Beyond BTC: The Irrational World of Alternative Currencies
Introduction
You have probably read much about Bitcoin and its underlying blockchain technology in the last few months. Moreover, trading Bitcoin is becoming a trend, and to get the most out of their bitcoin trading, traders may use websites like bitcoinsmarter.org. You may have even bought some BTC and started calling yourself an early adopter. However, if you think that the world of cryptocurrencies ends there, you are mistaken. The truth is that the scope of blockchain extends far beyond Bitcoin.
Apart from its many possible applications in different industries, the world of virtual currencies has also seen an explosion of alternative digital coins in recent years. These so-called “altcoins” are essentially smaller versions of Bitcoin, with a few tweaks here and there to differentiate them from their bigger brother. Investors in these virtual currencies stand to make or lose a lot depending on which one they choose.
What makes an altcoin different from Bitcoin?
Several key differences between Bitcoin and its altcoin counterparts. For one, altcoins have shorter blockchains compared to Bitcoin. The Cryptocurrency exchange uses about 170 terabytes, an autonomous, secure network that records all BTC operations.
In comparison, the blockchain of Ethereum, a decentralized app (DApps) platform that users can use to create any app, is currently just 20 gigabytes. The shorter blockchain length of altcoins means they can confirm transactions much faster. Moreover, the higher network throughput of altcoins implies a lower chance of congestion and network delays.
The shorter blockchains and faster block times of altcoins are due in part to the fact that these coins have smaller transaction volumes. In other words, altcoins are tailored exclusively for specific use cases. Since their target market is smaller than that of Bitcoin, altcoins have a lower total coin supply than Bitcoin. BTC’s entire quantity is limited to 21,000,000 tokens, but Bitcoin and Ethereum production is restricted to about 100 billion dollars.
Ripple: A different kind of blockchain
Ripple is a blockchain-based payment network that specializes in cross-border transactions. Ripple’s network is unlike the decentralized network of Bitcoin because it is managed by a small group of trusted validator servers. Currently, around 100 validator servers are operating within the Ripple network, and the company behind the virtual currency (Ripple Labs) controls about half of these servers. The Ripple blockchain’s centralized nature has been a concern for many virtual currency investors.
A centralized system is vulnerable to government regulation, and governments may attempt to shut down validator servers to disrupt the network. In terms of scalability, the Ripple network is far more scalable than the Bitcoin network. Users can scale the throughput of the Ripple network with the addition of new validator servers. In contrast, Bitcoin’s throughput depends on the slower rate of increasing the processing power of Bitcoin mining hardware.
Litecoin: The silver to Bitcoin’s gold
Litecoin was the first altcoin to be created after Bitcoin. The Litecoin network is based on the same proof-of-work mining algorithm as Bitcoin, and the total supply of LTC is capped at 83 million coins. The critical difference between the two coins is that Litecoin has a faster block generation rate than Bitcoin, and the transaction confirmation time (roughly 2.5 minutes) is much faster than Bitcoin (10 minutes).
Due to such distinctions, LTC has earned the moniker “the metal to Currency’s golden.” The faster block generation rate of the Litecoin network means a higher chance of centralization. However, a centralized mining network is not a critical problem for Litecoin since the coin’s total supply is 84 million compared to Bitcoin’s 21 million.
Ethereum: A platform for decentralized apps
Like Ripple, Ethereum is also a blockchain-based DApps platform. However, Ethereum has an entirely different focus compared to Ripple. While Ripple focuses on providing cross-border payment solutions, Ethereum is a general-purpose DApps platform. For example, users can use Ethereum’s blockchain to create decentralized versions of online services like Airbnb and Uber.
It’s crucial to remember that Ethereum’s digitalization supports more than simply monetary operations. Ethereum is a fully functional decentralized computer that users can use to execute computer code and run software. The Ethereum Virtual Machine (EVM) is a decentralized global computer that executes computer code using a peer-to-peer network.
Conclusion
If you’re interested in investing in cryptos, it’s a good idea to research and find out which ones you think could be successful in the long run. As with any investment, it’s a good idea to diversify your portfolio and not put all your eggs in one basket.
