The Rise of the Altcoins
Bitcoin has blown up in popularity over the last few years. It promises to change the way that our world processes financial transactions however with all of the buzz surrounding Bitcoin, people are forgetting that Bitcoin is just one iteration of the blockchain technology which is what makes Bitcoin so valuable.
Because the Bitcoin code is open source, anybody can clone the code, change a few numbers like max supply and block times, and create their own cryptocurrencies. Thousands of cryptocurrencies have been created in this way however most of them don’t add anything new therefore they never posed a threat to Bitcoin’s dominance. They were easy to forget.
The other coins developed as clones are known as altcoins. They were largely ignored until 2017 when they acquired massive gains in their value. At the beginning of 2017, Bitcoin’s dominance in the cryptocurrency market was 90% however that number dropped to 40% by June.
So what are these altcoins and can they be considered as serious contenders in the cryptocurrency market? Here are a few of the most exciting altcoins out there and what new functions they bring to the cryptocurrency world.
Ethereum ($29 Billion Marketcap)
The Ethereum Virtual Machine was designed to be a platform that people can use to deploy decentralized applications on a blockchain. This is different from Bitcoin because Bitcoin can only be used to send value but applications cannot be built on top of it. This flexibility that Ethereum has allows it to implement smart contracts as well.
Smart contracts are lines of code that allow users to bind payments to a condition. For example, a person can send ether, Ethereum’s native currency, to another person on the condition that it arrives on a certain date. This and numerous other applications for smart contracts will revolutionize how businesses handle their accounting.
Ethereum’s push towards the top has been fuelled largely by the recent release of several ICOs on the Ethereum platform. These ICOs are run by executives that are offering partial ownership of their companies to early contributors in the form of tokens. These tokens are stored on Ethereum wallets and can represent voting rights or a share in the company’s profits.
Monero ($1.4 Billion Marketcap)
A big issue among most cryptocurrency enthusiasts is the lack of privacy. Users don’t have to sign up or give any personal information to use public blockchains however the contents of any wallet are visible for any other person to see. This doesn’t bode well when you’d rather keep your finances a secret.
Monero brings privacy to the world of cryptographic transactions with a technology know as ring signatures. This technology makes it so that transactions can be verified on the network while keeping the blockchain analysis-resistant i.e you can only view the balances of wallets that you own the private keys to.
Detractors of Monero claim that this makes it the cryptocurrency of choice for illegal activities however there are many legitimate uses for private transactions, such as when you want to keep your landlord from knowing how much money you really make.
IOTA ($1.22 Billion Marketcap)
IOTA is a coin designed to be used by Internet of Things enabled devices. IoT enabled devices such as smart cars and smart fridges will need to talk to each other and send payments and since they cannot open up their own bank accounts, they’ll need to use cryptocurrencies..
Most cryptocurrencies use standard blockchains but IOTA uses a blockchain hybrid known as a Direct Acrylic Graph. This graph, or Tangle, allows the IOTA network to scale infinitely and send transactions in an instant. This currency doesn’t charge transaction fees either which makes it ideal for micro-transactions, a critical part of any Internet of Things infrastructure.
Bitshares ($133 Million Marketcap)
Created by Dan Larimer, BitShares is a decentralized cryptocurrency exchange. The platform is governed by lines of code therefore there is no one entity that can make off with the funds, which is a problem that most centralized exchanges suffer from.
Centralized exchanges are also feeling increasing amounts of pressure from governmental regulatory bodies to shut down. BitShares is free from this pressure because there is no off switch. It runs itself and the only law that it obeys is code.
Besides being one of the first decentralized exchanges on the market, BitShares also boasts an incredibly high transaction capacity. While Bitcoin can only handle 3 transactions per second, BitShares is designed using the Graphene blockchain which can handle up to 100,000 transactions per second. This puts it miles ahead of other cryptocurrencies in terms of solving the scalability issues.
You must remember that the cryptocurrency world is an evolving market. Brilliant minds are constantly developing and implementing new ways to use blockchains therefore the best is yet to come. What we can see from this year’s altcoin explosion is that Bitcoin will be overtaken soon in an event that the cryptocurrency community has dubbed as ‘The Flippening’.
The world of cryptocurrencies is expanding at an exponential rate. New coins emerge to fix new problems so when you get involved in the industry try not to suffer from the tunnel vision that Bitcoin maximalists have. There are many coins out there, and one of them may just be the perfect fit for you.