Bitcoin is the pioneer and most notable cryptocurrency, and it remains the dominant player in the market. However, there are many other cryptocurrencies, known as altcoins, that have been developed in the years since Bitcoin's inception.
These altcoins may offer various advantages over Bitcoin, such as faster transaction speeds, lower fees, or different mining algorithms. Some of which are designed to improve the features of Bitcoin, while others are created as experiments or for specific purposes.
What exactly are Altcoins and how is it different from Bitcoin? Let’s dive deeper and compare the two, and find out which could be more beneficial.
What is Bitcoin?
No need for introduction – Bitcoin is the grandfather of cryptocurrencies and is a decentralized digital currency that uses cryptography for security, which is not controlled by any government or financial institution. It was implemented in 2009 by an anonymous individual or group of individuals known as Satoshi Nakamoto.
Users can send and receive bitcoins electronically for an optional transaction fee using wallet software on a personal computer, mobile device, or a web application. Transactions are verified by network nodes through cryptography and recorded in a public distributed ledger called a blockchain.
Bitcoins are created as a reward for a process known as mining, in which computers solve complex mathematical problems to verify and record transactions on the blockchain. They can also be bought and sold on exchanges with fiat currencies or other cryptocurrencies.
What are Altcoins?
Altcoins, or alternative cryptocurrencies, are digital currencies that are alternatives to Bitcoin. They were created after the success of Bitcoin and are often based on the same basic principles as Bitcoin.
Like Bitcoin, altcoins use cryptography for security and are decentralized, meaning that they are not controlled by any government or financial institution. Many altcoins are based on the same open-source code as Bitcoin, but they may have different features and capabilities.
There are many different altcoins available, each with its own set of features and characteristics. Some examples of altcoins include Litecoin, Ethereum, and Dogecoin. The choice between Bitcoin and an altcoin will depend on an individual's specific needs and priorities.
How are they different?
One key difference between Bitcoin and altcoins is the level of decentralization. Because Bitcoin has been around for much longer and has a larger user base, it is generally considered to be more decentralized than many altcoins. This is because the network is supported by a larger number of nodes, making it less vulnerable to control by any single entity.
In addition, Bitcoin belongs to no specific team or protocol. This greatly reduces counterparty risk for investors as alt coins do have a higher propensity of rug pulls and disastrous tokenomics.
Another important difference is the level of adoption and acceptance. Bitcoin has achieved a level of mainstream acceptance that many altcoins have not, and it is accepted as a form of payment by a wide range of merchants and organizations. Some altcoins, on the other hand, are accepted by fewer merchants and may be less liquid, making them more difficult to use as a means of exchange.
There are differences in the technical features and capabilities of different cryptocurrencies. Some altcoins offer features that are not present in Bitcoin, such as anonymity or the ability to process a higher volume of transactions per second.
Weighing out the pros and cons
Altcoins may offer various advantages over Bitcoin, such as faster transaction speeds, lower fees, or different mining algorithms. However, they may also come with trade-offs, such as reduced security or liquidity.
Bitcoin has a strong track record when it comes to security. It has never been hacked, and the underlying blockchain technology is considered to be very secure. This makes it a safe choice for those who are concerned about the security of their funds.
Being the most well-known cryptocurrency, achieving a level of mainstream recognition that many altcoins have not, Bitcoin appears more appealing to most people, as they may feel more comfortable using a cryptocurrency that is widely recognized and accepted.
Although Bitcoin has been subject to volatile price fluctuations, it has also been adopted by a growing number of merchants and individuals as a form of trusted payment. Its decentralized nature and the fact that it is not subject to government or financial institution control make it an attractive option for some users.
Ultimately, the decision of whether to invest in Bitcoin or altcoins depends on the professional investor’s finance goals and risk tolerance. It is important to carefully research and evaluate any cryptocurrencies before investing to avoid any potential scams. If you are looking to diversify your portfolio, it is important to work with a licensed fund manager with crypto experience if you need help determining when to invest.