypto coin of the Hedera Hashgraph. The Hedera network isn’t blockchain in the traditional sense, but solves the trilemma of having a secure network that is cheap to operate and fast at the same time. Average cost of a transaction is $0.0001 with more than 10,000 transactions per second capability. Hadera also supports online file storage, among other services.
The only blockchain that has been peer reviewed in a scientific manner, Cardano’s ADA allows modular development and deployment of smart contracts and dApps. ADA has currently seen immense use and adoption in the agricultural sector. Unlike other cryptos where miners can only have say on the larger ecosystem, ADA holders have a voice.
Bringing in interoperability to different blockchains, the open source cross chain sharding Polkadot allows not only transfer of tokens and coins, but data and assets too. The use of oracles also ensures a trustless environment for sharing of authentic data and values.
A permissionless and public network, Zilliqa offers an extremely high throughput of thousands of transactions per second without compromising on the security or scalability through second layer solutions. It also supports DeFi such as yield farming and staking.
Scalable, fast and secure, EOS goes a step further than its rivals. Instead of competing on the grounds of having more features, EOS takes the simple route. It makes it easy for anyone to develop and deploy different dApps on it. Perhaps one of the easiest blockchain networks for programmers, it has a huge unlocked potential to attract a major portion of the crypto environment. EOS also offers a number of tools and educational material to on board not only professional programmers and enterprises, but the general public too.
With the world of blockchain evolving constantly, you should keep a close look on these 5 third generation cryptos as they are ready to break out big any time.