Media
Crypto Vs Altcoin
January 29, 2018
TL;DR: A cryptocurrency is a digital currency that runs on its own blockchain and uses cryptography to cut out inefficiencies of traditional online finance. Bitcoin was the original cryptocurrency and all others are referred to as ‘altcoins’.
What is a cryptocurrency?
A cryptocurrency is a cryptographically-secured digital currency which is generated, distributed and controlled by a distributed ledger, most commonly and famously, blockchain technology (see ‘What is Blockchain Technology’?).
The original cryptocurrency was bitcoin and it still remains the one with the largest market value. The history of cryptocurrency (or at least viable ones) more or less begins with bitcoin.
History of bitcoin
In 2009 a person, or group of people, using the pseudonym ‘Satoshi Nakamoto’, released the very first cryptocurrency - bitcoin - into the world. Satoshi Nakamoto had previously released a whitepaper - Bitcoin: A Peer-to-Peer Electronic Cash System - which described an alternative to banking or cash in facilitating financial transactions. The intent of bitcoin and the system it used was to provide a number of benefits over traditional finance methods, including more efficient system by removing third parties (including banks) and being able to send transactions of any size. Comments from Satoshi Nakamoto seemed to indicate that the financial crisis was the driving force behind the creation of bitcoin.
It is important to note that the cryptocurrency (bitcoin or altcoins) are separate from the blockchain that underpins them (the bitcoin blockchain or others that support altcoins).
A total eventual limit of 21 million bitcoin is designated by the bitcoin blockchain and the first bitcoins were mined by Satoshi Nakamoto in the first block of the bitcoin blockchain on the 3rd of January 2009. This ‘genesis block’ was embedded with the text ‘The Times 03/Jan/2009 Chancellor on brink of second bailout for banks’. Early adopters included people who were involved with cryptography for the use of financial independence around the time, including those who had tried to create bitcoin-esque systems previously. At the time, there was no real use for bitcoin as payment as merchants didn’t accept it and people were mostly experimenting with transferring it for fun.
The first instance of bitcoin being used in commerce didn’t occur until the 22nd of May 2010, where a US engineer called Laszlo Hanyecz offered 10,000 bitcoins (valued at about US$41 at the time) in payment for two large pizzas in a post on the BitcoinTalk forum. Another user, Jeremy Sturdivant, took him up on his offer and ordered two pizzas from Papa John’s.
Following the first commercial use of bitcoin, it continued to grow in popularity but began to receive a lot of negative press as it was reported that criminals were using bitcoin on the dark web to conduct illicit transactions due to the anonymity of the cryptocurrency. It would later come to be understood that bitcoin wasn’t truly anonymous, more pseudo-anonymous, and that a number of law enforcement companies were using the bitcoin blockchain to track and catch criminals. Regardless, the incorrect stigma of bitcoin being a currency for criminals was one that stuck for a long time and still lingers.
More attention was garnered by bitcoin as the price began to rapidly rise. Given the decentralised nature of the currency and the lack of knowledge that people had of it, the price of bitcoin was highly unstable. Negative news around bitcoin or cryptocurrency caused large drops in value, usually followed by a large recovery afterwards when the fear caused by the events evaporated.
Some of the negative news that came out around bitcoin and other cryptocurrency was about companies such as cryptocurrency exchanges or wallets being hacked or failing, (which was incorrectly represented as the bitcoin blockchain being hacked), even when it wasn’t bitcoin that was lost. Other news that heavily affected bitcoin’s price was governments and banks banning its use, either through the lack of regulations for it, their inability to control it, or its negative connotation.
On the other side, the rapid rise of bitcoin’s value was reportedly fuelled earlier in its lifespan by its use by criminals in illicit transactions (to their detriment later) and the huge rise in popularity of the ICO (see ‘What is an ICO?’).
Bitcoin continues to be the most popular cryptocurrency by market cap, holding more of the market than all other cryptocurrencies combined at the time of writing.
What is altcoin?
An altcoin is any cryptocurrency which is not bitcoin.
Altcoins are essentially a medium of value exchange (online currency) and most of their history is tied to the development and fortunes of the blockchain they are based on. The variation in price seen by bitcoin is often mirrored in altcoins when the same factors occur (news of hacks or government rulings etc).
Altcoins can be created to offer benefits when compared to bitcoin in terms of efficiency, privacy, compliance, utility, scalability, usability or a number of other areas.
A history of altcoins.
Following the release of bitcoin in 2009, many alternatives (altcoins) were created in response. Some of these were put forward as an improvement of bitcoin and others were simply made by people trying to make money. The manner in which they differ can be hugely varied, and includes factors such as cryptographic hashing algorithm, transaction confirmation times, timestamping scheme used, or even type of distributed ledger employed, There are too many altcoins to list but currently, the five largest by market cap (besides bitcoin) are ether (ETH), XRP (XRP), Litecoin (LTC), bitcoin cash (BCH), and EOS (EOS). We can see some of the development of altcoins through these five examples.
One of the very first altcoins, Litecoin was created by Charles Lee in October 2011 and is very similar to bitcoin. The main difference between them is the parameters of the blockchains they run on; mainly, the transaction confirmation time for Litecoin (2.5 minutes as opposed to 10 minutes for bitcoin) which was a significant issue at the time (although new developments in the bitcoin blockchain are making this irrelevant). The other main difference is that Litecoin uses scrypt algorithm rather than the SHA-256 algorithm that bitcoin uses, making the computational requirements to mine it focussed more on RAM than processing power. There is also a higher potential total number of Litecoins, but when a cryptocurrency is infinitely divisible the importance of this is negligible.
Released in 2012, XRP, the cryptocurrency of the Ripple network, is the next of the five altcoins we are examining to be created. Unlike bitcoin, XRP was geared towards being used by financial institutions, rather than replacing the need for them, bringing the benefits of blockchain to existing financial companies; as the Ripple website notes, ‘Using XRP, banks can source liquidity on demand in real time without having to pre-fund nostro accounts. Payment Providers use XRP to expand reach into new markets, lower foreign exchange costs and provide faster payment settlement’. XRP has vastly improved transaction confirmation times over the cryptocurrencies that came before it, and many since, and it can process more transactions per second - an important metric for a digital currency being used all over the world. XRP has come under fire before due to its lack of decentralisation. There are two main concerns here. Firstly with the distribution of new XRP being controlled by a company (Ripple Labs) people are concerned that the price can be influenced by the company. Secondly, the initial status quo that Ripple introduced was that validators of the Ripple network were selected by Ripple, as opposed to open to anyone as they are in public blockchains; this has since been changed as the company moved to become more decentralised and anyone can now run a Ripple validator node.
On the 30th July 2015, Vitalik Buterin released Ethereum, a blockchain-based platform which was notable in its focus on smart contracts. Ether was the currency that the platform uses, but rather than simply a medium of value exchange, ether is mostly designed to be used to fuel the running of the decentralised applications that Ethereum enables through its focus on smart contracts and developers. Transaction costs on the Ethereum network are priced in ‘Gas’ and ether is used to pay that cost. One point of note is that, unlike many cryptocurrencies, there is no cap on the amount of ether in existence. The price of ether took a significant hit in 2017 when a vulnerability in a significant project - the DAO - was exploited, leading to the loss of a huge quantity of ether and the eventual splitting of the ethereum blockchain into ‘ethereum’ and ‘ethereum classic’ and the associated cryptocurrency being split into ether (ETH) and the new ‘ethereum classic’ (ETC).
Bitcoin cash came about on the 1st of August 2017 when the bitcoin blockchain was forked. A fork, is when a blockchain splits into two potential ways forward, and can be accidental or intentional. The bitcoin cash fork was intended to create a currency with faster validation times and the associated increased number of transactions per second. At the time this was seen as the only option. The low number of transactions per second on the bitcoin network is now intended to be addressed by the development of the lightning network.
EOS is the cryptocurrency of the EOS.IO blockchain, which was released on the 31st of January 2018. The project was originally built on the Ethereum blockchain with EOS as tokens, but built its own blockchain and exchanged the EOS tokens for its own EOS cryptocurrency. The project uses a Delegated Proof of Stake consensus mechanism so EOS has utility beyond being a currency in that it allows holders to participate in the governance of the ecosystem, with a weight equivalent to the amount of EOS they hold. In addition, holders of EOS are entitled to use a proportion of the bandwidth of the blockchain equivalent to the amount of EOS they hold. EOS is expected to eliminate transaction fees for users and offer a huge amount of transactions per second and transaction confirmation in a second.
Useful Links
https://bitcoin.org/bitcoin.pdf
https://coinmarketcap.com/
https://litecoin.org/
https://ripple.com/
https://www.ethereum.org/
https://www.bitcoincash.org/
https://www.coindesk.com/information/comparing-litecoin-bitcoin
https://www.investopedia.com/tech/whats-difference-between-bitcoin-and-ripple/
https://www.coindesk.com/information/what-is-ether-ethereum-cryptocurrency
https://cointelegraph.com/bitcoin-cash-for-beginners/btc-bch-differences#bitcoin-and-bitcoin-cash-in-your-wallet
https://www.bitdegree.org/tutorials/eos-vs-ethereum/#What_is_EOS
https://www.cnbc.com/2017/12/14/bitcoin-ether-litecoin-ripple-differences-between-cryptocurrencies.html
A cryptocurrency is a cryptographically-secured digital currency which is generated, distributed and controlled by a distributed ledger, most commonly and famously, blockchain technology (see ‘What is Blockchain Technology’?).
The original cryptocurrency was bitcoin and it still remains the one with the largest market value. The history of cryptocurrency (or at least viable ones) more or less begins with bitcoin.
History of bitcoin
In 2009 a person, or group of people, using the pseudonym ‘Satoshi Nakamoto’, released the very first cryptocurrency - bitcoin - into the world. Satoshi Nakamoto had previously released a whitepaper - Bitcoin: A Peer-to-Peer Electronic Cash System - which described an alternative to banking or cash in facilitating financial transactions. The intent of bitcoin and the system it used was to provide a number of benefits over traditional finance methods, including more efficient system by removing third parties (including banks) and being able to send transactions of any size. Comments from Satoshi Nakamoto seemed to indicate that the financial crisis was the driving force behind the creation of bitcoin.
It is important to note that the cryptocurrency (bitcoin or altcoins) are separate from the blockchain that underpins them (the bitcoin blockchain or others that support altcoins).
A total eventual limit of 21 million bitcoin is designated by the bitcoin blockchain and the first bitcoins were mined by Satoshi Nakamoto in the first block of the bitcoin blockchain on the 3rd of January 2009. This ‘genesis block’ was embedded with the text ‘The Times 03/Jan/2009 Chancellor on brink of second bailout for banks’. Early adopters included people who were involved with cryptography for the use of financial independence around the time, including those who had tried to create bitcoin-esque systems previously. At the time, there was no real use for bitcoin as payment as merchants didn’t accept it and people were mostly experimenting with transferring it for fun.
The first instance of bitcoin being used in commerce didn’t occur until the 22nd of May 2010, where a US engineer called Laszlo Hanyecz offered 10,000 bitcoins (valued at about US$41 at the time) in payment for two large pizzas in a post on the BitcoinTalk forum. Another user, Jeremy Sturdivant, took him up on his offer and ordered two pizzas from Papa John’s.
Following the first commercial use of bitcoin, it continued to grow in popularity but began to receive a lot of negative press as it was reported that criminals were using bitcoin on the dark web to conduct illicit transactions due to the anonymity of the cryptocurrency. It would later come to be understood that bitcoin wasn’t truly anonymous, more pseudo-anonymous, and that a number of law enforcement companies were using the bitcoin blockchain to track and catch criminals. Regardless, the incorrect stigma of bitcoin being a currency for criminals was one that stuck for a long time and still lingers.
More attention was garnered by bitcoin as the price began to rapidly rise. Given the decentralised nature of the currency and the lack of knowledge that people had of it, the price of bitcoin was highly unstable. Negative news around bitcoin or cryptocurrency caused large drops in value, usually followed by a large recovery afterwards when the fear caused by the events evaporated.
Some of the negative news that came out around bitcoin and other cryptocurrency was about companies such as cryptocurrency exchanges or wallets being hacked or failing, (which was incorrectly represented as the bitcoin blockchain being hacked), even when it wasn’t bitcoin that was lost. Other news that heavily affected bitcoin’s price was governments and banks banning its use, either through the lack of regulations for it, their inability to control it, or its negative connotation.
On the other side, the rapid rise of bitcoin’s value was reportedly fuelled earlier in its lifespan by its use by criminals in illicit transactions (to their detriment later) and the huge rise in popularity of the ICO (see ‘What is an ICO?’).
Bitcoin continues to be the most popular cryptocurrency by market cap, holding more of the market than all other cryptocurrencies combined at the time of writing.
What is altcoin?
An altcoin is any cryptocurrency which is not bitcoin.
Altcoins are essentially a medium of value exchange (online currency) and most of their history is tied to the development and fortunes of the blockchain they are based on. The variation in price seen by bitcoin is often mirrored in altcoins when the same factors occur (news of hacks or government rulings etc).
Altcoins can be created to offer benefits when compared to bitcoin in terms of efficiency, privacy, compliance, utility, scalability, usability or a number of other areas.
A history of altcoins.
Following the release of bitcoin in 2009, many alternatives (altcoins) were created in response. Some of these were put forward as an improvement of bitcoin and others were simply made by people trying to make money. The manner in which they differ can be hugely varied, and includes factors such as cryptographic hashing algorithm, transaction confirmation times, timestamping scheme used, or even type of distributed ledger employed, There are too many altcoins to list but currently, the five largest by market cap (besides bitcoin) are ether (ETH), XRP (XRP), Litecoin (LTC), bitcoin cash (BCH), and EOS (EOS). We can see some of the development of altcoins through these five examples.
One of the very first altcoins, Litecoin was created by Charles Lee in October 2011 and is very similar to bitcoin. The main difference between them is the parameters of the blockchains they run on; mainly, the transaction confirmation time for Litecoin (2.5 minutes as opposed to 10 minutes for bitcoin) which was a significant issue at the time (although new developments in the bitcoin blockchain are making this irrelevant). The other main difference is that Litecoin uses scrypt algorithm rather than the SHA-256 algorithm that bitcoin uses, making the computational requirements to mine it focussed more on RAM than processing power. There is also a higher potential total number of Litecoins, but when a cryptocurrency is infinitely divisible the importance of this is negligible.
Released in 2012, XRP, the cryptocurrency of the Ripple network, is the next of the five altcoins we are examining to be created. Unlike bitcoin, XRP was geared towards being used by financial institutions, rather than replacing the need for them, bringing the benefits of blockchain to existing financial companies; as the Ripple website notes, ‘Using XRP, banks can source liquidity on demand in real time without having to pre-fund nostro accounts. Payment Providers use XRP to expand reach into new markets, lower foreign exchange costs and provide faster payment settlement’. XRP has vastly improved transaction confirmation times over the cryptocurrencies that came before it, and many since, and it can process more transactions per second - an important metric for a digital currency being used all over the world. XRP has come under fire before due to its lack of decentralisation. There are two main concerns here. Firstly with the distribution of new XRP being controlled by a company (Ripple Labs) people are concerned that the price can be influenced by the company. Secondly, the initial status quo that Ripple introduced was that validators of the Ripple network were selected by Ripple, as opposed to open to anyone as they are in public blockchains; this has since been changed as the company moved to become more decentralised and anyone can now run a Ripple validator node.
On the 30th July 2015, Vitalik Buterin released Ethereum, a blockchain-based platform which was notable in its focus on smart contracts. Ether was the currency that the platform uses, but rather than simply a medium of value exchange, ether is mostly designed to be used to fuel the running of the decentralised applications that Ethereum enables through its focus on smart contracts and developers. Transaction costs on the Ethereum network are priced in ‘Gas’ and ether is used to pay that cost. One point of note is that, unlike many cryptocurrencies, there is no cap on the amount of ether in existence. The price of ether took a significant hit in 2017 when a vulnerability in a significant project - the DAO - was exploited, leading to the loss of a huge quantity of ether and the eventual splitting of the ethereum blockchain into ‘ethereum’ and ‘ethereum classic’ and the associated cryptocurrency being split into ether (ETH) and the new ‘ethereum classic’ (ETC).
Bitcoin cash came about on the 1st of August 2017 when the bitcoin blockchain was forked. A fork, is when a blockchain splits into two potential ways forward, and can be accidental or intentional. The bitcoin cash fork was intended to create a currency with faster validation times and the associated increased number of transactions per second. At the time this was seen as the only option. The low number of transactions per second on the bitcoin network is now intended to be addressed by the development of the lightning network.
EOS is the cryptocurrency of the EOS.IO blockchain, which was released on the 31st of January 2018. The project was originally built on the Ethereum blockchain with EOS as tokens, but built its own blockchain and exchanged the EOS tokens for its own EOS cryptocurrency. The project uses a Delegated Proof of Stake consensus mechanism so EOS has utility beyond being a currency in that it allows holders to participate in the governance of the ecosystem, with a weight equivalent to the amount of EOS they hold. In addition, holders of EOS are entitled to use a proportion of the bandwidth of the blockchain equivalent to the amount of EOS they hold. EOS is expected to eliminate transaction fees for users and offer a huge amount of transactions per second and transaction confirmation in a second.
Useful Links
https://bitcoin.org/bitcoin.pdf
https://coinmarketcap.com/
https://litecoin.org/
https://ripple.com/
https://www.ethereum.org/
https://www.bitcoincash.org/
https://www.coindesk.com/information/comparing-litecoin-bitcoin
https://www.investopedia.com/tech/whats-difference-between-bitcoin-and-ripple/
https://www.coindesk.com/information/what-is-ether-ethereum-cryptocurrency
https://cointelegraph.com/bitcoin-cash-for-beginners/btc-bch-differences#bitcoin-and-bitcoin-cash-in-your-wallet
https://www.bitdegree.org/tutorials/eos-vs-ethereum/#What_is_EOS
https://www.cnbc.com/2017/12/14/bitcoin-ether-litecoin-ripple-differences-between-cryptocurrencies.html