Home » Exploring the Differences and Similarities Between Bitcoin and Altcoins
Although Bitcoin is the oldest digital currency and reigns as a proud king in the world of crypto, there’s a whole kingdom of digital currencies that crave to dethrone it. All the other digital currencies available on the market are defined as alternative coins, or altcoins for short.
After Bitcoin was introduced on the market and generated a lot of buzz due to its increased return on investment, many developers tried to replicate it or develop blockchain-based currencies that exceeded its success. Bitcoin’s price has soared during bull markets, reaching its highest peak in November 2021 when it cost $64,000. It’s easy to track its price evolution; you only have to register on an exchange platform like Binance and keep an eye on the charts. On the same exchange platform, you can identify its greatest competitors. Ethereum is by far the digital currency that could steal its title because it has been at the forefront of the sector for years now.
While some altcoins are developed in the spirit of Bitcoin, others serve different purposes. This article could provide information about the differences and similarities between Bitcoin and alternative coins.
Bitcoin is the pioneer
Satoshi Nakamoto introduced the world to Bitcoin in 2009. It presented it as the first digital currency based on the blockchain, aiming to enable peer-to-peer transactions that require no third-party intervention.
Blockchain technology is innovative because it keeps a record of all transactions ever completed on the network. It serves as the foundation for all digital currencies and stores information regarding all projects.
Bitcoin functions independently of governments or central banks; therefore, no entity can control or interfere with it. Bitcoin and other digital currencies reduce the risk of manipulation and corruption because they are based on blockchain, which has a cryptographic nature that guarantees an increased level of privacy.
It’s regarded as the pioneering digital currency because it introduced decentralized alternative currencies operating on a secure and transparent blockchain network. It also offers unique advantages like financial inclusion, borderless transactions, and decentralization.
Alternative coins are worthy contenders
Alternative coins, or altcoins, as they’re known for short, are all digital currencies available other than Bitcoin. They were developed to offer alternatives to the original cryptocurrency and bring new technologies, use cases, and features.
While Bitcoin will always come on top when investors search for cryptocurrencies to invest in, alternative currencies make worthy portfolio additions due to several reasons. Considering that all cryptocurrencies (Bitcoin and altcoins) are part of a speculative asset class, they’re all volatile. Therefore, they have numerous similar characteristics because they all can be used as mediums of exchange. They enable holders to buy services and goods online. Also, people need a digital wallet if they want to purchase, sell, or trade cryptocurrencies. All digital currencies are decentralized because they’re based on blockchain, and no third party can interfere with transactions.
The main differences between Bitcoin and altcoins are their longevity, value, and utility. Bitcoin is the first cryptocurrency, so it’s older than any other digital currency. Also, Bitcoin has always been more expensive than alternative coins. However, while investors see it as a great store of value, many altcoins offer better capabilities and functions than Bitcoin.
What should you know about altcoins?
As mentioned earlier, the term altcoins defines all the other cryptocurrencies available on the market besides Bitcoin. Some of them were created after a fork from Bitcoin. Their purpose is to address particular issues like security factors and transaction speed or enable some blockchain functions.
Litecoin was the first alternative cryptocurrency launched after a fork from Bitcoin. In 2011 when it was introduced on the market, there were few cryptocurrencies, and the term altcoin came into being to refer to them. However, as other digital currencies were developed, the group of altcoins has become quite extensive.
Investors usually turn to altcoins because they offer innovative technologies and features, like improved scalability and smart contracts, that could enable them to make a profit. Several altcoins experienced significant growth and offered higher returns on investment than Bitcoin. Adding multiple altcoins to an investment portfolio makes diversification easier and reduces the impact of market volatility on investment.
What are the most popular altcoins on the market?
By far, Ethereum is the most well-known altcoin because it’s more than a digital currency. Vitalik Buterin created an open-ended decentralized platform that enables the creation of distributed applications and smart contracts. Ethereum is based on blockchain technology but differs from Bitcoin because it was designed to do more than serve as a digital payment alternative.
Litecoin and Bitcoin are similar in code, but Litecoin is quicker than the pioneer. It was created as a faster alternative that should solve Bitcoin’s limitations. The wider public can mine it because it uses a different encryption algorithm (Scrypt encryption SHA-256). Litecoin also has a higher supply than Bitcoin (84 million) and needs a lower level of energy to mine new blocks.
XRP has also gained popularity in the sector among investors and crypto enthusiasts. Ripple is more than an alternative payment system; it works as a system that enables direct transfer and offers solutions to transferring assets and money worldwide. It also differs from Bitcoin because it was developed as a centralized platform with a central authority that owns 60% of all available tokens.
Monero is known for its increased decentralization, privacy, and fungibility. It’s based on a public ledger, so all crypto users can send or broadcast transactions. Currently, the blockchain generates a new block every two minutes, but it has a hard fork every half year, which upgrades its algorithm. Hard forks are fundamental changes within the blockchain’s code which usually decide the project’s new direction.
Many investors wonder if altcoins will ever overtake Bitcoin. While another digital currency can always rise to its height, no one can predict which project will succeed and when. Bitcoin remains the most dominant digital currency in the sector, and chances are, it will remain for another couple of years.