When we talk about cryptocurrencies, we mean not only Bitcoins. A lot more alternative cryptocurrencies, known as altcoins, exist in the world. They are much like Bitcoin electronically managed currencies having their own miners, blockchains, and wallets. So, do they operate like Bitcoin, and what is their purpose?
Why do Altcoins exist?
Being a pioneer in the cryptocurrency world, Bitcoin follows its own specific rules. For instance:
- The Bitcoin blockchain allows new coins to appear every 10 minutes.
- It takes huge computing power consumption to mine Bitcoin.
- Some specifically designed computer chips are able to mine Bitcoin much quicker than conventional ones.
- Bitcoin mining is limited to 21 million coins.
- Bitcoin is developed to be used as digital money and that is all.
When the Bitcoin protocol was developed back in its time, these were the thought out choices to serve as rules, but there are no points in them, instructing that the rules should be permanent.
The team dealing with Bitcoin software development conforms to strictly conservative line and dislikes to make extreme changes to the Bitcoin blockchain or the rules in the network. They exactly know why they are doing so. Bitcoin market capitalization reaches billions of dollars. Consequently, many businesses depend on it now. Too many changes will inevitably cause problems for those who rely on Bitcoin, a cryptocurrency to that extent popular.
If not Bitcoin, then what
Not to be so dependent, many developers have used the basic blockchain principles and created their own cryptocurrencies with rules which differ from those in the Bitcoin network and which will suit their own needs better.
There are many of them, and they create the community supporting altcoins.
Litecoin is among the most popular altcoins. It’s a cryptocurrency with the changed rules to fit users who have a different apprehension of what digital money could be. Litecoin was developed almost three years after Bitcoin, and a new coin appears every 2.5 minutes in its blockchain. It’s four times faster than Bitcoin. Consequently, Litecoin transactions are carried out and confirmed faster than in the Bitcoin network.
The Litecoin blockchain operates complying with a different set of rules. The mining process differs as well. The network deliberately excludes new kinds of technology like ASIC mining chips providing some miners with an unfair advantage over those who still use GPU-based equipment to mine coins. The advocates of this idea want to achieve parity for all miners, giving everyone an equal chance to earn and preventing those financially stronger from grabbing all the network capacity with dedicated equipment.
What is Scamcoins
As in every aspect of the human life, there are people who don’t have principles so laudable. In the last few years, thousands of altcoins were launched being nothing more than scamcoins. They are altcoins pursuing the single objective – to make money for the people who created them.
As a rule, such coins appear out of thin air and are advertised on popular forums dedicated to cryptocurrency technologies. Their creators often pre-mine them and possess sizeable amounts by the time the coins are announced.
Scamcoin developers are trying to win the cryptocurrency community’s support for their coins and encourage everyone to mine them using their PCs. In case some users start trading such scamcoins, they may create hype about them and that may lead to their value increase. Right at this point, the scamcoin developers will get rid of all their pre-mined coins selling them and exciting the market. The scamcoins are left to go in the doldrums and will eventually cease to exist.
This scheme is known as “pump and dump” and is widely used in the world of altcoin. However, many altcoins are genuine and possess good potential. How do you know them? We will provide some tips to look for the right ones.
A genuine altcoin often sufficiently alters the Bitcoin rules to serve some unique purpose or to be applied in a particular way. For example, some altcoins are designed to be a unit of exchange for solar power production. Some others create the foundation for a new system of domain names on the Internet. If you see that an altcoin adds some technical value to the existing variety of blockchains, that’s a healthy sign.
A Strong Team
A strong team supporting the cryptocurrency is an excellent evidence of a true altcoin. Keep a wary eye on coins launched by developers with no reputation in the community, especially those who are new to the dedicated forums.
The most reliable altcoins are developed by volunteers and users who have contributed to forums quiet for some time.
Some coins just weirdly hit a high. The most prominent example is Dogecoin, which once was launched as a joke. Using an image of a dinky dog as its mascot, the coin went viral, and people started exchanging it. In February 2015, its market capitalization hit the point of $14 million and continued to grow.
Altcoins are oftentimes projects started out of a pure enthusiasm, but sometimes, they are a foundation for something more serious, turning into new profitable businesses. Altcoins are often more than just monetary assets. They can grow into the whole new systems serving different purposes like PC applications or online stores. Some traders, especially those knowing the ropes, can earn fortunes carrying out exchange transactions among altcoins, though for inexperienced users, it may be a risky engagement.
Do you still consider your involvement in some altcoin? Then make sure you’ve made a profound market research looking for some of the above-stipulated features. Alert today, alive tomorrow!