If you are new to cryptocurrency, you should have heard about altcoin. So, what is an altcoin? Does it have anything to do with Bitcoin? Let’s explore.
An Altcoin is a technical term used to differentiate other coins from Bitcoin. Put, any cryptocurrency different from Bitcoin is termed “Altcoin.” Simple, right?
The word “Altcoin” can be broken down into “ALT” and “coin.” The “ALT” aims at “Alternative,” whereas “coin” means cryptocurrency.
Altcoin came into existence just after Bitcoin was released. Bitcoin is the first cryptocurrency that surfaced. Cryptocurrency also introduced the concept of blockchain and distributed ledger technology. It brought a revolution with it. But, like any other first-generation technology, it also had severe drawbacks.
Altcoins had the opportunity to embrace what Bitcoin has to offer and improve on it. This is where the 2nd-generation and 3rd-generation blockchains arrived. Some key examples of the 2nd and 3rd generation cryptocurrency include Monero, Zcash, Ethereum, Litecoin, and others. Each one of them has improved on Bitcoin in one way or another.
Ethereum, for example, improved the use of blockchain by providing a platform where DApps can be built and maintained. It gave rise to other altcoins that are ERC20 compliant. Binance, EOS, and TRON are just examples of ERC20 standard altcoins. At the time of writing, there are more than 88,000 ERC20 crypto coins. However, only a few of them are helpful in the real world and have gained a lot of markets, according to CoinMarketCap.
Different economic models and distribution methods
The bitcoin blockchain is powered by Proof-of-Work(PoW) consensus algorithm. This resulted in a blockchain entirely dependent on computation power. Initially, the computation power to mine a block was not much. But, with time, it grew exponentially due to its popularity.
That’s a big problem for the whole cryptocurrency environment. To solve the problem, new consensus algorithms were released. They included Proof of Stake(PoS), Delegated Proof of Stake(DPoS), Proof-of-Authority(PoA), and so on. PoS solved the energy and computational problem by requiring nodes to stake coins to participate in the consensus.
However, not all altcoins are revolutionary. Some of them are just the fork of the popular Bitcoin blockchain. Bitcoin cash is one of the examples that forked the original Bitcoin blockchain. The only difference is that Bitcoin cash has a big block size, faster transactions, and a centralized approach. Bitcoin cash is an alt-coin that was not well received by the community as it went against the philosophy of blockchain technology.
Another popular altcoin that falls into this category is Ripple. It is a centralized cryptocurrency aiming to allow banks to transfer assets faster and cross-border payments quickly. The coin also garnered some backlash due to its centralized approach.
When Litecoin was first introduced, it got recognized as silver compared to “gold” Bitcoin. However, it lost its position due to other altcoins in the market.
What’s next?
At the time of writing, there are more than 1500 altcoins in the market. The Bitcoin whitepaper gave the know-how to build coins at any time. Startups are heavily interested in this idea as they release their tokens to the market. The idea is to raise money for their business. However, we speculate that most of them will fail in the long run.
Learn more about What Are Penny Cryptocurrencies?
With blockchain still in its infant stage, it is hard to say where the altcoin party will go. Until now, people have always trusted Bitcoin compared to other altcoins. And this can be pretty evident from the fact that Bitcoin rose to 19,000 USD in December 2017. Right now, it is sitting close to the 8,000 mark.
An altcoin is moving the blockchain revolution in the right direction. Startups are at the forefront of doing the heavy lifting. With almost every sector affected by blockchain, altcoins are making it easier for these sectors to use blockchain and becoming fuel for change.
So, what do you think about altcoin? Are they going to stay or perish? Also, do you have any favorite altcoins? Comment below and let us know. We are listening.
