My 5 Favorite Proof of Work Cryptocurrencies

Many cryptocurrency “players” already know the rules of the game, THERE ARE NO RULES…yet. Yep, these are shark-infested waters. It is probably why Hackernoon does ask writers to call out any cryptocurrencies they may own. On my About page, my disclosure reads: If I wrote about it on HN, then I am probably HODLing some amount. However, since I have a feeling I may get caught up in an upcoming heated debate about Proof of Work versus Proof of Stake, I figured I could be a bit more transparent. I also wanted to write something for people just getting into the cryptoverse which explained what some of the most popular cryptocurrencies really were in lay terms. Here are my favorite Proof of Work cryptocurrencies:

Bitcoin

Bitcoin is a digital currency that is underpinned by a kind of distributed ledger known as a blockchain running on a decentralized Proof of Work network. This ledger contains a record of all bitcoin transactions, arranged in sequential blocks. No user is allowed to spend any of their holdings twice. In order to prevent tampering, the ledger is public, or “distributed” to all the nodes on the network. An altered version of a block in the chain would quickly be rejected by other users so there is no need for a third-party validator of transactions, like a bank.

Unlike a fiat currency, Bitcoin has a capped supply. This cap makes Bitcoin digital gold. There is a limited supply of Bitcoin like the precious metal, gold. Bitcoin’s 21 million coin cap is currently built into the protocol.

The rewards for mining have been reduced significantly as far as the number of coins per “solve” of the Proof of Work equation. Because the price of Bitcoin has been increasing the reduced coin count has not seriously changed miner behavior. No one actually knows what will happen as the reward shrinks to increasingly small amounts of Bitcoin for mining. The idea is that the network will be self-sustaining by this point. Transaction fees are expected to compensate node operators since mining will no longer yield coins some time in the early 22nd century.

However, it is also possible miners may flee the Bitcoin network for more lucrative currencies, if rewards are insufficient to justify their endeavor. Remember Bitcoin miners are humans. They do human-like things such as chasing returns. On the other hand, the transaction fees may more than suffice to retain miners. No one really knows.

Ethereum

If the analogy of a ‘distributed ledger’ to describe Bitcoin seems complicated, Ethereum is magnitudes more complex. A Proof of Work blockchain enables a decentralized currency because of the rules which govern what one can and cannot do to modify the ledger. For example, a Bitcoin address cannot spend more Bitcoin than it has previously received. These rules underpin all transactions on cryptocurrency blockchains.

Ethereum has a native cryptocurrency (Ether) that follows almost exactly the same intuitive rules. However, there is no real cap on Ether right now and likely this situation will persist. Ether also enables the new and much more powerful function of smart contracts which drives Fintech. Instead of a distributed ledger, Ethereum is a distributed state machine supporting DeFi apps and many others.

The Ethereum Virtual Machine manages all of this complexity. It is all very cool. Too cool really, because so many smart contract applications are now built on this blockchain, it is often painfully slow or prohibitively expensive to get things done.

For this reason and many others real and imagined, a new version of Ethereum is scheduled to come out soon. Ethereum 2.0 promises a new model, Proof of Stake, which will be more environmentally friendly and faster than Ethereum as it stands. Whether this will happen is still open to speculation because the miners must cooperate or a hard fork could occur. As of this writing, Ethereum 2.0 remains a gleam in Vitalik Buterin’s eye.

Litecoin

LTC is the cryptocurrency world’s ultimate wallflower. Litecoin never seems to get any love. Nonetheless, it is one of the oldest cryptocurrencies as it continues to exist and perform actual duties. It is one of the most well-known and trusted cryptos out there.

Litecoin is a robust cryptocurrency like Bitcoin. It is fully decentralized and boasts a healthy miner ecosystem. It has had a consistently high market cap since its inception in 2011. It is widely used globally. Yes, people really use Litecoin. Yet, Litecoin gets very little press.

The Litecoin network has zero downtime and 100% uptime. It is a true Proof of Work currency. On any given day, it is transacting over a billion dollars. Despite the usage, it is still fast to transfer money and extremely cheap compared to other financial protocols.

Litecoin’s inventor, Charlie Lee, wanted to create digital silver to supplement the digital gold which Bitcoin represents. Like Bitcoin, Litecoin also has a supply limit. Litecoin has four times the supply of Bitcoin. Bitcoin’s supply is capped at 21 million, which means that Litecoin has a supply limit of 84 million coins.

Charlie Lee created Litecoin in 2011 by tweaking Bitcoin’s code while working at Google. He then served as director of engineering at the crypto exchange Coinbase Inc. Coinbase listed Litecoin while Lee was still on the payroll, which would seem to violate some rule somewhere, but it is the Wild West people! in any case, Lee left soon after the listing to focus on Litecoin.

Later the inventor bailed out. Lee announced his decision on Dec. 20, 2017, when he sold almost all of his coins into the market. Since that time, Litecoin has lost favor though not utility. It is hard to blame Lee. In the crypto world, money can be lost in large volumes. Losers of enormous amounts of money often look for someone to blame.

Litecoin has a real-world use case in the payment domain already extant. With Litecard, payments are even easier. Litecoin has over 50,000 transactions on the network per day. Litecoin is one of the most liquid and stable cryptocurrencies without actually being a stable coin. Litecoin is on just about every exchange, so whether the inventor has a big stake or not no longer really matters.

Dogecoin

This cryptocurrency is considered a joke by many. One can be excused for thinking this since the cryptocurrency was created literally as a joke. As such the value of the coin has historically been in fractions of a penny.

Dogecoin was created by Jackson Palmer and Billy Markus to satirize the growth of altcoins by making the doge internet meme into a cryptocurrency. It is a derivative of Luckycoin which forked from Litecoin and uses a Scrypt algorithm.

Dogecoin started its initial coin production schedule with 100 billion coins in circulation. By mid-2015 the 100 billionth Dogecoin had been mined though. Now, an additional 5 billion coins are put into circulation every year. There is no cap to the supply of coins and thus the coin can inflate infinitely.

The inventor actually removed the cap to continue the joke. Bitcoin and other cryptocurrencies do have a cap on the number of coins the system will support. Dogecoin without a cap should suffer from a constant reduction of its value over time according to the logic of many pundits. It is years later though. The Shiba Inu is still grinning and Dogecoin is well above fractions of a penny. This is a significant increase over its historically low price.

Elon Musk made this cryptocurrency hot in 2021. I saw Dogecoin charts on CNBC and Bloomberg. I heard commentators stumble over ‘Dogecoin’ on the teleprompter. It might be Dog-E-coin at first, then they call it Dodge-coin followed by Dough-ja-coin. Then they grin thinking they finally got it right!

I admit that in my head, I always call it DoggyCoin, because the first time I saw it, I thought the meme was cute. I like cute doggies, but that is not the correct way to say the world’s favorite cryptocurrency’s name. I try to purge that Doggy word from my mind, but then I will stumble. Sometimes I will say “Dojah”coin. Maybe I think this sounds like I have some street cred, like Sister Soulja. I am not sure why this tongue slip occurs

Well here is how to pronounce Dogecoin. One of the inventors confirms it is “DOhj”coin. They were Japanophiles. The name is made up but “sounds” Japanese. Their chosen mascot is the Shiba Inu. It is pronounced DO — long O and then the G is a kind of soft J sound, then the E is completely silent… “dohj”coin -> #dogecoin.

There you go. You now know how to pronounce the cutest cryptocurrency around. Dogecoin will always be DoggyCoin to me, but it may not remain a Proof of Work cryptocurrency, though. Vitalik Buterin appears to have been brought in by Elon Musk to move this cryptocurrency to some kind of staking model. As it stands though, Dogecoin is mined and validated by the Litecoin miners and that decentralized network.

Monero

Bitcoin is a public blockchain. Everyone can look and see addresses and validate the ledger. Monero is the cryptocurrency to use when you NEED things to be private.

Unlike Bitcoin, you don’t receive funds at your public address. Instead, Monero places the funds in a new anonymous account and then locks that account with a password only you can discover. This way your Monero is never associated with your public address.

Every transaction on Monero involves creating one of these new anonymous accounts. Monero calls these new accounts stealth addresses. The stealth address creates a layer of anonymity between the public address and the Monero owned. The addresses on the publicly available blockchain are stealth, so personally-identifiable information stays off the blockchain.

Monero’s privacy algorithm is formidable. That is why there is a bounty on Monero’s head with the IRS offering a reward for cracking its privacy algorithm. Monero remains a Proof of Work cryptocurrency, but one wonders whether the central government’s regulatory agencies will allow it to remain legal.

Much of this essay has been excerpted from the book Cryptocurrency Investing in the Age of Dollar Chaos.

Disclaimer: The opinions in this article belong to the author alone. Please conduct your own thorough research before making any investment decisions.