Bitcoin vs Altcoins: main differences and advantages
Bitcoin was originally developed as the first and only cryptocurrency in the world. The original idea was to create an alternative, decentralised digital currency that could eventually replace fiat money, like the dollar or euro. With time, Bitcoin grew and found new rivals. While Bitcoin still holds the majority of the market share, its alternatives are now becoming more popular. In this article, you will find out more about the rivalry between the king of the market — Bitcoin and claimants to its throne — altcoins.
The king of the market
Bitcoin is the first cryptocurrency that appeared at the dawn of the crypto revolution. It’s the first generation project of crypto with the highest price per coin today. With great power comes the high cost of transactions and its relatively low speed. Still, the founding father of crypto has a lot to offer:
- Sequential record
- The block size is 1 MB
- Fixed transaction size in blocks
- Commission reward to miners
The first generation of altcoins inherited a lot of interesting features. All cryptocurrencies related to the first generation use Bitcoin source code as a basis.
Of course, when we talk about the first generation, we mention Litecoin, Dogecoin, Reddcoin, and others. These coins use simple ledgers that record transactions.
Proof of work
The first generation of blockchains use Proof-of-Work. When we talk about Proof-of-Work, we should mention that there are several problems with this consensus.
It makes networks costly — mining requires much electricity. Bitcoin uses more electricity, annually, than the whole of Argentina. The Bitcoin mining industry is enormously energy-intensive.
One more feature worth mentioning is a 51% attack. A 51% attack on a blockchain refers to a miner or a group of miners trying to control more than 50% of a network’s mining power. Bitcoin is responsible for more than 50% of the cryptocurrency market cap, so the consequences for such an attack can be just enormous.
Newer coins use different mechanisms to reduce both the cost and complexity of mining. They can process many more transactions per second than Bitcoin’s paltry seven.
Let’s take a look at the statistics for transaction quantity and confirmation time of most popular platforms:
- Bitcoin network: 7 transactions per second (confirmation: ~60 minutes)
- Ethereum network: 15 transactions per second (confirmation: ~5 minutes)
- Litecoin network: 56 transactions per second (confirmation: ~30 minutes)
- Bitcoin cash network: 61 transactions per second (confirmation: ~60 minutes)
- Ripple network: 1,500 transactions per second (confirmation: ~4 seconds)
Bitcoin vs altcoin — which one is better?
In terms of popularity, Bitcoin will always be the top dog. Traders just adore this cryptocurrency and there are almost no real contestants that can challenge BTC. Bitcoin’s profitability for traders is facilitated by:
- Transit of cryptocurrency
- Good reputation
- High volatility
- Availability on platforms
The price of BTC moves the market. In other words, when BTC sneezes, all crypto markets catch a cold. Pump-like movements of the crypto world are built on the Bitcoin phenomenon.
Big whales also prefer to hold Bitcoin in their wallets because of a few reasons:
- It is guided by the principles of technical analysis
- Reacts well to news
- Does not depend on altcoins
- Shows good dynamics and excellent liquidity
Well, yeah, one more thing, altcoins are less promising for trading. They are usually capitalised through the transit to Bitcoin, which increases their correlation with the main crypto by 90%.
That’s why, when it comes to trading, big whales may avoid altcoins due to:
- High correlation with Bitcoin
- Less volatility
- Low liquidity
- Less predictability
Investing in BTC or altcoins?
Bitcoin has one big advantage over altcoins — experience. BTC has been on the market for more than 10 years. These are 10 years of steady growth that have not been repeated by any altcoin to date.
Of course, we all know that BTC can go higher than sixty thousand dollars and lower than three thousand. That’s what investors actually like about BTC. This and its chances of gaining regulation and derivatives. In other words, BTC has already become a conservative asset with a good history of stable profit.
On the other hand, altcoins may change the situation drastically. We should expect that the last BTC will be mined somewhere in the 2140s. While the new rise of altcoins should be in the 2020s. That’s why everybody talks about a new era of altcoins!
Technically, Bitcoin has already become obsolete, and when a new major project appears, it may drop in price. And yes, BTC actually has no fundamental pricing component. So, its price is based on its popularity and has high risks of depreciation.
However, do not forget that altcoins have higher potential when it comes to price. The calculations are simple, statistically speaking, 7 out of 10 altcoin projects fail during their first year. Two usually maintain their initial price and one can grow by up to 10 or even 100 times.
BTC cannot offer the same results as these newbies. That’s why investors hold BTC as a ‘wallet savior’ while risking their money on newcomers of the cryptomarket.
How do altcoins solve the problems of BTC?
Altcoins are here to solve the following problems of BTC:
Scalability problem. The Bitcoin blockchain structure is relatively old. Starting from the second generation, altcoins became something more than just a payment method. Ethereum, for instance, created a structure of Smart Contracts that provide better scalability and more security for transactions.
Anonymity issue. The transactions in the Bitcoin network can be called semi-anonymous. You don’t need to be a detective to trace a wallet just by following the transaction number. Anonymity tokens, like Monero or Golem, take security to a completely new level and protect a user’s data from being traced.
High cost of transactions. Proof-of-Work takes a lot of energy, that’s why new consensus methods, like Proof-Of-Stake have gained popularity amongst altcoins.
Emission problem. We don’t know what will happen when the last BTC will be mined, but a lot of experts believe that it will be the turning point of the whole crypto market. For better or worse. That’s why altcoins create new ways to work on emission.
Conclusion
No one argues that BTC is the king of all cryptocurrencies. The entire crypto market is highly correlated to BTC but altcoins have much greater potential than ever. Remember, 1 out of 10 new altcoins have the potential to grow 10 or even 100 times a year. Especially when the market is bullish. BTC doesn’t have the same potential anymore but, of course, the market changes rapidly… And who knows? Maybe tomorrow we will wake up in a world where one BTC costs one million dollars or even more!
