Cryptocurrencies are virtual currencies that normally operate independently of governments and banks but are still valid for exchanges like other physical currencies. For the past decade, cryptocurrencies have increased in popularity, and more people are investing in them.
Some countries even allow people to use them to make purchases. Bitcoin, launched in 2009 by Satoshi Nakamoto, was the initial decentralized cryptocurrency and remains the leader of the market.
However, with the popularity of cryptocurrencies, there are more and more new ones that have come into the market. Because of the variety, people, especially those new in the cryptocurrency world, might be confused on which one to trade and what makes Bitcoin stand out in the market.
Other Crypto Currencies
The creators of Bitcoin made it intending to ensure the security of payments across peer-to-peer networks. They also had the aim to democratize money, eliminate third trusted parties in transactions, and make transactions anonymous.
While it is the most popular cryptocurrency, it needs traders to have specialist mining equipment and also has slow transaction speeds compared to other cryptocurrencies. Some of the other cryptocurrencies in the market include;
Bitcoin cash (BCH)
Created by a ‘hard fork’ in 2017 as a Bitcoin offshoot, this is a standalone digital currency. People developed this currency following slow Bitcoin transaction speeds and the inability of the Bitcoin network to agree on proposed upgrades.
Compared to Bitcoin’s 1mb block size, the maximum block size for BCH is 8mb, which allows it to make more transactions every second. However, just like Bitcoin, it requires you to have specialist mining equipment.
This cryptocurrency underpins RiplleNet, a payment network used by big financial institutions and banks like American Express and Sandler. Since it operates differently from other cryptocurrencies, many people question if it is a true decentralized cryptocurrency.
One of its main advantages is that it has very high transaction speeds. However, you cannot use it without Ripple, its underlying cryptocurrency.
This payment network works the same way as RippleNet, and it can process multiple currency transactions. The currency that underpins it is called Lumes, commonly known as stellar. You can use Lumes to make payments on the network.
Lumes could also be anti-spam because you need to pay transaction fees for every transaction. One of the main advantages is that it integrates with banks, and you can use it to process multiple currency transactions. However, many people do not recognize it as much as they do other currencies.
This Ethereum network cryptocurrency allows you to code and release your ‘decentralized applications’ and then create ‘smart’ contracts that automatically enforce your clauses.
To prevent hackers from spamming the ether network, the network processes transactions and destroys small amounts of ether.
One of the main advantages is its high transaction speeds. However, it has an uncapped supply, which means could make it inflationary.
According to Charlie Lee, the founder of this cryptocurrency, he made it as a ‘silver to Bitcoin’s gold.’ Just like silver’s supply is more than that of gold, Litecoin has a maximum supply of 84 coins, which is four times more than that of Bitcoin’s.
This cryptocurrency has high transaction speeds but low market capitalization than Bitcoin.
What Makes Bitcoin Different?
Bitcoin is by far the most common cryptocurrency and one that most people trade in. Some of the things that make it different include;
Bitcoin is more accessible, has more merchants, more exchanges, and more hardware and software to support it. It is also more liquid, with greater volumes than any other cryptocurrency.
Compared to other cryptocurrencies, Bitcoin has the most business people creating their businesses around it with a lot of dedication, intellect, and creativity that make it more useful. It also has the biggest developer ecosystem with the most implementations and software.
Soundness and stability
Andrew Poelstra, a Blockstream mathematician, said that they care about soundness, stability, and long-term implementations in the Bitcoin community, often at the expense of privacy.
He said that Bitcoin developers focus on developing things that help improve their overall goals while still preserving the current system state.
He added that the difference between Bitcoin and other cryptocurrencies is that the developers work hard to improve the system and take every precaution not to destroy it or any of its aspects.
Maintaining its decentralization
Poelstra said they desire to minimize the cost people incur to be participants in the network to maintain useful decentralization levels.
He said they care about minimizing disk space, minimizing bandwidth and CPU resource usage, unlike other cryptocurrencies that trade such things off in favor of fungibility technology and privacy.
He added that they do that not only because of the Ethos in the Bitcoin community but also because of scalability concerns. Concerns about blockchain scalability are more profound in Bitcoin than other cryptocurrencies because they have not gained a lot of traction.
Unlike other cryptocurrencies, users have proved that Bitcoin is a great store of value. Bitcoin ranks as number one for being a store of value over any other cryptocurrency. This is because it has been around for a long time and has never failed.
Bitcoin’s security has been proven by almost all matrices exceeding other cryptocurrencies because of its usage. More businesses and governments have also started accepting Bitcoin as a means of transaction, which shows that it is safe and reliable.
This is an achievement that not many other cryptocurrencies have made, and it would take time for them to get there.
Why Differences In Cryptocurrencies Matter
Traders need to understand the differences between cryptocurrencies because it gives them clues of how demand and supply for every cryptocurrency may change in the future and influence market prices and how to trade cryptocurrencies.
Supply and demand affects the coins in the following ways;
Circulating supply plus upper limit- The supply of cryptocurrencies have a major impact on setting market prices. Holding all other factors constant, the scarcer the coins, the more value they have. For example, the upper limit for Bitcoin Cash and Bitcoin is 21 million coins, while that for Ripple and Litecoin is 100 million and 84 million.
Once all the coins from those cryptocurrencies are released or mined, they become deflationary. However, cryptocurrencies like Ether that don’t have fixed limits may become inflationary depending on the coins that are lost or burnt.
Cryptocurrency release dates and mining- Coins’ supply changes with time as new coins are released and mined. Bitcoin, for example, has a current mining rate of 12.5 coins for each verified block. The reward halves after around four years.
On the other hand, the founders of Ripple pre-mined the coins, and the release rate is a billion coins every month.
Decentralized applications- Bitcoin, Litecoin, and Bitcoin cash are standalone cryptocurrencies. Ether and Ripple, on the other hand, are part of wider networks that have expanded applications.
If the networks on which Ether and Ripple are had increased popularity or mainstream businesses start adopting them, there would be an increase in the demand for cryptocurrencies.
Reputation- Although it has fewer applications, Bitcoin remains the most popular and most used cryptocurrency mainly because of its reputation. However, if it were to have a negative reputation, its prices would go down.
Scalability and transaction speed- as more people adopt cryptocurrencies, their ability to handle many transactions and their transactions speeds are currently under scrutiny.
Security and blockchain size could also influence scalability because they affect mining profitability and users’ willingness to use the coins. Therefore, as a trader, you should pay attention to forks and software updates to monitor the evolution of scaling technology.
Why People Buy Altcoins
While many people buy and trade in Bitcoin, some people will also buy Altcoins for the following reasons;
Bitcoin could suffer a catastrophic failure that other cryptocurrencies are not subject to. The first catastrophe would be a technological flaw, like a virus allowing people to steal coins. The flaw could be a weakness in the consensus code or the cryptography that Bitcoin uses.
However, even though the developers catch the vulnerability early, it could have numerous effects on Bitcoin. The value of the coins could drop, and there could also be a lack of trust from traders, not only for Bitcoins but also other cryptocurrencies.
An economic flaw is another way that Bitcoin could die catastrophically, for example, a code change that can award an entity millions of coins for no explainable reason. One economic flaw could be a change in the Bitcoin economic rules.
Compared to Bitcoin, many other cryptocurrencies have technical differences, which is one of the main reasons many people trade in them.
This is because they have the same utility as Bitcoin, but the technical differences are an addition, making them better and more useful than Bitcoin.
Other cryptocurrencies have tried to come up with more niches of usage. The main way that this can make sense for other cryptocurrencies is to start doing something that Bitcoin won’t or can’t do.
The developers of Ripple, for example, initially created it as a means for large institutions and banks to transfer value.
Niche usage, however, is debatable because Bitcoin developers and entrepreneurs could bring about the same profitable innovations or better ones to Bitcoin.
While Bitcoin sounds and looks more superior to other cryptocurrencies, it does not mean that investing in different cryptocurrencies is bad.
As a trader, you need to evaluate the differences and see what advantages and disadvantages the differences could bring you if you trade in Bitcoin or any other cryptocurrency.
You also have to keep up with the developments and changes in all cryptocurrencies. While Bitcoin makes unexpected growth in many sectors, altcoins could also do the same and get on the same level or higher than Bitcoin.
One of the main advancements that Bitcoin has made that other cryptocurrencies have not is establishing Bitcoin ATMs. This helps eliminate the slow transaction process because ATMs make transactions faster.
Using Bitcoin ATMs, you can buy, sell, and transfer Bitcoins faster than you would have on your phone.
- Bitcoin Security: What You Wanted to Know
- Bitcoin Wallet Safety Information
- What You Did Not Know About Crypto ATMs
- Bitcoin for Beginners
- Cryptocurrency for Beginners