What’s in a Name? Cryptocurrencies, Platforms, and Knowing the Difference
By Thomas Hodge
Twitter can be an incredibly useful platform for the rapid dissemination of information, but it can also be a downright terrible place. Not only does the platform offer anonymous refuge for hecklers and trolls, but it is also a haven for misinformation. Look no further than the cryptocurrency industry to witness this unfortunate trend — a veritable deluge of tweets pours forth each and every moment, full of hot takes about investing in the next big thing in the digital asset space.
It’s important to take a step back from the wild speculation in the Twittersphere. This is especially true regarding basic crypto vocabulary. While armchair financiers online might use certain terms interchangeably — and while overlap in nomenclature might contribute to the confusion — there are discrete differences between the terms that we use to refer to digital assets and the platforms on which they operate. Once these basics are established, we can then start to have informed conversations about cryptocurrencies, leading to a more thoughtful, and ultimately more constructive, dialogue than that which you might find in 280 characters.
Bitcoin is partially to blame for all the misunderstanding. The word is used variably to denote the coin as well as the platform it moves across. First unveiled as an open-source software in 2009, its inventor Satoshi Nakamoto labelled Bitcoin an “electronic payment system” in the white paper announcing its launch. The paper defines “an electronic coin as a chain of digital signatures” — the blockchain technology that acts as a ledger recording each transaction transferring value from one user to another. Users can be rewarded with coin for running the algorithms that verify each transaction, frequently called “mining.”
As the software gained traction, users referred to the electronic coin as a bitcoin. Today, Bitcoin.org states “Bitcoin — with capitalization, is used when describing the concept of Bitcoin, or the entire network itself.” Whereas “bitcoin — without capitalization, is used to describe bitcoins as a unit of account [. . .] it is also often abbreviated BTC or XBT.” It’s a subtle difference, but an important one.
This distinction became increasingly unclear as cryptocurrencies and networks proliferated. Developers saw a host of potential applications for the platform — from payment processing and logistics to legal contracts and data sharing. But they would often follow Bitcoin’s example in differentiating the asset from the system only with a capital letter or minor differences.
Take Ethereum, for example –it’s among several second-generation distributed ledger platforms opening up to a wider array of applications. The token this network uses is called Ether. Ethereum operates on the same fundamental “mining” principle as Bitcoin. And the Ethereum blockchain is being leveraged to fuel a wave of decentralized apps — or “dApps” — that don’t require a third party to manage a user’s data or other information. The company even bills itself as a “blockchain app platform.”
According to Ethereum.org, “Ethereum is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third-party interference.” And “[e]ther is a necessary element — a fuel — for operating the distributed application platform Ethereum. It is a form of payment made by the clients of the platform to the machines executing the requested operations.”
These differences become increasingly important as we look to developers with products in the midst of mainstream adoption. These innovators are showing the true viability of cryptocurrencies, and it’s essential to understand the distinctions among their offerings. U.S.-based company Ripple has built a global payments solution that leverages blockchain technology and works with traditional financial institutions to process cross-border transactions quickly and efficiently.
Some confusion has arisen between Ripple and the digital asset XRP. While the two share a common history dating back several years, each has developed away from each other, and XRP is now an independent crypto asset that can be used for payments on the XRP Ledger, independently of Ripple. Indeed, XRP will continue to exist regardless of the company’s performance. The rapidly growing XRP ecosystem shows how tokens and platforms can evolve. And yet some online continue to mistakenly call the XRP token “Ripple”.
In certain instances, the blurring of lines between token and platform is intentional. XRP, Ether, and bitcoin are among the most high-profile tokens being traded on the crypto market. Ripple, Ethereum, and Bitcoin also rank among the most popular platforms and systems being used. They receive an outsize amount of attention from the worst type of anonymous troll on social media — those who would try to muddy the waters in order to advance their own interests or investments rather than serve as a source of reliable information. Therefore, it’s crucial for responsible observers, investors, and policy makers to develop a solid grasp of the basics — one that is not derived exclusively from the Twittersphere.