Although Bitcoins and other cryptocurrencies have not officially gotten the UN's stamp of recognition as legal tender, it hasn't prevented their existence and virtual circulation. With more than 650 cryptocurrencies in existence, they are a big deal, and if you are not already bitcoin trading, you probably are considering it.
So there are bitcoins, and then there is altcoin trading; it can get the best of us confused, more so if you are new to cryptocurrencies. Let's get right into demystifying bitcoins and exploring its differences from altcoins.
Where Did Cryptocurrencies Come From?
Before 2008, we all went about our business online and never even knew about anything like cryptocurrencies. Then, Satoshi Nakamoto invented the Bitcoin as a form of digital cash.
The whole point of the bitcoin was that it existed solely digitally as a decentralized electronic cash system. Cryptocurrencies came about from Satoshi's vision of building a peer-to-peer digital cash network. However, it isn't a straightforward process as it sounds and many are still trying to understand how it all works.
How Do Cryptocurrencies Work
Now, let's go back to the traditional banking system and how it works. You have a bank that centrally controls several individual bank accounts with account balances and money constantly going in and out of them.
The bank as the central control has details of all these transactions and can trace them all to make sure that it all balances out. Now, cryptocurrencies rely on peer-to-peer networks to manage the digital cash in a decentralized manner.
What it means is that every entity in the system has lists of all transactions and details are agreed upon in a consensus. If there is a lack of a consensus within the network, it could break down the system.
Unlike the traditional banking system where a central authority mints money, miners create the cryptocurrencies in the digital world. Cryptocurrencies rely on confirmations, which are done by miners and then shared with everyone else within the network.
Bitcoins And Their Functions
Bitcoins were the first cryptocurrencies created, and in a nutshell, they are essentially an electronic form of currency.
Their existence in the virtual world means that there is no need to store the money or move it through banks. Bitcoins hold intrinsic value as gold, and they can be used to buy virtually anything online or even stored up as savings.
The mining of bitcoins will stop when there are 21 million of them in circulation, and this is expected to happen around 2040.
Altcoins And Their Functions
Now, after bitcoins emerged and people started embracing them and using them, a few issues started cropping up in the system that needed improvement. That gave rise to alternative bitcoins dubbed altcoins that worked on improving the shortcomings of the bitcoin.
Soon, there were hundreds of altcoins in existence, and most would fade out of circulation as soon as they started. However, many have maintained a stronghold in the cryptocurrency market giving the bitcoin a run for its money.
Altcoins in essence function as bitcoin clones but with improvements in the speed of transactions, enhanced hashing algorithms, and better distribution methods.
The Differences Between Altcoins And Bitcoins
There are substantially minimal differences between altcoin trading and bitcoin trading. They both offer unique and highly lucrative investment opportunities but with marked levels of risks that come with any other type of trading.
Bitcoins still maintain a significant market share when it comes to cryptocurrencies, but some altcoins came up giving it a run for its money.
Given that altcoins come with improvements that the bitcoin lacks, bitcoin developers maintain a high level of innovativeness to ensure that it continues to stay at the top of cryptocurrency trading.
There is always the chance of technical and economic flaws causing bitcoins to die off catastrophically. Altcoins continually work on addressing these identified flaws to create marginally stronger digital currencies. Also, consensus flaws could lead to the bitcoins natural death.
While bitcoins, with community desires, can add utilities similar to those found in altcoins, most cryptocurrency traders prefer to put their trust in a tried-and-tested model rather than having it incorporated as a test drive.
Finally, every investor will have to critically assess both bitcoin trading and altcoin trading to figure out which one works for their needs. Often, most investors dabble in both bitcoin and altcoin trading.
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