Bitcoin is older and it was launched in 2009, whereas the first altcoins came out in 2011, and new altcoins were released regularly with the exception of stablecoins, altcoins which tend to offer a higher risk and reward as a cryptocurrency investment. Although Bitcoin is volatile, it’s the market leader and has already gained substantial value whereas Altcoins have more room to grow, but they also have a higher chance of failure. Altcoins are more advanced, Since they came out after Bitcoin, they’ve improved on its technology. In terms of transaction speeds and costs, many altcoins are far superior to Bitcoin.
Known as the original cryptocurrency even though Bitcoin was the founder of the world of digital currency. The concept of blockchain was brought forward to the world in the year 2009. Ever since then, it has become the most valued and famous cryptocurrency out there. The number of Bitcoin out there is limited, but each day, more precisely for every 10 minutes, the amount varies as new Bitcoin are mined. The mining process is crucial as, without it, bitcoin’s growth can be brought to a halt.
How Bitcoin Work:
Bitcoin was created by Satoshi Nakamoto, a pseudonymous person or team who outlined the technology in a 2008 white paper. It’s a simple concept: bitcoin is a digital money that allows a secure peer-to-peer transactions on the Internet.
The invention of Bitcoin was a breakthrough in cryptography. Bitcoin’s key innovation was the blockchain — a piece of software that acts like a ledger, logging every transaction ever made using bitcoin. Unlike a bank’s ledger, the Bitcoin blockchain is distributed and verified across a network of computers. No company, country or third party have control over it. And mostly anyone can become a part of that blockchain network.
Bitcoin is based on encryption, making it extremely secure and universally accessible. Creating a “bank account” on the global Bitcoin network generates an extremely long password a.k.a. a “private key” that is impossible for anyone else to guess. Anyone, anywhere with Internet access can receive, send, and hold Bitcoin using the public version of their key (i.e. the version of their private key that can be freely shared in order to securely receive funds).
There will only ever be 21 million BTC. Bitcoin is a digital money that cannot be inflated or manipulated by any individual, company, government or central bank.
Bitcoin is highly divisible. You can hold, send or receive fractions of a BTC. The smallest unit, i.e. 0.000 000 01 BTC, is called a “satoshi” or “sat.” As bitcoin’s value has risen, its easy divisibility has become a key attribute.
The term “altcoin” is shorthand for “alternative coins” and simply means cryptocurrencies other than Bitcoin. After Bitcoin, the nine most popular cryptocurrencies are as follows: Ethereum, Ripple, Litecoin, Tether, Cardano, Polkadot, Stellar, USD Coin, Dogecoin, Chainlink, Uniswap, Cosmos.
How Altcoin Work
Altcoins have the same premise as bitcoin: to use the blockchain as an incorruptible, distributed public ledger, which allows and records a transaction only if there’s consensus that the transaction is legitimate. But many altcoins have taken this premise and either used it to achieve different goals or sought to improve a perceived flaw in bitcoin.
Benefits of Bitcoin
Transactions with Bitcoin don’t include banking fees
Perhaps the biggest advantage of using Bitcoin as a preferred payment method is that transactions with it don’t incur banking fees. It means that, for example, if you want to purchase a gift card with Bitcoin, you are able to do so without any kind of banking fees. It means that there are no minimum balance fees or maintenance, as well as overdraft charges, returned deposit fees, among numerous others.
- Low transaction fees for Bitcoin international payments
Which is also interesting to know when it comes to fees is that Bitcoin payments include very low transactional fees for international payments. Here’s the thing, foreign purchases and typical wire transfers usually involve exchange costs and fees. Since Bitcoin transactions don’t include government involvement and intermediary institutions the costs of transacting, in comparison to transactions for bank transfers, are generally lower. For example, it is a huge advantage for travelers. In addition to that, it’s no secret that the transfer of Bitcoin is extremely fast. Therefore it eliminates the inconvenience of wait periods and typical authorization requirements.
- These transactions are mobile and secure
Besides low transaction fees, it’s also known that Bitcoin transactions are very mobile and secure. When it comes to mobility, as with numerous other online payment systems, Bitcoin users are also able to purchase their coins anywhere with internet access.It means that purchasers are not required to go to a store or a bank in order to buy a product. On the contrary, unlike numerous other payments made with credit cards or US bank accounts, there’s no need for personal information in order to complete any transaction. What’s also important to note is that Bitcoin isn’t a physical currency. For that reason, it’s impossible for thieves to pass off the holder. Cybercriminals can only steal cryptocurrency if they are aware of the private keys for the wallet. Nonetheless, with good security, it’s almost impossible to steal Bitcoin.
- Bitcoin transactions are also P2P and pseudonymous
In addition to all of the above mentioned, Bitcoin transactions are also pseudonymous. It means that they’re not completely anonymous and that transactions are able to be identified only by using a blockchain address. Therefore, an individual is able to have multiple addresses and multiple passwords and usernames for just one account. It’s also important to know that the payment system of Bitcoin is purely peer-to-peer. It means that users can able to send and also receive payments worldwide from or to anyone on the network. The parties to a transaction are not required approval from authority or an external source unless they are receiving or sending bitcoin from an institution or an regulated exchange. Transactions with Bitcoin don’t include banking fees
Drawbacks of Bitcoin
- Bitcoin Are Not Widely Accepted
Bitcoin are still only accepted by a very small group of online merchants. This makes it unfeasible to completely rely on Bitcoin as a currency. There is also a possibility that governments might force merchants to not use Bitcoin to ensure that users’ transactions can be tracked.
If a hard drive crashes, or a virus corrupts data , and the wallet file is corrupted, Bitcoin have essentially been “lost”. There is nothing that can done to recover it. These coins will be forever orphaned in the system. This can bankrupt a wealthy Bitcoin investor within seconds with no way form of recovery. The coins the investor owned will also be permanently orphaned.
- Bitcoin Valuation Fluctuates
The value of Bitcoin is constantly fluctuating according to demand. As of June 2nd 2011, one Bitcoin was valued at $9.9 on a popular bitcoin exchange site. It was valued to be less than $1 just 6 months ago. This constant fluctuation will cause Bitcoin accepting sites to continually change prices. It will also cause a lot of confusion if a refund for a product is being made. For example, if a t shirt was initially bought for 1.5 BTC, and returned a week later, should 1.5 BTC be returned, even though the valuation has gone up, or should the new amount (calculated according to current valuation) be sent? Which currency should BTC tied to when comparing valuation? These are still important questions that the Bitcoin community still has no consensus over.
- No Buyer Protection
When goods are bought using Bitcoin, and the seller doesn’t send the promised goods, nothing can be done to reverse the transaction. This problem can be solved using a third party escrow services but then the escrow services would assume the role of banks, which would cause Bitcoin to be similar to a more traditional currency.
- Risk of Unknown Technical Flaws
The Bitcoin system could contain unexploited flaws. As this is a fairly new system, if Bitcoin were adopted widely, and a flaw was found, it could give tremendous wealth to the exploiter at the expense of destroying the Bitcoin economy.
- Built in Deflation
Since the total number of Bitcoin is capped at 21 million, it will cause deflation. Each bitcoin will be worth more and more as the total number of Bitcoin maxes out. This system is designed to reward early adopters. Since each bitcoin will be valued higher with each passing day, the question of when to spend becomes important. This might cause spending surges which will cause the Bitcoin economy to fluctuate very rapidly, and unpredictably.
- No Physical Form
Since Bitcoin do not have a physical form, it cannot be used in physical stores. It would always have to be converted to other currencies. Cards with Bitcoin wallet information stored in them have been proposed, but there is no consensus on a particular system. Since there would be multiple competing systems, merchants would find it unfeasible to support all Bitcoin cards and therefore users would be forced to convert Bitcoin anyway unless a universal system is proposed and implemented.
- No Valuation Guarantee
Since there is no central authority governing Bitcoin, no one can guarantee its minimum valuation. If a large group of merchants decide to “dump” Bitcoin and leave the system, its valuation will decrease greatly which will immensely hurt users who have a large amount of wealth invested in Bitcoin. The decentralized nature of bitcoin is both a curse and blessing.
- Plenty Of Choices:
- Better Version Than Bitcoin:
It wouldn’t be wrong to say that altcoins are better and improved versions of Bitcoin in many ways. In terms of technology, they are more advanced, as they came after Bitcoin. Even in terms of transaction speeds, many altcoins are superior to Bitcoin.
For altcoins, the price fluctuations are generally low, unlike Bitcoin. This would be a great benefit for the investor since it is more stable, unlike the volatility associated with Bitcoin.
Drawbacks of Altcoins
- Lack of acceptance:
Many people are still not aware fully of altcoins. Thus, there is not much acceptance of the same in the market. And it is difficult to build that soon since now Bitcoin has become so popular.
There are a few risks involved while dealing with altcoins. They could be prone to scams or other failures.
- Market Value:
Many investors were not aware of altcoins until recently. Of course, Bitcoin is more popular and has a high market value as compared to altcoins. Investors wouldn’t want to invest in something that provides them with lower returns.