Altcoin – Investopedia

DEFINITION of Altcoin

Altcoins are the alternative cryptocurrencieslaunched after the success of Bitcoin. Generally, theyproject themselves as better substitutes to Bitcoin. The success of Bitcoin as the first peer-to-peer digital currency paved the way for many to follow. Many altcoins are trying to target any perceived limitations that Bitcoin has and come up with newer versions with competitive advantages. As the term ‘altcoins’ means all cryptocurrencieswhich are not Bitcoin, there are hundreds of altcoins.

“Altcoin” is a combination of two words: “alt” and “coin”; alt signifying ‘alternative’ and coin signifying (in essence) ‘cryptocurrency.’Thus together they imply a category of cryptocurrency that is alternative to the digital currency Bitcoin.After the success story of Bitcoin, many other peer-to-peer digital currencies have emerged in an attempt to imitate that success. While Bitcoin was the first cryptocurrency, and remains the best-known, it is now only one of hundreds of cryptocurrencies, which all seek to improve upon Bitcoin in various ways.

Many of the altcoins are built up on the basic framework provided by Bitcoin. Thus most altcoins are peer-to-peer, involve a mining process by which users solve difficult problems to unlock blocks,and offer efficient and cheap ways to carry out transactions on the web. Buteven with many overlapping features,altcoins vary widely from each other – altocoins differ themselves from bitcoin with a range of procedural variations, including different proof-of-work algorithms, different means by which users can sacrifice energy to mine blocks, and application enhancements to increase user anonymity.

The earliest notable altcoin, Namecoin, was based on the Bitcoin code and used the same proof-of-work algorithm- and like Bitcoin, Namecoinis limited to 21 million coins. Introduced in April 2011, Namecoin primarily diverged from Bitcoin by making user domains less visible, allowing users to register and mine usingtheir own .bit domains, which was intended to increaseanonymity and censorship resistance.

Current leading examplesof altcoin includeLitecoin, Dogecoin, Ethereum(2nd to Bitcoin in market capitalization as of May 2018), and Ripple. Litecoin is seen as the closest competitor to Bitcoin.

Introduced in October 2011, shortly after Namecode, Litecoinwas branded as the ‘silver to Bitcoin’s gold.’ Whilefundamentally similar in code and functionality to Bitcoin, Litecoindiffers from Bitcoin in several essential ways.Itallows mining transactions to be approved every 2 1/2 minutes, to Bitcoins 10 minutes, and it also allows for a total of 84 million coins to be created – exactly 4 times higher than Bitcoin’s (and Namecon’s) 21 million coins. It also uses a different proof-of-work algorithm than Bitcoin- scrypt, a sequential function that is much more memory-hard than most proof-of-work algorithms. This is supposed to make it much more difficult to generate bitcoins, as increasing memory space required for the proof-of-work algorithm reduces the mining speed, and makes it harder for any one user or group of users to dominate the blockchain.

As of May 2018 there are more than 1500 cryptocurrenciesavailable over the internet, all but one of which are altcoins. New cryptocurrenciescan be created at any time; additionally, there are many older cryptocurrencies which are no longer on the market.

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Altcoin – Investopedia

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