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What is Altcoin?

• by System
• Wednesday, August 31, 2022

Altcoin, also known as alternative coin, is a term used to describe digital currencies other than  Bitcoin . Any Cryptocurrency existing other than Bitcoin can be qualified as altcoin.

After the success of Bitcoin, the first altcoin to be released was Namecoin (NMC). Although Bitcoin, the first cryptocurrency, dominated the majority of the cryptocurrency market for a long time, its market share decreased with the increase of altcoins. As of March 2021, there were almost 9,000 cryptocurrencies on the market. Altcoins accounted for more than 40% of the total cryptocurrency market in March 2021.

Many of them are derived from Bitcoin and thirdly; Since the cryptocurrency is bitcoin, altcoin price movements tend to mimic those of Bitcoin. However, analysts say that the maturity of cryptocurrency investment ecosystems and the development of new markets for these cryptocurrencies will make altcoins' price movements independent of Bitcoin's buy and sell signals.

Why Common Altcoin?

The naming of cryptocurrencies other than Bitcoin as altcoins symbolizes that Bitcoin was the original cryptocurrency and that later cryptocurrencies were accepted as an alternative to Bitcoin. "Altcoin" is a combination of the words "alt" and "coin" and includes all alternatives to Bitcoin. It is similar to the basic framework for Bitcoin and altcoins. As such, they share code and function as P2P (pear to pear) systems, or as a giant computer capable of handling large amounts of data and transactions at the same time. In some cases, altcoins also aim to become the next Bitcoin by becoming an inexpensive method for digital transactions. The best-known examples are the ERC-20 tokens, which are at the top of the Ethereum blockchain.

Since Bitcoin's creation in 2008, most of the more than 9,000 alternative cryptocurrencies that have been released were originally designed as modified copies of Bitcoin through a process known as a Hard Fork. However, despite all these similarities, there are also functions that make each altcoin different from the others. Therefore, it cannot be said that altcoins are exactly copies of Bitcoin.

Altcoins derived from Bitcoin, usually Bitcoin's "Proof of Work" It offers a similar mining process based on the (PoW) idea algorithm. However, there are a few that have tried methods of achieving alternative consensus algorithm within different blockchain networks; There are more cryptocurrencies. The Proof of Stake consensus algorithm is the most common alternative to Proof of Work. In addition to these, Delegated Proof of Stake, Proof of Burn, Proof of Authority and Delayed Proof of Work consensus algorithms can be cited among other important examples.

Although some users may find the term "altcoin" derogatory or insulting, it is generally accepted that the term altcoin is neutral. Therefore, the term altcoin does not express a positive or negative emotion. On the other hand, the term "shitcoin", for example, expresses a negative emotion and is often considered pejorative.

Two Reasons for Altcoin's Emergence

The two reasons for the emergence of altcoins are the cryptocurrency world and this sector; is to grow. It is also aimed to make transfer transactions faster than Bitcoin. Mining operations are easier with altcoins than Bitcoin. Thanks to the altcoins, the market has become more active and crypto currencies with faster transfer process have also been created.

What is the Difference Between Bitcoin and Altcoin?

Bitcoin is the first example of a cryptocurrency, and its philosophy and design is a testament to the development of other digital currencies. However, its application has some shortcomings. For example, Proof-of-Work (PoW), the consensus mechanism used to create blocks, is energy-intensive and time-consuming. Bitcoin's smart contracting capabilities are also limited.

Altcoins improve the limitations of Bitcoin to provide a competitive advantage. a few; The altcoin uses the Proof-of-Stake (PoS) consensus method to minimize the time and energy consumption required to create blocks and validate new transactions.

Another example is the world's largest by market capitalization, used as gas (or payment for transaction costs) in smart contracts on Ethereum.