Altcoins – What are they, and why are they useful?
What is an Altcoin?
Altcoin is a catch-all term used to describe all the types of cryptocurrencies other than Bitcoin (Alternate Coin). While Bitcoin is the most popular and commonly known cryptocurrency, there are thousands of other types of coins available through cryptocurrency markets and exchanges.
While Bitcoin operates primarily as a currency, some Altcoins offer additional functionality or additional features that make them unique. Both Bitcoin and Altcoins are founded on blockchain technology, which I’ll cover in a Basics of Blockchain post.
Like Bitcoin, most Altcoins have significant privacy and flexibility advantages, while coming with the additional risks of being an unregulated marketplace.
Major Types of Altcoins
A few types of altcoins are becoming significantly more popular and valuable than the rest, primarily because of their features. Users are considered with privacy, transaction speed, transaction cost, usability, and more.
Altcoins can differ in their mining procedure – including the algorithms they use and the methods they build into the process. Some have open-source code and others have code that is privately-owned. Some are built to necessarily create inflation (with max supplies and ever-diminishing returns for mining) and others are built to produce the opposite effect.
Many of the Altcoins have strong underlying philosophies that fuel the communities that support, buy, and build them. Differences in these philosophies can end up being much more than mere ideological differences. They can have real, practical effects on the function, process, and value of the coins.
It should also be noted that sometimes a cryptocurrency coin and the cryptocurrency network go under different, interchangeable names, but they don’t always mean the same thing. For example, Cardano is the name of the actual network or platform, but Ada is the coin itself. On the market, this isn’t always clear.
I’ll cover some of the different types of cryptocurrencies below.
Crypto units are in LTC.
Of all crypto tokens, this one of the most similar to Bitcoin. It was introduced on October 7, 2011 and has many technical similarities to Bitcoin. It has a decreased block generation time (block generated every 2.5 minutes compared to Bitcoin’s 10) and an increased maximum number of coins (84 million).
The use of a different hashing algorithm makes mining this coin more difficult. Bitcoin relies on SHA-256, but Litecoin relies on Scrypt.
Litecoin adopted Segregated Witness (SegWit) first among top 5 cryptocurrencies. SegWit activated in August of 2017 as a a soft fork solutions to technical issues of scalability and malleability within blockchain technology.
This allowed Litecoin to undertake the first transaction over the Lighting Network – designed to speed transaction times in blockchain, but with increased security risk – by transferring 0.00000001 LTC from Zurich to San Francisco in under a second.
For more on Litecoin, visit their website.
Ethereum / Ether
Crypto units are in ETH.
Ethereum actually refers to a blockchain network and application. The currency of the kingdom for Ethereum is Ether, a type of crypto token. Miners can mine for Ether, which can then be used within Ethereum. Ethereum can also be bought and sold on cryptocurrency exchanges, which I explain here (post coming soon).
One of the major advantages of Ethereum is the ability to build a smart contract. This is a phrase used in crypto circles to refer to a contract that can be programed to automatically execute when specific conditions are met. Because it’s on the blockchain, not only does this contract protect anonymity, but it should be free of censorship, downtime, and fraud.
The other is the Ethereum Virtual Machine, which is the chief innovation of the Ethereum network. The EVM is a software that allows you to run any program, regardless of programming language, within the platform, meaning that thousands of application can function without having to have entirely original blockchains built for them.
For more on Ethereum, you can check out their website.
Crypto units are in ADA.
Cardano is a little talked about but strong cryptocurrency. It’s decentralized and fully open source and it’s ultimate goal is to be a smart contract platform with much more advanced features than current blockchain protocols.
What’s particularly interesting about Cardano is that it’s built by a large group of engineers and researchers from around the world. As such, it has a strong scientific and research philosophy behind its creation. Right now, its still in its developmental phases where improvements are being made. Despite this, it already has huge market capitalization and should be watched closely.
It has three guiding principles: One, focus on the growth of the community and the community’s needs. Two, creating a decentralized and strong network true to Satoshi’s original vision. Three, balancing commercial advantage with scientific rigor.
It has a very clear development roadmap on its website, which you can find here.
Crypto units are in XRP.
Ripple actually grew the most in value over the course of 2017 out of all cryptocurrencies. It grew 35,000% over the course of 2017. While this number sounds large, the value of a ripple is hovering around $3.00.
One of the reasons for its growth is that it’s been working with large institutions like major banks, which has lent it an aura of legitimacy in a market with a lot of uncertainty.
Ripple’s critics, however, suggest that it defeats the purpose of a cryptocurrency if it operates within the current financial scheme. It’s possible that this represents a bubble as a result.
And while most cryptocurrencies are open-source, Ripple’s source code is owned by a private company based out of San Francisco. It was developed and released in 2012 and, as mentioned, the Ripple network has become popular among banks.
Ripple’s website can be found here.
Crypto units are in XMR.
Monero is touted as being one of the most, is not the most, privacy-oriented cryptocurrency. Launched in April of 2014, it levers “ring signatures” and stealth addressed to shield users. Ring signatures work by combing a variety of user account keys with public keys from the blockchain to create a so-called “ring” of possible users. In this way, a third-party cannot determine which user was associated with the transaction.
While mixing services are available from other cryptocurrencies, Monero mixes all transactions. In a cryptocurrency where mixing is optional, shielded transactions draw attention. Since all Monero transactions are mixed, no particular transaction can draw attention.
Monero is also notable because it was built to not require specialized hardware to mine, meaning that it can be mined somewhat efficiently on consumer grade hardware.
Because of its enhanced privacy features and common-market mining ability, Monero has become one of the more popular cryptocurrencies used in illicit or illegal transactions.
For more information, visit their website.
Crypto units are in DASH.
Dash has traded under several names. It was first released as XCoin on January 18, 2014 before changing two weeks later on the 28th to Darkcoin, It was rebranded as Dash on March 25, 2015.
Dash focuses on transaction speed and privacy. Unlike Litecoin and Bitcoin, Dash doesn’t use a single mining algorithm, but a collection of 11 algorithms known as X11 designed to ensure fairness.
Dash has three notable features and a very active community associated with it.
First, Dash has a two-tiered network. Block creation is done by miners but so called “masternodes” perform the remaining functions of Dash, like governance and the two major abilities discussed below. Since these functions are vital, block rewards are split between miners and masternodes.
PrivateSend is a functionality that uses mixing, of the kind described under the Monero heading above, to hide the origins of transaction funds. InstantSend is a functionality that allows for much faster transactions than cryptocurrencies like Bitcoin.
For more, here is Dash’s website.
Additional Information on Altcoin
Which cryptocurrency will reign supreme is, as of yet, uncertain. Each struggles to offer competitive advantages, such as quick transaction times, low transactions fees, or enhanced privacy. As time goes on, certain coins may become specialized in certain areas, or functionalities might be combined in existing coins or in entirely new coins.
All the coins listed above have their own mining software and their own wallets, both of which are available directly from the website.
To understand the current market cap of any coin, check out https://coinmarketcap.com.
As mentioned above, these are only a few of the most popular crypto applications on the market. I’ll be posting additional articles as time goes on to help you stay up to date. If you want more to read, take a look at my other Cryptocurrency Articles!
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