If you are new to the cryptocurrency sphere, you should have heard about altcoin. So, what is an altcoin? Does it have anything to do with Bitcoin? Let’s explore.
What is an altcoin?
Altcoin is a technical term that is used to differentiate other coins from Bitcoin. In simple words, any cryptocurrency that is different from Bitcoin is termed as “altcoin.” Simple, right?
The word “altcoin” can be broken down to “alt” and “coin.” The “alt” aims at “alternative” whereas “coin” means cryptocurrency.
Altcoin came into existence just after Bitcoin is released. Bitcoin is the first cryptocurrency that surfaced. It is also the cryptocurrency that introduced the concept of blockchain and distributed ledger technology. It brought a revolution with it. But, just like any other first-generation technology, it also had some serious 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 blockchain arrived. Some of the key examples of the 2nd and 3rd generation cryptocurrency include Monero, Zcash, Ethereum, Litecoin, and others. Each one of them has improved on the 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 a just few 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 useful in the real world and have gained a lot of market according to CoinMarketCap.
Different economic-model and distribution method
Bitcoin blockchain is powered by Proof-of-Work(PoW) consensus algorithm. This resulted into a blockchain completely dependent on computation power. Initially, the computation power to mine a block was not much. But, with time, it grew exponentially, due to its rise in 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 as it required 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 being is that Bitcoin cash has 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 with the aim to provide banks the ability to transfer assets faster and cross-border payments easily. 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.
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 are releasing their tokens to the market. The idea is to raise money for their business. However, we speculate that most of them will fail in a 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 always trust Bitcoin compared to any other altcoin out there. And, this can be quite evident from the fact that Bitcoin rose to 19,000 USD in December 2017. Right now, it is sitting close to 8,000-mark.
Altcoin is moving the blockchain revolution in the right direction. Startups are in the forefront to do the heavy lifting. With almost every sector affected with 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 altcoin? Comment below and let us know. We are listening.