Spotlight on five exciting cryptocurrencies: their purposes plus use cases explained in plain English

Bitcoin is the best-known and most widely traded cryptocurrency in the world. It dominates the market with the highest market capitalization and the largest trade volume. Indeed, at PostFinance it is also the most widely traded cryptocurrency.

However, Bitcoin is by no means the only digital currency of interest. In addition to this industry pioneer, other cryptocurrencies have also become established, opening up new areas of application with innovative technologies. Five of these are amongst the most widely traded at PostFinance: Ethereum (ETH), Ripple (XRP), Solana (SOL), Cardano (ADA) and Chainlink (LINK).

Each of these cryptocurrencies has its own purpose. While some focus on ultra-fast transactions, others enable programmable contracts or they connect blockchains with the real world. But what lies behind these five digital assets, what problem do they solve, and why are they amongst the most popular coins and tokens at PostFinance?

What is Ethereum: the operating system for decentralized applications

Ethereum is the second-biggest cryptocurrency in the world after Bitcoin. However, unlike Bitcoin, which is a store of value and payment method, Ethereum is a platform used for decentralized applications (dApps). Much like an operating system for a computer or smartphone, Ethereum provides the technical basis for programmes that run in a decentralized environment.

It works like an app store without any central control where developers can create their own apps. The network’s own currency is called Ether, which is used for things like transaction fees.

Smart contracts: what Ethereum is all about

This platform revolves around smart contracts These are self-executing, digital contracts, also known as self-executing programmes, where the contractual conditions are written directly into the code. If a given condition is met, the programme is executed automatically, without any intermediaries/brokers such as banks, notaries or payment providers.

Using this technology, Ethereum has developed an enormous ecosystem: from financial services (DeFi) to digital identities, all the way to blockchain-based games. Developers can programme applications that are independent, decentralized, secure and accessible to all.

Use case for Ethereum

Uniswap (UNI) is one of the biggest decentralized trading platforms (DEX) for cryptocurrencies and a tried-and-tested application on Ethereum. Unlike conventional stock exchanges, where a centralized body monitors trade, Uniswap is run entirely via smart contracts. These automated programmes enable secure and transparent transactions, which are executed on the blockchains themselves without intermediaries such as banks or financial service providers.

How trading works on Uniswap

Participants on Uniswap (both private individuals and companies) can exchange cryptocurrencies directly with each other without having to rely on a centralized platform. Instead of an order book used by traditional stock exchanges, Uniswap relies on an automated liquidity system (automated market maker, AMM). This involves participants providing liquidity by paying their coins into what are known as “liquidity pools”. The programmes (smart contracts) calculate the price automatically based on supply and demand.

Why Uniswap enhances Ethereum

This model makes crypto trading more open and efficient seeing as everyone can supply liquidity and, in turn, benefit from Uniswap trading fees. Ethereum benefits from Uniswap because every transaction costs fees in Ether. These fees go to the Ethereum blockchain validators and are not linked to Uniswap fees. The more Uniswap is used, the more transactions are made, which, in turn, tends to increase the demand for Ethereum.

The organization behind Ethereum

Ethereum is not managed by a centralized authority, but by a global community of developers, operators and businesses. The Ethereum Foundation, a charitable organization based in Switzerland that co-ordinates research, development and technical upgrades, plays a key role here.

Despite this organizational structure, Ethereum remains largely decentralized. Changes to the network, such as upgrades and technical modifications, must be accepted by the community and the operators of the network nodes. This ensures that no single company or government has complete control over Ethereum.

What is Ripple: an efficient solution for global payment transactions

Ripple (XRP) is a payment network that makes international transactions quicker, cheaper and more efficient. While conventional bank transactions via the SWIFT system (a global banking network) can take days, payments via Ripple are processed in just a matter of seconds, and with far lower fees to boot.

XRP as a bridge currency in the financial system

Unlike other cryptocurrencies that seek to bypass financial institutions, Ripple works directly with banks and payment service providers. The technology acts as a bridge between the traditional world of finance and the blockchain economy by automating processes and making transactions more transparent.

XRP plays a key role here. The cryptocurrency Ripple is used as a bridge currency to exchange fiat currencies such as the euro or US dollar directly, without the need to go through third-party banks. Not only does this cut costs, it also speeds up the entire payment process.

Use cases for Ripple

RippleNet, the payment network developed by Ripple, provides a more efficient alternative for international payments. Whereas conventional international transfers often take days and incur high fees, RippleNet enables speedy transactions in real time, whatever the day or time zone.

Tranglo uses RippleNet for international transfers

One way this technology is used is Tranglo, a fintech company from Malaysia, which specializes in international payment processing. As one of the leading payment service providers in Asia, Tranglo uses RippleNet to make transactions smoother and more economical for customers.

Ripple and Bank of America: innovation in payment transactions

Even large banks use Ripple. Bank of America (BoA) has experimented with RippleNet in the past to optimize international payment transactions. The technology might allow money transfers to be processed quicker and more easily than with conventional systems.

Additionally, BoA has submitted several patents relating to Ripple, which could indicate potentially lower integration. Increased use of blockchain technologies may help make international payment transactions more flexible and cost-effective.

The organization behind Ripple

Unlike many other cryptocurrencies, Ripple was not developed by a decentralized community, but by Ripple Labs, a company based in the USA. Ripple Labs plays a central role in refining the network and also owns a large proportion of XRP stock.

The Ripple network itself may technically be decentralized seeing as transactions are validated via a distributed system, but the influence of Ripple Labs keeps sparking debates over whether XRP is actually independent. Its critics argue that the company’s centralized role is at odds with the idea it’s decentralized, whereas its proponents stress that tight control over it facilitates its development and regulatory acceptance.

What is Solana: the high-speed blockchain

Solana was developed to solve one of the biggest challenges of many blockchain platforms: slow transactions and high fees. While networks such as Ethereum often end up being expensive and slow during times of peak usage, Solana uses an efficient infrastructure that processes transactions quickly and cost-effectively.

This is made possible by an innovative consensus procedure The consensus procedure is a mechanism that ensures agreement amongst participants regarding the blockchain’s status. This is a key factor in ensuring security and harmony in a decentralized system. that validates transactions efficiently and, as such, enables high scalability, without a central point of control. This allows the processing of thousands of transactions every second, which makes Solana particular appealing for decentralized financial applications (DeFi), cryptocurrency exchanges and NFT marketplaces. 

With a growing developer community and expanding ecosystem, Solana is becoming established as one of the leading platforms for the next generation of decentralized applications.

Use case for Solana

Solana has become established as a blockchain for fast-moving, trend-based applications. In the field of meme coins in particular, Solana is gaining in prominence. Meme coins are cryptocurrencies often based on Internet trends or viral jokes. They don’t usually have a direct application, but are widely distributed in social media. The best-known examples are Dogecoin and the Trump meme coin. 

NFT marketplaces use Solana

Even in the field of NFT, Solana has become established as an alternative to Ethereum. Magic Eden, one of the biggest NFT marketplaces, runs on Solana, and benefits from the quick processing and low fees provided. Here, users can buy, sell and trade in digital artworks and collector’s items, without the high costs that Ethereum-based platforms often incur.

Additionally, Solana is becoming increasingly used in the field of decentralized financial services (DeFI). Solana-based, decentralized stock exchanges offer quick and affordable trading opportunities, and therefore compete directly with Ethereum-based platforms.

The organization behind Solana

Solana is supported by two central organizations: Solana Foundation and Solana Labs. The Solana Foundation, based in Zug, is committed to the decentralization, security and distribution of the Solana blockchain. It supports developers and projects that build on Solana, and encourages further development of the network.

At the same time, Solana Labs, the company behind the original development of Solana, is working on technical development. It is developing products, tools and reference implementations that further bolster the ecosystem.

This structure allows Solana to remain an efficient, largely decentralized blockchain while it benefits from an active developer community and institutional support.

What is Cardano: the science-based blockchain

Cardano is a third-gen blockchain developed to fix weaknesses in older blockchains such as Bitcoin and Ethereum. The platform combines high-level security, scalability and energy efficiency to create a sustainable foundation for decentralized applications and smart contracts.

A core feature of Cardano is its scientifically tested development. Every technological innovation is first verified by independent experts before it is integrated into the network. This methodical approach is designed to guarantee the highest degree of security, stability and long-term scalability.

Science meets technology

To enable quick and affordable transactions, Cardano relies on layer 2 scaling solutions  A layer 2 solution refers to a protocol built on an existing main blockchain (layer 1). The aim of layer 2 solutions is to improve the main blockchain’s scalability and speed. . They improve the network’s efficiency without impacting its security or decentralization.

Thanks to this combination of robust research and innovation technology, Cardano is positioned as a secure platform for decentralized applications and smart contracts (automatisierte Programme).

Use case for Cardano

Blockchain technology is increasingly being used to promote financial inclusion and to reduce economic hurdles. In regions with limited access to traditional banking services in particular, decentralized financing (DeFI) provides a solution.

One example is Empowa, a project on the Cardano blockchain that helps build affordable housing in Africa. Empowa enables international investors to invest directly in local construction projects by financing housing with tokenized assets. At the same time, residents gain access to fair financing options by means of blockchain-based loan agreements without having to rely on traditional banks.

Investing with an impact

The Empowa model not only promotes sustainable construction, it also ensures transparent financing processes seeing as payments to construction companies are automated and linked to milestones. In the long term, this technology can help to alleviate the housing crisis in underserved regions and to increase financial participation.

Organizations behind Cardano

Cardano is managed by three organizations: IOHK (Input Output Hong Kong) develops the technology, the Cardano Foundation monitors governance, and EMURGO promotes commercial applications. This multi-layered approach ensures a controlled, scientifically sound development process, while the blockchain itself remains decentralized.

What is Chainlink: the bridge between blockchain and the real world

Blockchains are secure and decentralized, but they have one crucial limitation: they cannot access external data independently. There is where Chainlink (LINK) comes in.

Chainlink is an oracle Oracles are services that feed external data (such as temperature, prices, etc.) into a blockchain to provide smart contracts with real-world information., A network that connects smart contracts with external data sources. Oracles provide real-time information such as financial market data, weather reports and sport results so that smart contracts can be executed automatically. Seeing as blockchains are isolated by their very nature, oracles provide secure access to external information without sacrificing their decentralization or tamper-proof quality.

The bridge to reality

To guarantee the reliability of the data, Chainlink uses a decentralized system that collects information from several independent sources and checks it before sending the data to smart contracts. This prevents tampering and ensures solely trustworthy, verified data is used in the blockchain.

Because of this mechanism, Chainlink has become key technology for numerous blockchain applications, ranging from decentralized financial services (DeFI) and insurance to supply chain tracking.

Use case for Chainlink

Aave is one of the largest decentralized financial protocols (DeFI) and it allows users to lend cryptocurrencies or to take on crypto loans without the need for a bank as an intermediary. For this system to function securely, reliable price data is crucial. There is where Chainlink comes in.

As an oracle network, Chainlink provides Aave with real-time, tamper-proof price data that is required for important processes, such as liquidation. If a borrower is no longer able to secure their loan sufficiently, Aave automatically provides liquidation. For this to be fair, the prices of the cryptocurrencies traded must be kept accurate and up to date, which is a task Chainlink handles via its decentralized network.

The organization behind Chainlink

Chainlink is a decentralized network supported by a global community of developers. The infrastructure is operated by independent nodes that make sure the data supplied is reliable and tamper-proof.

The further development of the network is primarily being spearheaded by Chainlink Labs, a company based in the USA. Chainlink Labs plays a pivotal role in the technical development and establishment of strategic partnerships. Thanks to this partnership between decentralized stakeholders and a centralized organization, Chainlink combines the benefits of decentralization with targeted innovation.

Remember: “D-Y-O-R"

This blog is exclusively for information purposes and does not constitute investment advice or a recommendation for certain cryptocurrencies. Anyone interested in making an investment should get to grips with the basics, which is where “DYOR” comes in: “Do your own research”. In other words, investors should do their own research before investing in cryptocurrencies.

The reason for this lies in the risks associated with the crypto market: there are many fraudulent projects and overblown advertising claims, especially on social media. Additionally, a lot of information is unsubstantiated or misleading. By getting to grips properly with a project, you will get a clearer understanding of it.

In other words: investors should read the whitepaper for a project to get a grasp of how it works. It’s also worth scrutinizing the team: are the members experienced and known to the public? Market data such as the size of a project or real use cases can also give further indications as to its potential.