Is Bitcoin a high-tech pyramid scheme or an important piece of finance for the future? The value of the virtual currency soared to $1,200 in 2013 before crashing to about $100 in 2014 and recovering to $300-$500 more recently. That has added volatility concerns to those of viability. While many observers continue to scratch their heads about the ultimate value of the Bitcoin concept, others are investing in the idea that it will entirely change how finance works before long.
Even if they do not accurately understand how it works, most people are at least somewhat familiar with Bitcoin. However, once they begin to get involved with cryptocurrency, they may be surprised to learn that there are actually hundreds of types of cryptocurrencies known as altcoins.
The word “altcoin” is an abbreviation of “Bitcoin alternative,” and thus describes every single cryptocurrency except for Bitcoin. Altcoins are referred to as Bitcoin alternatives because, at least to some extent, most altcoins hope to either replace or improve upon at least one Bitcoin component.
There are hundreds of altcoins , and more appear each day. Most altcoins are little more than Bitcoin clones, changing only minor characteristics such as its transactions speed, distribution method, or hashing algorithm. Most of these coins do not survive for very long. One exception is Litecoin, which was one of the first altcoins. In addition to using a different hashing algorithm than Bitcoin, Litecoin has a much higher number of currency units. For this reason, Litecoin has branded itself as “silver to Bitcoin’s gold.”
It is true that bitcoin is currently too volatile to be a long-term store of value. But much of this is due to illiquidity, which is not unexpected when the technology is so new.
Many associate bitcoin with illegal transactions. The real target for illegal transactions should be cash. Cash is anonymous and private. There is no ledger detailing every transaction with cash.
Digital cryptocurrencies like Bitcoin may have failed to unseat their more traditional rivals, but the technology that underpins Bitcoin may yet bring about a revolution in finance and other industries. This technology is called the “blockchain”.
The blockchain acts as a public database or ledger, and is the technology that stores the details of every exchange of bitcoins. What makes it particularly clever is that it is designed to stop the same bitcoin being spent twice, without the need for a third party (like a bank).
Even from the early days of Bitcoin, it was believed that the blockchain could be used for much more than recording Bitcoin transactions. What the blockchain does is record a set of details that include a time, a cryptographic signature linking back to the sender and some data that can represent almost anything. In the case of Bitcoin, it is the number of bitcoins being sent but it could be a digital cryptographic signature, called a “hash”, of any electronic document.
It is inevitable that blockchain technology will become a mainstream technology. The level of interest being shown in this technology demonstrates its potential for enabling the development of applications that will bring new approaches to old business problems. It is the social, legal and financial challenges that these changes will surface that may prove a much harder problem to solve.
Just as block-chain technology has created a currency that operates without need of a bank, it could help users get loans without a bank, or make investments without a broker or exchange.
We have the technology and we need to make just few steps to discover THE COIN, but definitely this is not Bitcoin.