Almost everyone has heard about cryptocurrencies in the modern world. However, people who are not immersed in this topic for the most part believe that bitcoin is still the only cryptocurrency. Yes, of all the cryptocurrencies, bitcoin was the first to be created. He became a pioneer, playing a key role in shaping the modern crypto world. But the notion that Bitcoin is the only one of its kind is fundamentally wrong. In addition to it, there are more than a thousand cryptocurrencies that are successfully functioning today. All of them are collectively called altcoins. But what is the difference between bitcoin and altcoins? We will try to answer this question in this article.
What is bitcoin and altcoin?
First, let's look at the definitions of both concepts. Bitcoin became the first cryptocurrency that still retains the title of the leading digital coin by market capitalization. And altcoins are all other cryptocurrencies created after the advent of bitcoin. Their total share in the crypto market as of 2022 is about 40%.
It’s a paradox, but the appearance of altcoins was provoked by bitcoin itself. Due to its shortcomings and a few disadvantages, people began to create alternative cryptocurrencies, through which they tried to construct a full-fledged analogue of bitcoin. And partly they succeeded: as a rule, altcoins offer solutions that the most popular cryptocurrency lacks. However, if at first enthusiasts copied the idea of bitcoin and made only minor changes to the new digital currency, then over time, altcoins began to differ greatly from each other, acquiring uniqueness and originality. Every day their number is only growing, and many of them are created to perform completely different tasks. For example, Litecoin, which became the first alternative cryptocurrency, allowed to increase the transaction throughput and issue. Thanks to such innovative coins, the visual advantage of bitcoin in comparison with its peers is rapidly decreasing.
It should be noted that the top altcoins today are: Ethereum, Decentraland, Polygon, Raydium and Polkadot.
Causes of altcoins
So what are the problems with bitcoin that provoked the emergence of altcoins? Here are some of them:
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Long running transactions. To reduce their term, improved algorithms were used in new cryptocurrencies;
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Lack of anonymity. To correct this flaw in bitcoin, additional encryption methods were used;
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High cost of mining. Altcoins make it possible to mine without expensive hardware thanks to alternative protocols;
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Functional. For many, the functionality of bitcoin seemed insufficient. Then smart contracts, the ERC-20 standard and other innovations were born;
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Lack of scalability. When bitcoin gained worldwide fame, the number of transactions increased many times over. Then it became clear that the algorithm is not able to process such a volume of operations. As a result, transfers accumulated in huge queues, and commissions skyrocketed.
After listing all the minuses of bitcoin, one might get the impression that the altcoin is its ideal analogue, without flaws. But this is a delusion. Altcoin is extremely dependent on external factors: on the bitcoin rate, the actions of governments, and even the statements of popular personalities. In addition, he regularly suffers from exchange rate fluctuations.
In their philosophy, bitcoin and altcoins are not very different. They are not money in the usual sense for everyone. Rather, they can be called a digital product that has its own cryptocode and encrypted record. To obtain the status of digital money, both of them have to go through a sieve of a complex mechanism of transformation and processing with the help of special technologies.
It is not without reason that Bitcoin retains its leadership position even after the appearance of thousands of altcoins, most of which have the task of bypassing the main cryptocurrency in terms of efficiency and popularity. It has a stable blockchain, reliable protection against hacking, and a fairly simple interaction scheme that a user of any level can master. One of the proofs of the effectiveness of Bitcoin is that people who are engaged in mining still consider it the standard of profitability.
Summing up, we can say that despite the rapidly growing number of altcoins, bitcoin still remains the fundamental cryptocurrency. It has record capitalization reserves, recognition, and a well-built and efficient mining infrastructure. Therefore, bitcoin will not soon lose popularity and trust of cryptocurrency lovers.
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