What are Altcoins?

admin,February 20, 2018

What are Altcoins?

For people who aren’t familiar with cryptocurrencies, Bitcoin would be the only currency they are familiar with. However, once you begin to get involved with cryptocurrency, you will soon realise there are actually hundreds of types of cryptocurrencies known as Altcoins. Altcoin is the combination of two words, alt is short for alternative and coin to signifies currency. In short, Altcoins are alternative cryptocurrencies launched after the success of Bitcoin. Generally, they project themselves as better substitutes to Bitcoin. Many Altcoins are trying to target any perceived limitations that Bitcoin has and come up with newer versions with competitive advantages. Here are a few Altcoins you might kno, Ethereum, Ripple, Litecoin, ZCash, Dash, etc.

Up to this time, CoinMarketCap listed 1,578 Altcoins and more appear each day. Most altcoins are little more than Bitcoin clones, changing only minor characteristics such as their transaction speed, distribution method, or hashing algorithm. Most of these coins do not survive for very long. Altcoins can differ from Bitcoin in a range of ways that include:

  1. Some Altcoins have a different economic model or a different coin-distribution method, like the ones that were given away to all citizens of a country
  2. Others employ different proof-of-work mining algorithms, perhaps to resist specialized mining hardware — or maybe they don’t even rely on proof of work at all.
  3. Several altcoins offer a more versatile programming language to build applications on top of, while yet others offer more privacy compared to Bitcoin.
  4. There are also altcoins that serve very specific, non-monetary use cases, like domain name registry or data storage pointers.

One exception is Litecoin, which is one of the most successful Altcoins. In addition to using a different hashing algorithm than Bitcoin, Litecoin has a much higher number of currency units. For this reason, Litecoin has branded itself as “silver to Bitcoin’s gold.” However, there are a lot of Altcoins that don’t do much on the market. Most Altcoins offer no benefit over Bitcoin at all. Plus, they have less hash power securing them, involve fewer developers improving them, and are usually less useful due to smaller network effects. This also means that Altcoins are typically riskier than Bitcoin. Their exchange rates are often more volatile, and over the years virtually no Altcoins have maintained their value against Bitcoin. On top of that, many Altcoins can be considered outright scams, mainly created to enrich its inventors and early adopters.

Though many Bitcoin enthusiasts argue that Altcoins are completely not useful and will not succeed because they just copied Bitcoin’s infrastructure. However, Altcoins serve an important role. Decentralization is one of Bitcoin’s most prominent goals, and altcoins further decentralize the cryptocurrency community. Moreover, altcoins allow developers to experiment with unique features. While it is true that Bitcoin can copy these features if the developers or community desires, fully-functioning altcoins are much better “cryptocurrency laboratories” than Bitcoin’s testnet.

Finally, Altcoins give Bitcoin healthy competition. Altcoins give cryptocurrency users alternative options and force Bitcoin’s developers to remain active and continue innovating. If users do not feel that Bitcoin satisfies their digital desires, they can adopt an Altcoin. If enough users left Bitcoin for a particular altcoin, Bitcoin developers would have to adopt features the community desired or risk losing its place as the preeminent cryptocurrency.