In the simplest terms, cryptocurrency is an electronic currency that is stored in e-wallets or computer files, and it is transferred and tracked using blockchain technology. The concept of cryptocurrencies is still incredibly recent considering that the first decentralized crypto, Bitcoin, was created just over a decade ago in 2009.
In its relatively short history, however, cryptocurrencies have ushered in a radically different and innovative era when it comes to performing financial transactions online.
What’s more, cryptocurrencies have the potential to usher in social and economic growth throughout the world, mitigate the risk of fraud, and strengthen e-commerce. Almost everyone has heard of Bitcoin, but what many haven’t necessarily heard is that there are a range of alternatives to Bitcoin when it comes to cryptocurrencies.
More than 4,400 cryptocurrencies are traded today, and in this article, we’re going to be looking at 5 of the most viable and promising Bitcoin alternatives.
1. Ethereum (ETH)
Ethereum is by far the most successful and stable alternative to Bitcoin. Launched in 2015, this cryptocurrency mirrors Bitcoin in the way that it implements the same blockchain system in order to track the currency’s value and its holders on an international scale. Ethereum is a decentralized software platform, and the idea is that it will create financial products which will be accessible to anyone and everyone regardless of their nationality, ethnicity or faith.
Ethereum’s applications are run on its specialized token, ether, which basically functions as a vehicle for developers to move around on the Ethereum platform and build blockchains. At the moment Ethereum is the second-largest digital currency, preceded only by Bitcoin, and is certainly worthy of serious consideration.
2. Litecoin (LTC)
Litecoin is another reputable and successful contender to Bitcoin and Ethereum. Launched in 2011, this cryptocurrency was created from a copy of Bitcoin’s source code rather than a fork from the Bitcoin blockchain. Since Litecoin has followed in the footsteps of Bitcoin, shares many of its attributes, and is also one of the oldest cryptocurrencies around, it is often referred to as the ‘digital silver to Bitcoin gold.’
This crypto operates within an open-sourced global payment network that is decentralised. One way in which Litecoin differs significantly from Bitcoin is that it has a much faster block generation rate, which means that transactions happen considerably faster. Compared to Bitcoin, Litecoin is the sixth-largest cryptocurrency in the world.
3. Polkadot (DOT)
Polkadot is an interesting and unique cryptocurrency that is focused primarily on offering interoperability between other blockchains. Launched in 2020, Polkadot serves as a blockchain for blockchains, enabling interactions with additional blockchains that are a part of the Polkadot ecosystem. This is a critical distinction that separates Polkadot from the cryptocurrencies mentioned before because this not only conserves money and resources but also enables developers to access the Polkadot community more easily.
Essentially, developers no longer have to actually build their own communities for the purpose of building blockchains or other decentralized applications. Polkadot has successfully simplified the innovation process, which means that developers don’t have to build everything from scratch. Moreover, developers can depend on the security that Polkadot’s chain already has – a concept known as shared security. This is in contrast to Ethereum, where developers can build blockchains but have to create their own security measures.
4. Monero (XMR)
Monero is an open-source cryptocurrency that is built upon and operates around the concept of privacy. Launched in 2014, Monero’s blockchains are intentionally configured to be opaque. With other cryptocurrencies, blockchains essentially function as public ledgers displaying each transaction that has been completed on the network. With Monero, however, various transaction details such as the identity of the senders and the recipients as well as the value of each transaction are deliberately made anonymous by hiding the addresses of users.
Bitcoin’s protocol, on the other hand, relies upon pseudo name addresses in order to hide the identities of users. These pseudo name addresses aren’t completely private, however, which means that the address holder can still be identified. Moreover, the transaction history of each Bitcoin is recorded on the blockchain. Monero has a non-traceable transaction history and offers users complete anonymity and privacy.
5. Bitcoin Cash (BCH)
Bitcoin Cash is amongst the earliest and most successful forks of the original Bitcoin. In cryptocurrency, forks happen when there is a clash of interests between developers and miners, and because digital currencies are decentralized any changes to the currency’s code can only proceed if there is a general consensus. If a consensus can’t happen, then the digital currency will split and the original chain will maintain the original code whilst the new chain will implement the desired changes and become another version of the original code.
These are the events leading to the creation of Bitcoin Cash, launched in 2017. The split happened because the Bitcoin network limits the size of blocks to one megabyte, and Bitcoin Cash increased this to eight megabytes instead. The idea behind this was that larger blocks could contain more transactions, therefore increasing the speed of transactions and accommodating scalability.
The Currency Of the Future?
As far as investments are concerned, cryptocurrencies are a relatively new and high-risk venture. Cryptocurrencies are generally volatile and unpredictable, and this is because they are not backed by a centralized organization, government or asset. This means that their value is based on the willingness of people to actually make transactions with the currency, and there really is no way of predicting how and when a cryptocurrency will rise or fall.
But whilst the risks are immense, the rewards can be breathtaking. There’s no doubt that cryptocurrencies are around to stay, and many observers regard them as the future of money. Whether you’re interested in taking the leap and investing in crypto for the first time or you’re looking to diversify your investment portfolio, then the Bitcoin alternatives explored in this article are a great starting point from where you can begin.