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22 Oct 2021

The Great Crypto Debate: Bitcoin vs Altcoin

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There are certain debates that have divided generations: Friends vs The Office, Marvel vs DC, Apple vs Android. The latest one in the market, and probably the one with the highest stakes, is the Bitcoin vs Altcoin debate. And you can’t afford to pick sides based on biases in this one!

While Bitcoin has been the kingpin of the cryptocurrency world for nearly a decade, worthy underdogs like Ethereum and Cardano have become strong competitors in the last few years.

Let’s begin with a basic understanding of what Bitcoin is and what Altcoins are.

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Bitcoin

Think of Bitcoin as the Captain America of the crypto world, the first Avenger (and now you know where we stand with the whole Marvel vs DC debate).

Invented in 2008, Bitcoin is the first cryptocurrency ever.

It is a decentralized digital currency, which means no intermediary (like a bank) is required to verify transactions.

Bitcoin is a peer-to-peer currency, which means transactions happen directly from one party to another.

Bitcoin uses blockchain technology, as in, all transactions are entered into an online public ledger that is accessible to everyone.

Bitcoins can be used as currency for exchange or as a store of value. You can check the BTC to INR here.

Altcoins

Think of Altcoins as the rest of the superheroes in the Marvel universe that came after our beloved Captain. These are cryptocurrencies other than bitcoins, aka alternatives of bitcoins. They can do almost everything a Bitcoin does, and a little bit more. This is because they’re relatively new, and have had time to observe Bitcoin’s shortcomings and improve on them. Altcoins essentially diversify the uses of cryptocurrency beyond transactions and store of value.

On a side note, Tony Stark would probably, nay, most definitely invest in cryptocurrency.

Altcoins are similar to bitcoins in that:

They are also decentralized, peer-to-peer digital currencies.

They also use blockchain technology to ensure secure and transparent transactions.

While they’re fundamentally similar to their common predecessor, they offer certain added advantages like the proof-of-stake consensus method, smart contracts, minimized price volatility and much more that we’ll discuss below.

There are over 9000 altcoins for investors to choose from, and while some have no trading value whatsoever, a good lot of them are very popular with a loyal community of investors.

Points of Improvement in Altcoins

Let’s look into the differences mentioned above in detail here:

Proof-of-Stake

As decentralized databases, blockchains don’t need a third party to authenticate their data. But, in order to secure themselves, they need a process to confirm and validate transactions.

Bitcoin achieves this through a mining system called proof-of-work. This system is often criticised for being slow, expensive, and consuming a lot of energy.

A healthy alternative to this is proof-of-stake, which is cheaper, faster, and utilizes less energy.
Cardano is an altcoin that was fundamentally designed to use proof of stake. It utilizes a fraction of the energy that BTC does, and will be able to process 1 million transactions per second.

Smart Contracts

These are self-executing code in the blockchain. A smart contract is essentially an agreement between two parties in the form of computer code that can be activated when certain predetermined conditions are met, without any third party intervention.

Interestingly enough, the idea of smart contracts precedes the inception of blockchain technology.
While blockchains can record transactions, smart contracts enable complex transactions. With their help, a blockchain can execute deals. Smart contracts are the key to decentralized applications (Dapps) and non-fungible tokens (NFTs).

The Ethereum blockchain, which hosts the second largest cryptocurrency (ether) with a huge market cap of about $351 billion, operates on smart contracts. Ethereum has over 2,800 Dapps using its network. Smart contracts enable faster, accurate, and secure transactions at lower costs and low execution risk.

Reduced price volatility

Investors mainly view Bitcoin as store of value rather than as currency for transactions due to its high price volatility. Certain altcoins, like stablecoins (could the name be any more on the nose?), successfully tackle this problem, thus making them ideal for daily transactions.

Stablecoins are designed to maintain a fixed value overtime. Their volatility is on par with a traditional fiat currency because their value is pegged to a specific currency (usually the US dollar). This makes stablecoins more, well, stable than other cryptocurrencies.

Important Factors of Comparison

Popularity

Over 10 years since its inception, the world’s first cryptocurrency still remains at the top. Bitcoin is the most popular digital currency, and most people use it synonymously with the term “cryptocurrency” itself (guilty as charged, until I delved deeper into the wonderful world of crypto).

This popularity makes Bitcoin stable, because it’s the most traded currency. In other words, Bitcoin is most stable because it’s most traded because it’s most stable- a smooth cycle ensuring its position right at the top.

This, however, is not the case with other cryptocurrencies. Barring a few coins like ether, cardano, uniswap, litecoin, etc that are becoming well-known, most altcoins do not enjoy this popularity.

However, the cheaper prices of altcoins have resulted in many of them, like Dogecoin, Solana, etc,
gaining increasing popularity.

As the market runs on speculation, the only thing that’s safe to say is- only time will tell. (We sound a lot like Master Oogway there, don’t we?)

Ease of transactions

As mentioned earlier, most investors view Bitcoin as a store of value. And altcoins in general trade faster and cheaper than bitcoins, making them easily transactable. However, it is worth mentioning that the upcoming Taproot upgrade for Bitcoin can help it catch up in ease of transactions with popular altcoins.

Risk

Cryptocurrency, by nature, is volatile. This means its value can change drastically, quickly, and unexpectedly. That being said, the lower prices of altcoins as compared to bitcoins make them a little less risky.

Straying away from the investment angle, the immense fame that Bitcoin enjoys also attracts hackers.

Fraud is also possible in the altcoin community, where scammers make fake coins to cheat investors. The
best way to tackle this is to do your own, thorough research.

Cost

Altcoins are way cheaper when compared to Bitcoin. As of October 2021, Bitcoin is trading at around ₹3255758.01 per coin.

For new investors and those on a budget, altcoins are a more convenient and safer investment.

Price is a number issue that can affect how much you get when you cash out. Every coin will act like a multiplier, which means that the smaller gains by a more affordable altcoin could easily match the larger gains by Bitcoin—just by buying more altcoins. So it’s more about proportionality than anything, which is why it’s often better to buy three cheaper coins that multiply in value tenfold than it is to buy a more pricey coin that only multiplies in value twice.

Evolution

Altcoins have proven to be more profitable than bitcoins in the last 10 years, and this article proves so with the help of 10 “sample sizes”.

Here’s how the article says the following coins performed:

Bitcoin: 860 percent increase
Ethereum: 2,900 percent increase
Ripple: 2,400 percent increase
LiteCoin: 1,300 percent increase
Dash: 3,000 percent increase
Waves: 1,083 percent increase
NEM: 4,900 percent increase

If nothing else, the high return rates on the coins prove that investing in cryptocurrency could be a great choice. And if you want to buy Bitcoin, CoinSwitch has the best rate.

There you go, some basic trivia on the Avengers, ahem… we mean cryptocurrencies. If Captain Bitcoin will ever give up the shield and pass it on to another worthy altcoin, or if it will remain at the top is something we will all spectate together. But no matter which cryptocurrency you wish to invest or trade in, make sure to do your own research thoroughly.

Disclaimer : Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. The information provided in this post is not to be considered as investment/financial advice from CoinSwitch. Any action taken upon the information shall be at user's own risk.

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