About Altcoins – Alternative Cryptocurrencies
- 1 What are Altcoins?
- 2 Why Care About Other Cryptocurrencies?
- 3 Examples of Altcoins
- 4 Obtaining Altcoins
What are Altcoins?
Since the success of bitcoin, many other cryptocurrencies have come into existence. You could say many of them were an attempt to ride on the back of bitcoin, some more successful than others. A lot of these cryptos, otherwise known as altcoins, have brought extra value to the table in the form of new and/or improved features. Some have different use cases than bitcoin while others are attemmpts to compete with it.
While bitcoin remains the biggest cryptocurrency, at least for now, some of these altcoins are worth keeping an eye on.
Why Care About Other Cryptocurrencies?
Besides speculation there are other reasons to be interested in altcoins. Some of them have specific functionality that bitcoin doesn’t offer or different parameters. For example, shorter time for mining blocks, higher or lower maximum coins distributed than bitcoin’s 21 million. Monero (XMR) and Dash (DASH) add more privacy to transactions, making them more anonymous. Ripple (XRP) is used as a settlement layer for banks. Other cryptos were created just for fun, as satire, but became valuable assets, like Dogecoin (DOGE).
Bitcoin Scaling War
Recently there have been some issues with bitcoin that have made altcoins more appealing. Transaction times and fees have become a lot larger recently due to scaling issues bitcoin has been facing. The maximum block size of bitcoin, set temporarily at 1MB, was never increased. As bitcoin got used more and more, the blocks started to fill. For a while now blocks have been completely full, starting a backlog of transactions waiting to make it into a block. To get your transaction into the next block you have to pay higher transaction fees and compete with everyone else. Unless you pay these higher fees your transaction will likely not make it into the blockchain for a couple of blocks.
There are differing opinions on how bitcoin’s scaling issues could be solved, but politics in the community have thus far prevented any of them from being implemented. In the meantime, many people are looking to altcoins for faster and cheaper transactions.
Examples of Altcoins
Here’s a list of some of the main cryptocurrencies. It’s by no means exhaustive, but gives an idea of what’s out there.
Litecoin was created in 2011 as an attempt to improve on bitcoin. It was one of the first altcoins and uses a different mining algorithm to bitcoin. Bitcoin miners have to constantly create hashes using the SHA-256 algorithm on the bitcoin header until they create one with a certain amount of leading zeroes. However, with Litecoin the mining algorithm used is Scrypt. This helps prevent one of the issues with bitcoin: that a lot of hardware (ASICs) were being created specifically for mining, therefore making it harder for individual miners or those with less money to compete with those who could afford ASIC mining.
Ethereum is a platform for running smart contracts. These are methods of running software in a decentralised way, minimising the trust required in third parties or other users. This platform is powered by Ether, the currency used to run the code stored in the blockchain. It doesn’t have a maximum supply; it is to be released indefinitely to miners, albeit eventually at a slower rate than the deflation of the amount in circulation. Despite the unlimited release, it’s highly sought after as Ethereum is seen as being extremely innovative in not just the world of cryptocurrencies, but also in the future of the internet. This is in part thanks to the smart contracts which run on its blockchain.
There are some other interesting facts about Ethereum. It actually split into two separate blockchains back in 2016, with two successful cryptocurrencies and backing blockchains emerging: Ethereum (ETH) and Ethereum Classic (ETC).
Additionally, through making use of Ethereum smart contracts, it is possible to create and transact with tokens, which can represent any tradable good. These tokens can be traded using any Ethereum-compatible wallet, and many other popular cryptocurrencies are in fact tokens on the Ethereum blockchain, without their own separate blockchains.
Bitcoin is often misquoted as being anonymous. In reality, while transactions can be made by anyone, and anyone can generate a bitcoin address that isn’t linked to their identity, bitcoin is still not fully anonymous. Bitcoin transactions are stored in the public blockchain, which means anyone can follow transactions around and find the source of payments. This alone isn’t enough to identify users, but if you can link one transaction to a person, you can use this information to link the person to other addresses.
Monero is one cryptocurrency that attempts to increase the level of anonymity offered by bitcoin. With Monero, not all information about transactions is publicly available. To see all the data related to a transaction, you need the private key of the sending or receiving address.
Ripple is a settlement system which has its own currency using its public ledger, called Ripples (XRP). It also supports multiple other tokens, which can represent fiat currencies, commodities or anything else. Ripple can be (and in some cases, already is) used by banks or other organisations, enabling separate systems to communicate and transfer value between each other.
Ripple’s own currency, XRP, was 100% pre-mined, meaning that all 100 billion XRP were created with the system. Some of these were retained by the creators; others have been distributed to users using various methods; many of them have been donated to non-profits and charities. In any case, Ripple cannot be mined, unlike bitcoin and most other cryptocurrencies.
The above currencies are all quite serious, and came into existence to solve problems or fill gaps in the world of finance. Large communities started to form around interest in cryptocurrencies, and some more lighthearted altcoins were born. Some of these took off a lot more than anyone expected, leading to hundreds more being created. Some of these cryptocurrencies are often referred to as ‘memecoins’ due to the nature of their existence. However even those based on internet humour have in many cases been the centre of massive communities and relatively large economies of their own, bringing a lot of attention to cryptocurrencies.
Based on Doge, Dogecoin was introduced at the end of 2013 as a joke cryptocurrency. It gained a huge online community and recently reached a market cap of over $150,000,000. Currently at a total value of 118 million USD, Dogecoin is still going strong. There aren’t a whole load of real-life usages for the currency, but it is commonly used for tipping other members of online communities and on social media. It has also been used for fundraising on several occasions.
Trumpcoin was created in honour of Donald Trump, and to help raise money for his campaign for the presidency of the USA. When he won the 201 presidential elections, the value spiked a little, but when he was inaugurated the price of a Trumpcoin increased almost tenfold and some people made a lot of money. After many dumped their coins, the value decreased again, but it still has a market cap of half a million USD and has been holding steady for a while.
Pepe Cash (PEPECASH)
This is a memecoin based on Pepe the frog. The asset is actually a token based on the Counterparty platform, which in turn uses the bitcoin blockchain to manage ownership of tokens. For a long time, ‘rare pepe’ memes were posted online, but now through the use of Pepe Cash, people can actually issue a certain amount of instances of a meme they created, and allow them to be traded in a way that limits the spread of ‘rare’ memes. It sounds crazy, but it has a market cap of almost $7 million at the time of writing. That’s a 7 million USD economy based on trading memes!