Now many are interested in bitcoin, however, not everyone understands exactly what it is. But even those who have some idea of bitcoin, if they suddenly want to dive into cryptocurrency world, will be shocked. They will learn about the existence of an overwhelming number of other digital currencies.
Not by bitcoin alone
In addition to bitcoin, according to different sources there are from two to three thousand different cryptocurrencies. Each of them has its own name – Ethereum, Ripple, Monero, Litecoin, Neo, Dogecoin, etc. All these currencies are collectively called altcoins. The word altcoin is an acronym formed from two words – alternative and bitcoin, and means an alternative coin. All these digital coins are alternative to bitcoin – the progenitor of all digital currencies.
Precondition for the appearance of altcoins
It seemed that there was no special precondition for creating altcoins, since bitcoin has been, is and will be the main player on the cryptocurrency market for many years. However, over time, the reasons for creating an alternative coin to bitcoin became concentrated. Bitcoin has some technical drawbacks. Both altcoins and bitcoins use blockchain technology (chain of blocks) – network; where absolutely all transfers (transactions) are recorded.
A complete copy of this network is stored on each computer of hundreds of thousands, and maybe millions of participants. Many of now popular altcoins have appeared on the basis of the network of bitcoins and they are its forks. Their creators have tried to eliminate some of the technical shortcomings bitcoin has, without changing its basic principles.
Many attempts have been made to expand the functionality of the cryptocurrency. If bitcoin was created as a simple unit of account, a number of altcoins have much more abilities. It became possible to create, for example, smart contracts, i.e. special algorithms, to automate the processes for the enforcement of transactions in blockchain network.
In addition, altcoins are the basis of tokens – cryptocurrency analogues of securities and real assets.
The degree of anonymity was significantly increased. People started to use a new, more advanced method for data encryption that protects transaction participants in a better way. With the growth of chains of blocks and the bitcoins’ value increase, the influx of users of the network, mining bitcoin is becoming less profitable. We need more and more productive, and therefore more expensive equipment, the payback period of which is quite long. Electricity costs consume a major part of the profit.
Given that there is a larger number of altcoins and they are less popular, they can be mined by less powerful and less expensive equipment. In general, this reduces both the payback period of equipment and the cost of electricity, making the altcoins mining more profitable.
Because network load was greatly increased, the speed of the transfers was significantly reduced, and cryptocurrency rate volatility makes it more evident.
This is not critical, and developers are working on it, however, it takes time. Most people don’t want to wait. And the simplest solution was to use another stable currency, which has advantages over bitcoin and does not have its shortcomings.
Altcoins use new, more advanced algorithms that increased the speed of recording blocks in the chain, which positively affected the speed of transactions. It should be considered that altcoin is a very good way of speculative earning. Many new currencies, that just enter the market, often increase their value by hundreds of percent. The main thing here is to buy them on time and for a cheap price, and then sell when the price rises to an acceptable level. If to consider altcoin from this point of view, then it has a huge advantage over bitcoin – it is much cheaper and it is possible to earn on it with minimum investments. The whole situation in the cryptocurrency market shows that altcoins’ appreciation is very likely.
Creation of altcoins
Only a few years have passed, and digital money has evolved from the category of a little-known, questionable thing to the mega popular cryptocurrency. Just 2 – 3 years ago, a few people were using such concepts as bitcoin, blockchain, cryptocurrency, mining, etc., today it is no surprise. It is known that Satoshi Nakamoto is the creator of the cryptocurrency, but so far no one knows who exactly stands behind this name – a person or a group of people. From time to time, different people appear who say that they are Satoshi Nakamoto, but so far no one has been able to prove this. And if, in the situation with the bitcoin appearance, there is at least some clarity, then no one knows about the creators of the altcoins.
Usually, with the introduction of a successful innovation on the market, copied technologies quickly appear, trying to repeat success. The same with bitcoin: a lot of new cryptocurrency copy its idea. Most of them were a useless alternative to bitcoin, although some came up with original ideas. This process is still going on. From time to time there are new platforms that offer to use the currency created by them or buy it. So who creates altcoins? The answer is simple – anyone, who wants. It can be you.
There are two ways to do this. The first way is more complicated, we will consider it first. Here three conditions have to be observed:
- Possession of at least initial programming skills;
- a strong knowledge of the principles and internal mechanics of currency operations;
- transparency of the creation of the currency and its entry into the market.
If these conditions are met, then you can start creating a currency.
First, you need to select the source that will form the basis of the cryptocurrency network. This can be done on many special sites, for example, on github.com. At this stage it is important to understand which cryptocurrency is the most promising in the near future, in order to apply it as a basis for your own. After downloading the code on your PC, you need to study it. This can be done by downloading the software specifically designed for this from the network. Next, the code needs to be edited (many resources provide step-by-step guides how to do it), and it is easier, if you obtain even the slightest programming skills.
Next, you need to come up with a simple, harmonious and memorable name for your currency. Using specially developed programs for this, it is necessary to replace the old name with a new one in the code. You can change the name manually, but it’s quite difficult. The final stage is the start of the process that generates your coins in blocks, setting the number of coins that will be earned for the formation of each block. Done! Now you need only to advertise coins, and crowds of people rushed to buy them. But seriously, making a currency successful is a science, but that’s another story.
If the first method of creating cryptocurrency requires at least minimal programming skills, then anyone else can use the second method. There is a special platform Open-Transaction, where you can generate your money without writing a single line of code. Various documents can be created there, accounts that can be managed, using the platform. The resource is reliably protected from hacking and can be used for different types of trading in the market. There are similar, maybe less popular projects, but fully working – Monetas and Mastercoin.You might need your cryptocurrency if you, for example, have your own game resource and wish to monetize it. Then for internal calculation you can use your digital coins. If you decide to use virtual money to get some profit, you can market your cryptocurrency in order to speculate it on the exchange. The founders of various international projects use altcoins. They create their own internal money, not dependent on exchange rate fluctuations and external influences, and company employees can transfer this currency to the national currency in any country in the world.
There is always a chance that the new altcoin can be in the TOP of the strongest. For example, altcoin called Dogecoin, was created almost for the sake of joking, and now it is quite a popular currency, which takes the leading position for monetization. But there is a logical question: why would I bother with my own cryptocurrency, if I cannot affect it? The creator is not its owner. If you don’t need your cryptocurrency for the above purposes, there are many users and miners that have the same rights as you.
That’s true but everyone dreams about Satoshi Nakamoto’s success. The creator of the bitcoin, being unknown, surely mined more than one million of his cryptocurrency, and now it’s tens of billions of dollars.
Types of altcoins
No one can name the exact number of active altcoins. On coinmarketcap there is a list of almost all virtual money, but some of them disappear after some time and they are being replaced by the newcomers. 2017 could be rightly called the “cryptocurrency year”. At the beginning of 2017, the market capitalization of the entire world’s cryptocurrencies was only $ 17.7 billion, at the end of the year this figure exceeded $ 650 billion, which is 3500% per year.
But for bitcoin, the year was not lucky. But today, from the beginning of 2018, high and mighty bitcoin still reigns. However, many analysts and experts are already discussing which of the electronic currencies may replace bitcoin or even surpass it technically and financially.
Let’s take a closer look at some altcoins
Ethereum. This is probably the most high-tech currency for today. It allows you to create various multifunctional applications that simplify the relationship in the financial sphere. This cryptocurrency is very popular all over the world; it is trusted by Microsoft, Acronis, IBM and even Sberbank. Analysts believe that it will be able, ahead of bitcoin for capitalization, to become the first cryptocurrency in the world. It is possible that this will happen in 2018, because the potential for its growth is very high.Ripple. This currency is also a platform for using payment systems. It can make currency transfers anywhere as soon as possible, technically ahead of such giants as Western Union and SWIFT. Some time ago, several large companies, for example, American Express, announced their readiness to use Ripple.Bitcoin Cash. Some experts say that the appearance of this currency on the market is caused by the policy of Chinese pools; others believe that the initiator of the appearance of this currency is the Via BTC exchange. The coin works in the same way as bitcoin, being a decentralized, independent currency. In contrast to the classic bitcoin, a lower commission is charged for calculations, but the speed of payments is higher. In general, this cryptocurrency can be called a bitcoin’s copy.Litecoin. After the bitcoin code became public, its analogues immediately appeared. One of them is litecoin. The algorithms of work are different: bitcoin utilizes the SHA-256 algorithm, and the litecoin uses Scrypt. People issued many more litecoins, and it is much easier to be mined – this is its main advantage. And as its developers continue to work actively on the project, the currency has bright future.Stellar. This open source platform was created in 2014 as a network for carrying out “seamless” payments between banks of different countries. For example, through this network you can send money in your currency, and the addressee receives a transfer in the currency of his country. The stellar has its own cryptocurrency – “lumen”, used to pay fees during transactions. Thanks to this the network is better protected from the malicious acts.
NEO. Its capitalization is slightly more than $ 7.8 billion. It is often called “Chinese Ethereum”. The fact is that, unlike Ethereum, it is fully supported by China. In addition, the open source code and the similar functional of decentralized applications unite it with Ethereum. There are also differences. Ethereum uses a separate programming language, Soliditi, and Neo supports several popular languages: C sharp, Java. In the short term, it is planned to add the Go and Python languages. That’s why this coin is more attractive to a wide range of programmers.EOS. Its capitalization is $ 6.5 billion. The cryptocurrency is developed aimed at decentralized use for calculations in all kinds of programs (applications). It works on a well-developed blockchain and is capable to carry out several million transactions in one second. Most often it is used by developers. No transfer fee is charged.
Monero. Its capitalization is approximately $ 4.4 billion. Monero has specific features. Extra security and anonymity caused by the transaction protocol make the currency popular in different multiplayer games, for example, online casinos and other games made for money. In addition, emission from monero is not limited to anything. All this, of course, is not an advantage of a coin as a means of payment; quite the contrary, it causes concern of governments, advocating for full transparency of transactions.Ethereum classic. Its capitalization is more than $ 600 million dollars. Being a fork of Ethereum, it is considered as a fairly stable currency, there is almost no news about drawdowns. Therefore, the system is less exposed to attacks, overloads, and errors. Now these coins, thanks to their stability, are most often used on the Internet.
The example of this top nine altcoins can give you the first general impression of cryptocurrency. You decide which of them to choose. There are currencies with the prospect of rapid growth, but the risks of drawdowns are high. On the contrary, very stable currencies on which it is hardly possible to earn a lot, but the risks there are minimal. In each case, you need to study the history and the behavior of coin you like and its closest and not very close competitors and make your choice.