What are Bitcoin alternatives? Bitcoin is so volatile if its value goes up, it may go down also. In fact, it is a general rule for all kinds of investments in the financial market. Investments like stocks, mutual funds, gold, term deposit, government scheme and etc. The market capitalization of Bitcoin is much more than 80% of the GDP of the world.
One thing is clear enough cryptocurrency will be a part of our future. In this post, we are going to read what are the important parts of cryptocurrency. How cryptocurrency works in reality. And what are Bitcoin Alternatives?
The Need for Altcoins
As we all know that Satoshi Nakamoto made Bitcoin. Bitcoin is a form of alt-currency and that is why it has been created. Central banks control our existing currency. He made Bitcoin a decentralized currency. No other banks or institutions can control the cryptocurrency. Basically, new bitcoins can be searched by their algorithm. It can be mined and can be created between people with the help of digital wallets and keys.
All kinds of transactions of bitcoins are maintained in a public ledger and it is also known as a Distributor ledger. The main important thing is that it is public and anyone can access it at a certain level.
It does not reveal the identity of the buyer and seller. The ledger is decentralized and it makes it secure and trusty. Satoshi decided that the supply of bitcoins should be limited. He did the coding in such a way that only 21 million bitcoin could make.
For example, gold is limited in the world, it exists at a certain quantity. That’s why Bitcoin has been created so that its value can increase. If anything is available at a certain limit, people would prefer to buy it more.
Satoshi made an algorithm in such a way that it would be difficult to mine the bitcoins in the future. 90% of bitcoins have already been mined out of 21 million. Experts say that the last bitcoin will be mined in 2140. Bitcoin is not perfect, it has also some flaws like other things.
Ripple and Ether Altcoins.
There are so many cryptocurrencies that have launched like bitcoins. It is also known as Alt-coins, it is an alternative to Bitcoins. Many altcoins address the flaws of bitcoins. For example, there was a flaw in Bitcoin that it takes so much time while making a transaction. In order to replace this flaw, a new alt-coin is made that is Ripple (XRP). It takes less than 4 seconds only to complete a transaction.
Let me tell you the second example, there is a different alt-coin that is Ether (ETH). As we all know that the supply of bitcoin is limited, hence creators of Ether said that the supply of this alt-coin will be unlimited.
They also added that 18 million new coins will be issued every year. After the success of Bitcoin, many countries came up with the idea that they also should create their own cryptocurrency. There was a coin named Libra, and it was proposed by Facebook. Libra made a lot of controversies and messes when it came to the market.
Blockchain.
Every cryptocurrency has a blockchain and this is used to keep track of every transaction. One transaction gets added to the blockchain when it is completed. As we have read above that some cryptocurrency takes time to complete a transaction and some take a second. But it is impossible to reverse a transaction.
After every transaction, it gets added to a blockchain. No one can delete the old transaction, every transaction has a record. Exchange is an online platform where you can exchange fiat currency into cryptocurrency and cryptocurrency into fiat currency.
Miners.
Miners verify and check the accuracy of every transaction. It also maintains the security of the blockchain. Miners ensure to add every blockchain in every transaction. There is an important thing that you need to remember is, you need to create a new blockchain if you want to create a new cryptocurrency.
In order to create a new blockchain, you need more time, enough money, and advanced technology. Instead of doing this, you can also create a cryptocurrency that is based on different cryptocurrencies’ blockchains.
Such cryptocurrencies are known as tokens as well. The token is a kind of cryptocurrency that works on an existing blockchain. Before purchasing any altcoins you must research about it whether it is trusted or not. Many people became victims of the Pump and Dump scheme. Hence you need to be very careful before buying any alt-coins.
Wallet.
You all must be having a wallet where you keep your physical coins and note. In the same way, you need a wallet to store your cryptocurrency. This kind of wallet can be a cloud wallet, any other digital wallet, or any hard disk as well. You need to be very careful in order to choose your crypto wallet. There is an interesting story I am going to share here.
There was a man in the UK, James Howells who purchased 7500 bitcoins. He stored it in his hard disk and mistakenly he threw his hard disk in a dustbin in 2013. In 2017 he realizes that the amount of bitcoin has increased. The value of 7500 bitcoins became more than 100 million dollars.
Then he went to the council of a UK city for the hard disk that he threw in the dustbin. He requested the council to check his hard disk in the landfill. But he denied it because it was dangerous to go there. And the hard disk must have been damaged in the last 4 years. Moving further we are going to see What are Bitcoin alternatives?
What are Bitcoin Alternatives?
Ethereum.
Ether is based on Ethereum blockchain technology and it was launched in 2015. There are some critical differences if you compare it with bitcoins. Ethereum uses a smart contract to guarantee a transaction. For example, let’s see a vending machine. If you put 5 or 10 Rs of the coin you will receive the chips, coke, or any other things. There is no one sitting inside of it, it works automatically. Similarly, there is no involvement of any third party on the Ethereum platform.
Litecoin.
Litecoin is also a popular altcoin in cryptocurrency. This is listed in the top 5 coins and it was released in 2011. The basic structure of Litecoin is similar to Bitcoin. Litecoin has also a limited supply like Bitcoin, it has only 85 million of supply. The block creation time of Litecoin is only 2.5 minutes as Bitcoin takes up to 10 minutes. Ethereum block creation time is 25 seconds and Ripple has 4 seconds only.
Ripple (XRP)
Ripple was created as cross border payment platform which can be used for different-different institutions like banks. The basic idea is different from Bitcoin. Bitcoin was created so that centralized institutions keep away from it. But ripple was created so that centralized institutions can use it.
Ripple has collaborated with some of the biggest banks like American Express and Bank of America. It has collaborated so that it can use the platform to transfer the currencies.
The biggest issue you will see in cryptocurrencies is, they are volatile. Its value goes up at a very high speed and goes down at the same speed. This is the reason, it is hard to do a financial transaction. It is backed up with a reserve asset like the US dollar and Gold. These are also called stable coins because it is stable in price.
Stablecoins became so popular because it has benefits on both sides. People getting stability in cryptocurrency during its value differentiation. This is the reason people use stablecoins. Hope you must have understood What are Bitcoin alternatives. Share this post with someone who is interested in Bitcoins and cryptocurrency.
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