Bitcoin is known as ‘digital gold’ and is by far the most popular cryptocurrency. However, it is slowly losing its dominance in the market to some great alternatives. Bitcoin has seen some great success, but it has its problems, and it’s now becoming clear that it’s not suitable for every application.
‘Altcoins’ are also based on blockchain technology, but they have some key differences in their goals, communities, and technical details. Let’s take a look at some of the most popular alternatives to Bitcoin, and why you might want to get your hands on some.
Litecoin is the simplest alternative to Bitcoin. Its goal is to be the “silver to Bitcoin’s gold”, and offer a genuine alternative with a few subtle differences.
Litecoin has a much shorter ‘block time’ than Bitcoin. 2.5 minutes rather than 10 minutes. This means that Litecoin transactions are faster, and more transactions can happen per second. Also, there will be 84 million Litecoins mined in total rather than Bitcoin’s 21 million.
Bitcoin mining is now done mainly by big mining companies with specialist hardware. Litecoin prevents this by using a different encryption algorithm called ‘scrypt’. This helps Litecoin mining stay democratic and fair.
The Ethereum project is the next biggest alternative to Bitcoin, but it doesn’t see itself as a direct competitor. Bitcoin is designed for transactions, while Ethereum is designed for so much more. The plan is to build the world’s first global, decentralized computer, and Ether tokens are the fuel that drives it. All together this altcoin is currently worth almost $20 Billion and approaching half the total value of Bitcoins. As reflected by ETH to USD exchange rate Ether stands a good chance to compete with Bitcoin for the leadership in the near future.
The Ethereum blockchain contains a fully functional programming language, meaning developers can develop applications that run on the decentralized network. These can be things like smart contracts – contracts that are automatically fulfilled when certain conditions are met.
Back in 2016, Ethereum experienced some serious problems. Some of the ‘smart contracts’ running on Ethereum were poorly written, and lot’s of money was taken from them. Instead of just accepting this outcome, the Ethereum community came up with a plan to erase that theft from the blockchain history. It worked, and the ether tokens was recovered.
However, many believe that a blockchain should be an ‘immutable’ ledger that cannot be changed. This belief has led to a few Ethereum miners sticking to the old blockchain, even though it was hacked. You can still buy Ether tokens from this original blockchain on many cryptocurrency marketplaces under the name “Ethereum Classic”.
Monero literally means “coin” in Esperanto, and it is another serious player in the cryptocurrency world. Monero has a market capitalization of over $700,000,000 and markets itself as a “secure, private, untraceable currency”. This privacy-focused altcoin gained popularity after it was adopted by AlphaBay – a major darknet market.
Technically, Monero is quite different to Bitcoin. Early developers put more emphasis on robust algorithms for privacy, meaning you can make transactions on the Monero blockchain anonymously more easily. Like Litecoin, its mining method is designed to be more resistant to centralization and specialized hardware. Also, there is no fixed block size limit, meaning increasing demand can increase block size.
All this adds up to a cryptocurrency that’s great for transacting on large marketplaces that want to stay anonymous.
Dash, or ‘Digital Cash’, is similar to Monero in many ways but has taken a slightly different approach. It rebranded from “Darkcoin” in 2015. It’s still heavily focused on privacy, but also wants to make “digital currencies so easy your Grandma would use them”.
It has some unique features such as ‘InstantSend’ for instantaneous transactions, and ‘PrivateSend’ making it more difficult to trace transactions.
Zcash is another digital currency that claims to be more secure than Bitcoin. The Zcash website states that “If Bitcoin is http for money, Zcash is https – a secure transport layer”. It does this by implementing something called zero-knowledge encryption, enabling the ‘Fungibility’ of coins.
This means unlike Bitcoins, each Zcash coin is unlinked to its history and indistinguishable from other coins. The result is that the sender, recipient, and value of each transaction remain completely anonymous.
Ripple is a global payment network that uses blockchain technology. Privately owned, centralized, and heavily sponsored by big banks – it’s about as different from Bitcoin as you can get. It doesn’t aim to liberate money or remove the need for banks in transactions. Instead, its primary aim is to make banks more efficient – and it’s working. Ripple has the 3rd biggest market capitalization after Ethereum, with a total value of Ripple coins (XRP) currently at $1.2 Billion USD.
It is designed very differently from other cryptocurrencies. The focus is to offer fast, efficient transactions, and massive scalability. Also, there is no mining whatsoever. All the XRP coins already exist and most are controlled by Ripple.
One of the more light-hearted digital currencies, Dogecoin actually started as a joke. But, with a total value of over $300 million USD, it’s becoming quite a serious Bitcoin alternative. Dogecoin’s main application has been as an internet tipping tool. Users tip other users for providing helpful content online.
Technically it is very different to Bitcoin. Its block time of just 1 minute is even shorter than Litecoin and means transactions can happen quickly. Mining also works differently. 100 Billion Dogecoins have already been mined, and there is no upper limit on how many can be mined in the future.
Which One is Best?
There is no such thing as a perfect cryptocurrency. However, most exchanges are offering a limited range of cryptocurrencies to trade with. The leading cryptocurrency exchange, CEX.IO, allows for trading Bitcoin and Ether only. As a rule it depends on the demand among the users, trading volumes and the total market cap for that particular cryptocurrency.
Each decision in designing a blockchain protocol comes with advantages and tradeoffs. Bitcoin might be digital gold, but there is certainly room for other blockchain based projects to solve the problems Bitcoin can’t.
Whether you’re looking for privacy, security, decentralization, interesting applications, or just return on investment, there is something out there for you. The best cryptocurrencies to get involved in are the ones that align with your interests and needs.