What are altcoins?

Alternative cryptocurrencies

Altcoins or alternative cryptocurrencies is the name by which any cryptocurrency other than Bitcoin is known, regardless of the proof of consensus used to ensure the security of the P2P network on which it is held. This term emerged as the way to name all the cryptocurrencies that have copied the open source code of Bitcoin, and currently also includes the tokens.

The great success of Bitcoin has led to the development of these alternative currencies, largely thanks to the open source feature of this cryptocurrency. However, each altcoin implements its own Blockchain and its own P2P network, and some of them develop their own mining algorithm.

ICO, Initial Coin Offer

It is increasingly common for many business projects to use altcoins as a source of alternative financing for business projects related to technology and the development of new digital concepts, through the ICO, Initial Coin Offer.

Through this system, the creators of a certain project make available to the public a number of coins that they can buy and thus finance the projects. The objective of an ICO is the same as that of a public offer of sale in the stock market, just that in this case the securities that are delivered to the investor are altcoins.

Advantages of altcoins

The attractiveness of the altcoins lies in the characteristics that each has and the advantages they represent in the financial market or in the mining process. Beyond the decentralization with which it is sought that there is no central system that contains or manages data and processes, the fact of being innovations that offer solutions to current problems is also very attractive.

Because blockchains present a safe option for the way transactions have always been carried out, altcoins are convincing at the moment as disruptive technologies. Both industry and ordinary users find ways to make their processes simpler and safer.

But without a doubt the offer of Blockchain transparency turns out to be the most attractive feature of the altcoins. The interest in ending the lack of clarity in the management of information leads companies in the private and public areas to find an excellent opportunity to end this problem in this type of technology.

Some of these altcoins present their specific advantages such as the case of Ethereum, which offers the simplicity of being able to develop tokens without the need to create a new Blockchain network. Through a Smart Contract we can create the bases of a new token and thus reduce development costs by making it simpler to finance projects.

Most representative Altcoins

It is still very difficult to calculate the amount of existing altcoins, because more and more tokens are created as a means of financing different projects. But among the most recognized we can highlight the following as the best projection:

  • Ethereum: It is a decentralized platform where anyone can develop and publish a Smart Contract, computer programs that serve for the development of agreements between parties. The platform has its own cryptocurrency, Ether.
  • Ripple: A private company that develops software for banks. It uses of XRP, the cryptocurrency that works autonomously within the infrastructure of the company and could work autonomously if Ripple disappeared or got rid of this digital currency.
  • Dash: It is a solution for day-to-day payments. Its first name was XCoin, which was later replaced by Darkcoin, however, the community didn not like it either because of the negative connotations. Finally it was baptized as Dash, a contraction of Digital Cash.
  • Monero: One of the most liked projects among the community, since it offers great privacy through ‘ring signature’, a group of cryptographic signatures with at least one real participant but which does not offer the possibility of knowing which is the real one within the group, since they all appear as valid.

There are many other altcoins that have achieved recognition and among them are:

  • Litecoin: Created in 2011, its block confirmation time is lower than Bitcoin (2.5 minutes) and it uses another mining algorithm. There is a total limit of 84 million coins. By mid-2014, it had a market capitalization of approximately 160 million dollars.
  • Primecoin: Created in July 2013, it operates by trying to find new prime numbers thus bringing knowledge to  mathematics. Its blockchain contains the discovered prime numbers, thus producing a public record of scientific discoveries in parallel with the public accounting book of transactions. By mid-2014, it had a market capitalization of approximately $ 1.3 million.

More and more specialized buying and selling markets are filled with such unique names as PutinCoin, WeAreSatoshi, Rasputin Online Coin, Stress, Piggycoin, CHIPS, TRON or Pluton, and each day new altcoins developed for specific purposes arise, with their own protocols and of relatively greater ease of mining.

Disadvantages of altcoins

  • Liquidity: The liquidity of the majority of altcoins at the moment is negligible compared to Bitcoin.
  • Failure of many projects: The projects that finance altcoins are not always successful.
  • Speculation: Because they have a relatively short life cycle or are intended purely for speculation.
  • Duplicity: There are many projects that are almost the same as others with slight cosmetic changes and which sole purpose is of being a speculative and rapid enrichment tool.

Future of the altcoins

Alcoins are definitely a great innovation in the world of digital investments and are as unpredictable as they are exciting. Bitcoin represents from its advantageous first position a great competition for any other project, so they all try to create their own niches, with the aim of reinventing the way we do business.

If this method of carrying out transactions is expanded as much as has been speculated, and if the blockchain is established as the immutable technology that definitively transforms information management, surely we expect to see many more altcoins moving in the digital world of business.

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