So cryptocurrencies and blockchain exist independently. But how do digital currencies work without blockchain?

All cryptocurrencies make use of a distributed ledger — or a record of transactions shared by the network validators. There are many variations of distributed ledger technology; I’ll discuss those present in some of the biggest cryptocurrencies:

• Blockchain (used by Bitcoin, Ethereum);
• Tangle (used by Iota);
• Iterative Consensus Ledger (used by Ripple);

Blockchain has two main advantages over other distributed ledger technologies — it’s tested and it’s transparent. Bitcoin has been around for over a decade, which is centuries in crypto time. Bitcoin has never been hacked

. Transactions are forever in the public domain once validated by miners, which allows for full network transparency to make sure of no foul play such as spending the same Bitcoin twice.

But the drawbacks are significant. Blockchain in its current state is not scalable. Scalability refers mainly to two problems — the time taken to consolidate and validate blocks of transactions, and the fees associated with doing so. The two biggest currencies running on blockchain — Bitcoin and Ethereum — experience very slow

transaction times and very high transaction fees. Bitcoin can handle approximately 60 transactions per second, which pales in comparison to Visa’s peak rate of 47,000 per second. The transaction fees are so high that micropayments — small and frequent payments — are completely infeasible. Currently, buying a coffee with Bitcoin would require paying a transaction fee that might be more than the coffee itself. Blockchain desperately needs infrastructure. Luckily platforms such as Lightning Network, Plasma, and Sharding are being developed to alleviate network congestion.

The Tangle is a concept — it’s still in beta testing and has not been extensively used like blockchain. Transactions are not permanently saved to the ledger, so there is far less spatial overhead than blockchain. In order to push a transaction through to the Tangle, users must validate two other transactions using Proof of Work. This creates a “tangle” since every transaction is linked to two other transactions. In theory, the Tangle is decentralized, and can perform micropayments with no fees at far faster rates than blockchain can achieve. In theory.

Similarly, Ripple’s iterative consensus ledger does not permanently save all transactions. The ledger has a few central miners that constantly validate transactions through consensus, so the network has a far lower latency than Bitcoin’s. Ripple is a traditional company, so all miners are cleared and controlled by the parent company. Decentralization is compromised in favor of quick, low-fee transactions.