The crypto sector is continuously growing as new projects, known as alternative coins, are launched. Altcoins is the short term for alternative coins, which are digital assets created as solutions that provide other features than Bitcoin.
Bitcoin is the first digital currency developed with the help of blockchain technology. But this kind of innovative technology couldn’t have powered a single asset, hence others took shape to provide extra solutions and address the perceived limitations of the first cryptocurrency. As they offered alternatives to Bitcoin, sector specialists named them altcoins. They are built using the same blockchain technology but have different functionalities, features, and purposes. Nowadays, Ethereum is the first cryptocurrency that comes to one’s mind when talking about altcoins, but it wasn’t the first alternative digital asset introduced on the market. Namecoin was created in 2011, and it started the trend of developing altcoins to offer unique value propositions to the crypto market.
Now, going back to Ethereum, it has gained the status of the second largest cryptocurrency by market capitalization, and many experts believe that it’s time to shake up the altcoin label because it has been mostly used as a reference for other digital currencies to offer alternative solutions.
Let’s start a discussion about its status to determine whether we should still call it an altcoin.
Ethereum is closely correlated to Bitcoin
As mentioned earlier, some crypto enthusiasts suggest it’s time to stop classifying Ethereum as an altcoin because its correlation to Bitcoin is more significant than its connection to other digital currencies. The Ethereum price is closely linked to Bitcoin, and you can easily notice it if you keep an eye on the ETH and BTN prices over a more extended period. And with the latest network improvements, Ethereum has become a publicly recognized blockchain, just like Bitcoin.
Ethereum is the largest blockchain platform
In terms of market capitalization, Bitcoin is the largest cryptocurrency, but when it comes to blockchain volume, Ethereum surpasses it. The ecosystem homes over 1600 dapps, and it’s the first option for developers to start projects using blockchain technology. While Tron is the network with the largest number of active users, Ethereum has more active dapps.
Analysis reveals that Ethereum is the most decentralized blockchain at the moment, with around 17.000 nodes displayed across all continents. Bitcoin might have around 66.000 nodes, but they are mostly located in data centers; hence, its decentralization level cannot compete with Ethereum’s at the moment.
Ethereum has a significant community
Ethereum has attracted a large number of developers because it offers various solutions. Therefore, it’s no surprise that twice as many experts work on Ethereum than Bitcoin. According to studies, over 25,000 developers work on the platform to create blockchain-based solutions. Ether is also the second most talked about cryptocurrency, which is only natural considering the large community around it.
Ethereum has also become the most active smart contract platform, with over 94% of them being built on it.
How do the other cryptocurrencies differ from Ethereum and Bitcoin?
Bitcoin was developed to serve as a form of electronic cash, so it’s a decentralized cryptocurrency that a central entity or bank doesn’t control. Holders can transfer and trade bitcoins without the involvement of third parties because they have access to a peer-to-peer network. The network nodes use cryptography to verify transactions and record all operations on the public distributed ledger. Bitcoin differs from other digital currencies because it’s a scarce asset; there can be only 21 million coins.
Ethereum was designed to replace traditional currencies and functions as a decentralized platform that enables the creation of smart contracts, which are applications that run according to a set of rules established when developing them to prevent intermediary interference and fraud.
Altcoins have been created as alternatives to Bitcoin, at first, but as Ethereum has gained popularity, developers have started to create projects that offer alternatives to it. There are over 5000 different altcoins available on the market, and new ones are released regularly. The cryptocurrencies different from Bitcoin and Ethereum are created with a specific characteristic or aim in mind. Some are created to enable faster transactions, others to provide users with lower transaction costs, and so on. Bitcoin and Ethereum are quite complex blockchains that provide users with several use cases, and investing in them is considered safer than purchasing newer coins. Investing in altcoins is riskier than trading Ethereum and Bitcoin because they are more volatile and, therefore, experience dramatic price changes. Of course, there is a certain level of risk associated with investing in any kind of digital currency, but altcoins don’t have the same market history as Ethereum and Bitcoin, so they are less well-established and stable. It’s crucial to research any project you have your eyes on to figure out if it would make a good investment.
Some altcoins are quite popular
Even if they’re not as large in market capitalization or blockchain volume as Ethereum and Bitcoin, many altcoins are quite popular among digital users. They can easily be swapped for traditional currencies and have unique characteristics and purposes. Litecoin, for example, is a well-known alternative currency that was developed on the Bitcoin blockchain and functions like a fork. This means that it integrates some of the features of old cryptocurrency, but it also provides holders with extra benefits. Solana is another altcoin that appeals to investors because it has lightning-fast transaction speeds and low transaction fees. It was created to provide better solutions than the existing blockchains and improve scalability. Cosmos is a unique cryptocurrency because it enables blockchains to share data and tokens across ecosystems. It aims to enhance Inter-Blockchain Communication volume and facilitate a higher liquidity and diversity among digital currencies.
Altcoins are a worthy investment tool
The future of altcoins is still uncertain, and we cannot decide at the moment if Ethereum should continue to be part of the category as it shares features with both Bitcoin and the other digital currencies. However the rapidly changing sector will provide us with the answer in the near future, as it continues to evolve.