Altcoin – What is an Altcoin?

Image

WHAT IS AN ALTCOIN

Bitcoin gets most of the attention when it comes to cryptocurrencies.  This largely because it was the first digital currency to blaze the crypto trail for thousands of others.  It’s also a reflection on the sheer value potential of the cryptocurrency industry.

The cryptocurrency universe is a vast one.  Like the Milky Way, it keeps expanding with every passing moment. Despite Its dominance, Bitcoin is just one of over 1200 distinct altcoin currencies that exist. Each coin has its own features, modes of creation, and problems it seeks to solve. We look further at altcoin technology and its role in the future of transactions.

Altcoin Definition?

The word altcoin, or alternative coin, stands to represent all cryptocurrencies that came after the creation of Bitcoin in 2009.  In the cryptocurrency space, Bitcoin has become the largest market capped digital coin.  It is the standard of measure and considered the main measuring stick for the health of the industry.  This is where the alternate vernacular comes from in the term.  All other coins are alternates to Bitcoin.  They are smaller in market cap and technically less valuable.  That also means there is more room for growth in this segment. 

Altcoins developed out of need.  They are made to solve some of the various problems that come with Bitcoin’s applications.  Altcoins try to enhance areas of opportunity where Bitcoin lacks. Like many first iterations of products, cryptocurrency is expected to go through growth stages.  While still in early stages of existence, much of the developments in crypto have come from altcoins and ICO’s.

There are over 1200 distinct coin offerings that make up the cryptocurrency market.  They offer uses and features that are usually more industry and niche specific.  Bitcoin covers an overall blanket of transactions that are far reaching and macro in nature.  Altcoins look to solve micro-inefficiencies.  Check out some of the newest ideas over at our ICO page.

Bitcoin and Transaction Limitations

One of the main complaints consumers have about Bitcoin and the currency’s adoption is its limitation in transaction speed and frequency.  With only 7 transactions per second, Bitcoin lags far behind major payment processors like VISA and Mastercard.  This has given altcoins a chance to compete in the cryptocurrency market. 

With it being such a huge opportunity, many Altcoins have begun the ICO process. The availability of new coins has seen enhancements to what was only Blockchain technology.  These coin offerings bring the user a chance to conduct cryptocurrency transactions at speeds that are far greater than Bitcoin and with industry specific application.  

Bitcoin has been under endless criticism right from its on-set.  It’s difficult to argue with the Currency’s label of “cumbersome.”  A typical transaction can take as much as 12 minutes before it gets confirmed on the Bitcoin blockchain. This means that businesses and individuals alike are exposed to lag time when it comes to sending and receiving money.

One of the core ideas that brings value to cryptocurrency is that it is instantaneous.  The maker of Bitcoin, Satoshi Nakamoto, outlined in his whitepaper that the cryptocurrency should offer the fastest mode of making payment known to man.  In his opinion, the digital coin should move even faster than Western Union. His vision is yet to see fruition.  Perhaps this is why Satoshi Nakatomo remains unknown.  His invention is going to be reskinned repeatedly.  The first to market hardly ever gets it right.

We’ve discussed in previous articles how Ethereum is often run to as a haven currency.  Popular crypto exchange sites like Binance see users trade into Ethereum from Altcoins.  In this manner they can quickly transfer back to their Coinbase wallets to hedge their investments in cash. 

Bitcoin’s lack of agility in the event of a crash is just one of the reasons that Ethereum, the largest Altcoin, has seen its popularity grow.  It’s technically a “safer” cryptocurrency. 

Bitcoin Transaction Fees

The shear cost of cryptocurrency trades has opened the door for cheaper and more crowd sourced coin offerings.   Bitcoin is expensive to buy and sell.  The root of the problem is in the freedom it gives to miners.  Because Bitcoin is open source in its government, it would need a mass vote to change its expensiveness issues.  It gives miners far too much power over the process.  This limits scalability.  Miners, aka participating computers that confirm transactions, can set their own fees for an expedited confirmation.

With time and popularity, and as competition became tougher for new blocks on the Bitcoin blockchain, transaction fees for Bitcoin hit historic levels.  Depending on volume, it is not uncommon to see a 10% charge for a Bitcoin trade.  Mining rigs essentially run a bidding system.  The higher the bid for a transaction, the faster a miner is incentivized to act for quick confirmation.

This takes away from one of the most versatile aspects of the investment.  It penalizes those who make microtransactions of less than a full cryptocurrency unit.  They now face fees that are often bigger than the actual amount being sent.  As a result, many individual and business investors in cryptocurrency have moved away from using Bitcoin to other altcoins.

Much as altcoins tackle opportunities within niches, altcoins have filled the opportunity Bitcoin has left in the market.  Affordability is one of the main value propositions of many alternate cryptocurrencies when they come to market.  Most altcoins impose very tiny transaction fees on every payment.  Many come as close to zero as possible.  This makes them a more economical investment to Bitcoin.

Anonymity

One of the great misconceptions about Bitcoin is that it is completely anonymous.  We’ve got terrible news for you.  It’s not.

While transactions made on the Bitcoin blockchain do not carry the name or email of the sender or recipient, it is not completely void of details.  Bitcoin transactions still carry personal identifiers such as wallet addresses of the transacting parties, amount involved, and exchange used.  This data is easily accessible for anyone with a computer and an internet connection.

Altcoins offer users the alternative of having fully anonymous transactions.  Some, like Monero, go as far as encrypting any previous wallet locations a cryptocurrency has been to.  It’s hard not to prefer specific altcoins if security and anonymity are your value points.

Buyer-Seller Protection

Bitcoin can be a slippery cryptocurrency.  Transactions can NEVER be reversed once initiated on the network.   The currency is not for the faint of heart.  One must be sure of themselves when transacting. 

This means the sender must blindly trust the recipient to hold up their own end of the bargain when paying with Bitcoin. Many novice investors have been scammed by fraudsters who leverage this feature of Bitcoin to cheat the unsuspecting public.  They pose as a service provider of one service or another.  With no policing entity of cryptocurrency, it’s difficult to reclaim any losses once this scheme is in action.

Ethereum and other cryptocurrencies use safer environments to make and receive payments.  They use something called Smart Contracts to insure the integrity of a transaction. These contracts are a set order of conditions that must be met for the finalization and clearance of a transaction.  The contracts act as a form of digital escrow.  Finances from the buying party are held neutrally through infinite blockchain encryption connections.  When parameters are met, the finances are released and placed in the sellers account.  

Mining Method

Cryptocurrency mining is a critical process in the security of digital currency.  It is the process of adding transactions to a cryptocurrency ledger of record.  Essentially it is the process of securing transactions and normally requires a gaming computer.  This “gaming rig” is equipped with a high-powered graphics chip capable of significant computing power.

Some consumers had the foresight to begin Bitcoin mining in 2009.  Congratulations if you were one of these people.  I don’t know why you’re on this blog.  You’re a filthy rich baller.  For the rest of us, the Bitcoin mining strategy isn’t the most attainable.

Bitcoin mining has been a largely capital-intensive endeavor, with huge costs in specialized hardware and electricity needed to run a mining rig.  NVIDIA, AMD, and other chip processor have seen a surge in their stock prices from mining.  They can barely keep their expensive chips on the shelves as Bitcoin mining reaches a fever pitch.

As of 2017, every small mining rig running on its own is almost surely unprofitable.   Huge industrial mining outfits have taken almost all of the Bitcoin mining rewards on a daily basis.

Many altcoins view this mining snafu as a lesson.  It’s a huge waste of energy and a pointless, profit grabbing procedure.  Protocols such as the Proof-of-Stake have seen notoriety in early 2018.  This process does not require the huge electricity or specialized hardware that bitcoin mining does.  A lot of the altcoins today can still be mined by an old laptop, or a few GPUs making them more economical and profitable for small-scale miners.

Altcoin Investment Conclusions

Altcoins have been a force for good in the cryptocurrency industry. Disruption and consumer options are historically positive for markets.  They commonly result in change and invention.

As bitcoin rises in notoriety, the flaws in it become more apparent.  Whether it be mining methods, buyer-seller protection, keeping yourself safe, or transaction speed, there is opportunity in the markets for others to succeed.  We are in an exciting period for cryptocurrency.  Will Bitcoin be on top forever or will we see another up and comer take the top spot?  Your investment moves could be the difference between a 9-5 and a life on a yacht.  It already has been for many.  Keep your eyes peeled.  No matter what, do your homework.  There seems to be tons of room in altcoins.  We’ll do our best to tell you what they do over here.  Moreover, we wish you the best of luck!