Newcomers to the cryptocurrency space are often confused about the difference between Bitcoin from Altcoins. This article will shed light on the differences between both cryptos.
What is Bitcoin?
Bitcoin is the first type of cryptocurrency that came into existence in 2008. It was invented by a person or group of persons with the alias “Satoshi Nakamoto.” Bitcoin is a decentralized peer-to-peer digital currency, which means that all transactions happen directly between equal, independent network participants, without the need for any intermediary to permit or facilitate them. Bitcoin was created to allow “online payments to be sent directly from one party to another without going through a financial institution,” Satoshi Nakamoto said.
A short history of Bitcoin
On October 31, 2008, Satoshi Nakamoto published Bitcoin’s whitepaper, which described how the digital currency would work and be implemented. They proposed to use a decentralized ledger of transactions packaged in batches called “blocks” and secured by cryptographic algorithms. This system was later called “blockchain.” Two months later, on January 3, 2009, Satoshi Nakamoto mined the first block on the Bitcoin network, known as the genesis block, thus launching the world’s first cryptocurrency.
Although Satoshi Nakamoto was the original inventor of Bitcoin, over the years a large number of people have contributed to improving the cryptocurrency’s software by patching vulnerabilities and adding new features. There have been more than 750 contributors including Wladimir J. van der Laan, Marco Falke, Pieter Wuille, Gavin Andresen, Jonas Schnelli, etc., and they have helped the cryptocurrency become what it is today.
Why is Bitcoin so special?
Bitcoin is special because it gave birth to an entirely new industry that anyone in the world can participate in. Bitcoin is the pioneer of what we know as Blockchain technology, the technology that powers it.
Asides from being the first-ever cryptocurrency, it has managed to create a global community that trades and uses Bitcoin and other cryptocurrencies in their everyday lives. The emergence of the first cryptocurrency has created a conceptual and technological basis that subsequently inspired the development of thousands of competing projects. These projects are what we term “Altcoins.”
The entire cryptocurrency market is based on the idea realized by Bitcoin. The idea that money can be sent and received by anyone, anywhere in the world without reliance on trusted intermediaries, such as banks and financial services companies.
So, what are Altcoins?
Apart from Bitcoin, all other (9,894) coins listed on coinmarketcap are generically called “Altcoins.”
Altcoin is short for “Alternative Coin” which simply means an alternative to Bitcoin. They are cryptocurrencies that also use blockchain technology which allows for secure peer-to-peer transactions.
Altcoins build on the success of Bitcoin by slightly changing the rules to appeal to different users. You can think of altcoins as everything else other than Bitcoin.
Altcoins use the same decentralized concept that founded Bitcoin but they take things a step further with unique features. For example, Ethereum, the second-ranked cryptocurrency by market capitalization, introduced the idea of “smart contracts” which are codes that can automatically execute agreements between two parties using its blockchain technology. This opened the floodgates for the development of new use cases and applications for crypto.
Altcoins have improved on overall functionality, transaction processing rates, and generally scaling to meet the expanding demand for their services. As the market for Altcoins continues to expand, it’s easy to wonder if Bitcoin’s lead will end soon, as Bitcoin’s use case is very limited.
As every father’s dream is for his children to surpass him, the same is the case of Bitcoin and Altcoins. In its original state, Bitcoin simply can’t compete with these newer, more focused coins. Bitcoin was built as a catch-all currency, and its creator likely didn’t envision the multiple use cases of blockchain technology. Altcoins use different mechanisms to reduce both the cost and complexity of mining and can process many more transactions per second than bitcoin ever could. Additionally, some of these new cryptocurrencies use technology such as smart contracts, Non-Fungible Tokens (NFT’s), Decentralized Finance (DeFi), which let them build innovative applications and solve problems that supersede the problem Bitcoin is currently solving.
Simply put, Bitcoin is the first cryptocurrency while all other cryptocurrencies are termed “Altcoins.”