The Birth of the Altcoin
Episode #8 of the course The basics of Bitcoin by John Saddington
It’s impossible to talk about bitcoin without talking about the many other technologies it has given birth to. This is, of course, unsurprising because bitcoin itself was and is an open-source project, and anyone at any time is fully licensed to create their own “alternative coin” off the original bitcoin project.
In fact, you can quite literally (and legally) copy bitcoin’s core technology, not change a single line of code, and release it under whatever name you choose. Heck, people would even invest in it and maybe even use it. Many have tried and many more will continue to try.
The rise of these alternative coins (or cryptocurrencies) is a positive consequence of not only open-source philosophy but also the proliferation of decentralized technologies. We can welcome these brothers, sisters, children, distant cousins, and relatives of bitcoin with open arms. This is the direct consequence of expansive innovation unfettered by governance and thick bureaucracy.
So, What’s the Difference?
That depends on the altcoin. You see, many of these altcoins share similar properties of the original bitcoin, such as a distributed and decentralized ledger (i.e. record keeping), peer-to-peer transactions, mining systems, and processes to incentive and drive adoption.
But that’s where the similarities may end, as many altcoins add features that their own creators believe enhance the original vision of a fully distributed and virtual currency. Some of these innovations include different transaction speeds, privacy controls, different consensus and mathematical problem-solving requirements for mining (e.g. proof-of-work vs. proof-of-stake, DNS, and encryption resolution(s)), and more.
Some altcoins have become culturally relevant and extremely popular, rising among the ranks to gain huge market share and market capitalization. Most of them can be purchased on the same currency exchanges that you may purchase bitcoin on.
Although many have challenged bitcoin for dominance, it is currently difficult to imagine any altcoin becoming larger. However, this isn’t impossible, and it’s entirely likely that a newer innovative blockchain-based coin could prove itself to have more utility (and thus, have more understood and perceived value) than bitcoin.
The More “Popular” Altcoins
The idea of popularity, in many ways, is counter to the fundamental principles of bitcoin and decentralization because it assumes that there must and should be a “winner” in a race to a knowable end. But the reality is that the most “popular” coin, including bitcoin, is the one that you specifically find to be the most pragmatic and useful to your own set of needs as you transact and exchange with others in the digital space.
But to play along, the most common way to determine popularity is through market capitalization charts, which is the market value of the coin’s outstanding shares or issued coins (also called “tokens” in many instances). One of the more popular websites is CoinPuffs.com, which as of January 2018 shows these ten as the most popular coins (including bitcoin):
1. Bitcoin
2. Ripple
3. Ethereum
4. Bitcoin Cash
5. Cardano
6. NEM
7. Stellar
8. Litecoin
9. IOTA
10. Dash
As you might imagine, this list changes frequently, and if you are interested in staying on top of the prices, especially if you speculate and invest, sites like CoinPuffs are useful tools.
Overall, it is my firm recommendation to engage slowly and carefully, especially in the beginning, reading as much as you possibly can about the projects and doing as much due diligence as possible.
Many of these projects are inherently and intrinsically risky, so proceed with maximum prejudice and caution. You should research the team behind the project, how the team intends to use the funds, who else is supporting the project, their foundational whitepaper (like Satoshi Nakamoto’s bitcoin whitepaper), etc.
Tomorrow, we’ll talk a bit more about things to consider when buying cryptocurrency and how to protect yourself in the best way moving forward.
See you tomorrow!
John
Recommended reading
Proof of Work vs. Proof of Stake: Basic Mining Guide
How not to be scammed into buying crappy cryptocurrencies
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