The Altcoins

[menu items for first section: Introduction to Litecoin (h1), Litecoin Defined, Brief History of Litecoin, How Litecoin Differs from Bitcoin
second section: Introduction to Ripple (h1), Ripple Defined, Brief History of Ripple, How Ripple Differs from Bitcoin
third section: Introduction to Dash (h1), Dash Defined, Brief History of Dash, How Dash Differs from Bitcoin
fourth section: Introduction to Bitcoin Cash, Bitcoin Cash Defined, Brief History of Bitcoin Cash, How Bitcoin Cash Differs from Bitcoin]

Introduction to Litecoin

Bitcoin has gained a lot of attention, particularly in the last two years, as the leading cryptocurrency on the market. As bitcoin has risen to prominence, however, several of its counterparts—known collectively as altcoins—have also become more recognizable and significant. Litecoin is a prominent example of this development, and is undeniably one of the most high-profile altcoins on the market.

Litecoin Defined

Litecoin is a decentralized cryptocurrency operating on an open source software platform. As far as its strict definition goes, it’s largely identical to bitcoin. Litecoin is a currency that exists entirely in digital form. It is “mined” by a network of users, at which point it is put into circulation. The currency is encrypted and then traded on a fully decentralized network, meaning it is not regulated by any single authority.

Again, in all of these respects it is functionally identical to bitcoin, and is viewed as perhaps the closest imitator among altcoins. However, there are still some important differences between the two, which we’ll get to in the sections below.

Brief History of Litecoin

In retrospect, it’s fair to say that the emergence of litecoin was a guaranteed eventuality after bitcoin went public in 2009. Because the underlying software is open source—meaning that anyone can see how it works—imitations were more or less encouraged. It was a virtual guarantee that some tech innovator would think up a few ways in which bitcoin could be improved upon and then introduce an alternative.

Enter Charlie Lee, the ex-Google employee who released the litecoin network to the world in the fall of 2011, just a couple years after bitcoin. Lee’s cryptocurrency was almost identical to bitcoin from day one, though he did make some changes (which we’ll discuss in detail in the next section) aimed specifically at better practical usage.

Litecoin has always operated at a far lower price range than bitcoin, though it has experienced some similar trajectories over time. In the months following its initial release, it spiked from zero to about $25 in value before gradually declining to lower values for the better part of three years. Like bitcoin, litecoin experienced new peaks throughout 2017, reaching as high as $85 over the summer (though generally trading in the $40 to $60 range).

Also like bitcoin, litecoin is accepted at a growing number of online and in-person merchants over the years. However, most of these merchants are not as mainstream as some of the high-profile bitcoin retailers, and litecoin is best thought of as a peer-to-peer system or an investment commodity.

How Litecoin Differs from Bitcoin

There are three core factors that Charlie Lee built into litecoin to differentiate it from bitcoin: its processing speed, its proof-of-work algorithm, and its currency cap.

First, Lee integrated something called Segregated Witness, which is an underlying system to make block compilation more efficient. Segregated Witness enables a “Lightning Network,” which in turn makes litecoin processing significantly faster than bitcoin processing. A litecoin transaction can be processed, approved, and put into action in about 2.5 minutes; the average bitcoin transaction takes about 10 minutes.

Lee also sought to make litecoin mining more accessible than bitcoin mining, and did so by basing the process on a memory-intensive process rather than one dependent on processor power. At this point, bitcoin mining is only accessible to those willing to pay for a high-powered computer that can handle the process. Lee based litecoin on the scrypt algorithm, which relies less on this sort of machinery and is generally more accessible.

Finally, Lee set the cap of litecoins that can ever be mined four times higher than that of bitcoin. It’s believed that there will only ever be 21 million bitcoins in circulation, whereas we will eventually reach 84 million litecoins. One result of this could be that litecoins become more appealing for practical usage. There are so few bitcoins (relatively speaking), and the coins are worth so much, that an average transaction might involve something like 0.0001% of a bitcoin. Litecoins can simply be traded in more manageable amounts, due to there being a lower value per coin.

In Conclusion

Of the dozens (if not hundreds) of alternatives to bitcoin that have arisen, litecoin is the most similar and one of the most intriguing. While it is nearly identical in both structure and concept, the few differences that exist are significant and they make litecoin worth exploring for its own reasons.

Introduction to Ripple

Numerous alternative cryptocurrencies, known collectively as altcoins, have risen to prominence since bitcoin’s introduction in 2009. These currencies have varying properties and features, with some designed as near-bitcoin mimics and others exploring different concepts entirely. As many altcoins as there are, only a select few have grown to rival bitcoin. Among them is ripple, which has garnered a fairly significant amount of attention.

Ripple

Ripple Defined

For all intents and purposes, ripple is both a decentralized digital payment network and its own form of cryptocurrency. As with alternatives like bitcoin and litecoin, ripple uses open source software to facilitate the confirmation of digital transactions by a vast network of servers. However, its primary purpose is not to present an alternative currency so much as to serve as an intermediary facilitating currency transfers. Described as a real-time gross settlement system, the Ripple Transaction Protocol (RTXP) uses tokens to turn one currency into another.

Those “tokens” are the native cryptocurrency to the ripple network, which is known simply as ripple (and often written as XRP). While ripples can and do hold their own value, the idea is that they’re used primarily for exchange purposes. A user can buy a given quantity of ripples and send them to another user, who can then convert them back into currency or another store of value.

Brief History of Ripple

Often, when we explore how altcoins came to be, the story begins with bitcoin. Because bitcoin and its blockchain were introduced on a foundation of open-source software, imitations were essentially encouraged, and thus many of the most noteworthy altcoins operate in very similar ways. Ripple, however, has a more unique history that actually dates back to 2004 (five years before bitcoin went public).

That is when a man named Ryan Fugger first developed Ripplepay, which was meant to be a decentralized monetary system that could bring about secure payments. This system existed as Fugger had designed it until 2011, when additional developers found a way to tweak it and make it more useful. The new idea was to put together a digital currency system that would rely on a consensus among network members to confirm transactions, rather than the mining process used in bitcoin. Additionally, ripple’s creators wanted to make their system less dependent on centralized exchanges than bitcoin, and wanted to make the process faster and more electronically efficient.

By 2012, a new company called OpenCoin, conceived by Arthur Britto, David Schwartz, and Chris Larsen, was introducing the Ripple Transaction Protocol. This is the ripple system as we know it today, complete with the ripple cryptocurrency units that were introduced within it.

Bitcoin and Ripple

How Ripple Differs from Bitcoin

We’ve already addressed a few of the key differences between ripple and bitcoin, particularly with regard to purpose. Bitcoin was intended to be an alternative to fiat currency, as well as a potential commodity for investment. The ripple system, however, exists primarily to make cross-border (or cross-currency) transfers of wealth faster and more reliable. There are some additional differences between the two cryptocurrencies.

Perhaps most significant is the fact that ripples are not mined the way bitcoins are. Bitcoin mining is a continual process that has to do with both confirming transactions and bringing new bitcoins into circulation. With ripple, the creators have already created 100 billion units of XRP. While some are in circulation, the company made the decision earlier in 2017 to tie up 55 billion XRP in “smart contracts,” which will automatically release 1 billion XRP per month into the public market. This ensures that the company cannot simply control the value of ripple by altering the supply at will.

The other primary difference between the two cryptocurrencies is that ripple transactions are faster. The consensus process used to confirm transactions (which means various “node” computers on the network confirm the same new set of transactions at once) takes less time than the mining process through which bitcoin trades are confirmed. Bitcoin transactions can take several minutes (or longer); more relevant to ripple, other modes of currency transfer can take hours or even more than a day to go through. A ripple transaction is confirmed and completed in a matter of seconds.

There are a few more small differences as well:

  • Using ripple incurs larger transaction fees than bitcoin.
  • Ripple’s network tracks slightly more information about users. While personal data is not made public, account balances are.
  • Ripple proponents often note that the exchanges themselves take place across the decentralized network. Bitcoin, while itself a decentralized concept, does rely on centralized exchanges to facilitate the movement of funds.

In Conclusion

Ripple is not simply another alternative to bitcoin. While there are some similarities between the two, ripple serves a more unique purpose by helping to make wealth transfers efficient and affordable. Whether you are looking to convert a fiat currency, cryptocurrency, or even a commodity, ripple can help you to trade it with ease.

Introduction to Dash

With bitcoin surging into the mainstream, several altcoins have grown in popularity as well. In some cases, these are little more than smaller-scale bitcoin imitations. In others, they’re not really “coins” so much as redefined blockchain networks meant for other purposes. The most interesting altcoins are those that exist specifically to improve upon flaws in the bitcoin system. This is the kind of thinking that lead to the development of dash, which has turned into one of the most valuable and noteworthy cryptocurrencies on the market.

Dash

Dash Defined

Dash is an open-source, decentralized, peer-to-peer digital payment network built as an evolution of bitcoin. Dash was designed to work similarly to bitcoin and to serve the same general purposes. However, its creators identified specific issues in the bitcoin system that can cause user frustration and may ultimately slow the evolution of bitcoin, and attempted to address them with the creation of their altcoin.

Functionally speaking, dash can largely be viewed as a direct alternative to bitcoin, and one trading at a lower price. However, if you specifically care about underlying practices and growth potential, it may be that dash will have a unique appeal to you among mainstream cryptocurrencies.

Brief History of Dash

The history of dash can be somewhat difficult to follow because this particular cryptocurrency has gone through a few different names. It was created early in 2014 by a developer named Evan Duffield, who dubbed the cryptocurrency “XCoin.” Barely a month later, its name was changed to “DarkCoin,” and another year later the name “Dash” emerged (meant to combine the words “digital” and “cash”).

Duffield’s rollout of dash didn’t go particularly smoothly. Nearly 10 percent of the total number of dash coins that will ever become available were mined within two days of the cryptocurrency’s existence, which was not supposed to happen. Duffield blamed this on a bug in the system, which was a result of having forked the litecoin code to create the currency in the first place. Despite concern surrounding the rocky launch, no steps were made to correct it. The dash community rejected various fixes, and the 1.9 million coins that were mined in those first two days remained in circulation (albeit at very small amounts to start with).

Dash has since grown in numerous ways. The actual company (the Dash Core Team) has gained a regular base of employees, and the value of the currency has jumped significantly. Through August 2016, dash was valued almost exclusively in the range of $1-$10. Soon thereafter, it began a fairly steady rise (much like other major cryptocurrencies). Dash topped $100 for the first time in March 2017, topped $200 in June, and spent the fall of 2017 trading between $300 and $400. As with its counterparts, it has been volatile, thought it had an upward trend throughout 2017.

Dash & Bitcoin

How Dash Differs From Bitcoin

As mentioned, the dash developers sought to provide more of an updated take on the bitcoin concept than a direct alternative. To do this, they identified what they believed to be weaknesses in bitcoin and sought to address them accordingly. These are some of the primary features that dash introduced as a result of this effort:

  • Masternodes: Digital currencies work via a “mining” process. This process involves a massive network of “node” computers working to verify blocks of transactions, which are then encrypted and added to the blockchain. With dash, the idea of “masternodes” was introduced as a deeper layer to the node network concept. To operate a masternode, a dash user needs to invest 1,000 dash; the operator will then receive 45 percent of the dash reward for each block mined (with 45 percent going to the miners and 10 percent going to the dash budget system to fund employees). Masternodes exist to facilitate the following three functions in this list.
  • PrivateSend: Dash’s developers realized that despite bitcoin’s reputation for anonymity, a motivated data miner can trace transactions back to individuals. That’s not to say personal information is insecure in bitcoin transactions, but dash seeks to be more secure by offering the option for PrivateSend transactions.
  • InstantSend: Relative to some forms of bank transfer, bitcoin transactions are quite quick. However, compared to some other means of digital cash transfer, they’re actually on the slower side (with block verification often taking 10 minutes or more). The masternodes’ main function is to facilitate faster verification, such that “InstaSend” transactions can be confirmed and enacted in a matter of seconds.
  • Decentralized Governance: Each masternode gets one vote for governing decisions related to the dash blockchain, such that there are no unilateral decisions made by an individual, company, or institution. Because masternodes are already incentivized, there are no extra perks to voting one way or another, and majority rules when potential changes arise.
  • Self-Sustainable: The majority of cryptocurrency networks involve a great deal of volunteer work. In addition to individuals and groups voluntarily operating nodes (for which they are generally rewarded with digital cash), developers often work for free, which means projects are dependent on continued enthusiasm. Dash is different in that, as mentioned previously, developers receive 10 percent of the reward for each block mined.

In Conclusion

Dash has become a bitcoin alternative in the truest sense, operating as another cryptocurrency with distinct functionality that bitcoin lacks. Its function is as a peer-to-peer payment and exchange system, and thus isn’t as useful as bitcoin for transactions with merchants. However, like other cryptocurrencies, it has potential as an investment asset. And the various changes it made to improve upon the bitcoin platform do enhance its utility for peer-to-peer transactions.

Introduction to Bitcoin Cash

Bitcoin cash may be the most misunderstood altcoin that has emerged in the cryptocurrency. While the term “altcoin” in general refers to cryptocurrencies aside from bitcoin, the fact that this particular option is called bitcoin cash leads people to believe it’s the same as the original. Despite its close association, bitcoin cash is not simply another name for bitcoin. Rather, it is a separate cryptocurrency built as a direct twist on ordinary bitcoin.

[Insert image of bitcoin cash]

Bitcoin Cash Defined

Bitcoin cash is a fully decentralized, peer-to-peer cryptocurrency. In this sense, it is essentially identical to bitcoin, and operates in a similar fashion. Users can think of it as an encrypted currency that exists solely in digital form, and which is not centralized at any company or financial institution. However, a proper definition of bitcoin cash requires the context of bitcoin itself.

Bitcoin set the standard for cryptocurrencies, both in demonstrating their potential and in establishing how they work. It has risen to become far and away the most valuable cryptocurrency on the market. However, over the years developers have found various ways to improve upon or alter bitcoin’s founding principles so as to develop cryptocurrencies that serve specific purposes (because bitcoin itself, for all its benefits, isn’t particularly versatile). This is what has led to some of the most prominent altcoins and, more directly, to bitcoin cash. Technically, bitcoin cash is not an original development, but rather a hard fork from the bitcoin protocol.

Brief History of Bitcoin Cash

Bitcoin cash is a newer altcoin that emerged during the summer of 2017. It was around this time that many in the bitcoin mining community decided to push for a version of the cryptocurrency that would allow for faster transactions, and thus more convenient usage in peer-to-peer transfer. Bitcoin’s blockchain limits block sizes to 1 MB, a change that was implemented fairly early in its development to cut back on unlimited block sizes and stop relevant hacks. However, the 1 MB block size limits transaction speeds.

When enough bitcoin miners agree upon a change, they can implement a hard fork, which is a change in the blockchain protocol that will result in a new cryptocurrency. Such a change was put into effect on August 1, 2017, with the new, hard-forked blockchain accepting transactions involving larger (8 MB) block sizes. This did not end bitcoin (BTC), but merely established bitcoin cash (BCH) as an alternative. Consider it bitcoin’s speedier, transaction-geared cousin.

It may be that this hard fork was inevitable once bitcoin’s value skyrocketed and it began to be viewed more and more as a commodity. The idea of bitcoin cash is for it to be used more as a transactional currency than as a resource or investment. When it launched, its value was about 0.5 BTC, though it soon plummeted to 0.1 BTC by the end of July 2017. Since then, bitcoin cash has gotten its legs under it. While still a very new cryptocurrency with a volatile value, it began to trade in a range of 0.2-0.3 BTC, making it one of the most valuable altcoins on the market.

Another note regarding the early history of bitcoin cash is that upon its creation, everyone who owned bitcoin came to own an equal amount of bitcoin cash. This means that for every unit of BTC in circulation at the time of the hard fork, there was a new unit of BCH. However, because of bitcoin cash’s inherently lower value, its market cap still remains far below that of bitcoin.

[Insert image of blocks/blockchain]

How Bitcoin Cash Differs from Bitcoin

You get the basic idea—bitcoin cash emerged as a direct alternative to bitcoin, relying on larger block sizes for its blockchain to allow users to focus more on transactions than investments. But what does that actually mean?

A smaller block size means that fewer transactions are processed per second, because of the limited space for them. With bitcoin’s 1 MB block size, a single transaction can take seven or eight seconds, and users can wait 10 minutes or more to see transactions confirmed on their end. The issue here for bitcoin’s growth as a transactional currency is that other digital payment platforms such as PayPal can conduct as many as 2,000 transactions in a single second.

Bitcoin cash closes this gap by increasing block sizes to 8 MB. Many more transactions can be processed per second, per hour, and per day, ultimately improving transaction confirmation speed on the user end. It also makes bitcoin cash a convenient currency for digital transfers, particularly when compared to bitcoin and altcoins.

In Conclusion

Bitcoin cash is a hard fork to the bitcoin network that creates an alternative version of bitcoin aimed specifically at facilitating fast and easy transactions. The move was made to fix a flaw in the bitcoin network—namely, slow transaction speeds—as well as to compete with alternatives. From PayPal to litecoin, there are numerous digital transfer methods and altcoins that work more quickly than ordinary bitcoin in this regard. But bitcoin cash has provided bitcoin supporters with a competitive option that is identical to bitcoin in most every other way.