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Today, there are thousands of altcoins on the coin market cap. Essentially, all the cryptocurrencies you see after Bitcoin (BTC).
Altcoins have been around since the success of Bitcoin and we’re not talking about Bitcoin hard forks. Hard forks are quite different to Bitcoin in that they are simply upgrades to existing crypto asset network protocols. In order to make a change to a protocol, everyone needs to move over to a new network with different consensus rules that is not compatible with the existing protocol.
Here’s where the difference between hard forks and altcoins may come in:
If this attempt of creating a hard fork fails to gain consensus and people decide to move over to the newly created crypto asset network anyway, a new altcoin is created.
Thus, an attempted upgrade to the Bitcoin network can result in a hard fork; for example, Bitcoin Cash (BCH). However, it is arguable whether Bitcoin Cash is, in fact, an upgrade to the Bitcoin network or an altcoin. This is because the majority of Bitcoin users decided not to ‘upgrade’ and instead, remained a user of the existing network protocol, Bitcoin.
However, most people still view altcoins as a cryptocurrency that is not Bitcoin; be it a BTC hard fork or not. But, what exactly defines an altcoin? What makes it unique to Bitcoin? Coindirect answers these questions.
What are altcoins exactly?
Bitcoin paved the way for altcoins. The aim of many altcoin projects is to provide solutions to the limitations of Bitcoin by providing competitive advantages. Altcoins are essentially all cryptocurrencies that are not Bitcoin or Bitcoin hard forks, however, there a few things that define altcoins.
In terms of semantic technicalities, the word ‘altcoin’ is a combination of two works: “alt” and “coins”. In this case, alt is an abbreviation of ‘alternative’, while ‘coin’ signifies ‘cryptocurrency’. Altcoins are, therefore, cryptocurrencies that are an alternative to Bitcoin – each having their own purpose and list of benefits.
With Bitcoin being the world’s first digital currency, the development framework of altcoins is almost replica to that of Bitcoin. Like Bitcoin, most altcoins, therefore, use the peer-to-peer framework, has a mining process, provide efficient and affordable transaction methods, are tradeable on cryptocurrency exchanges and can be stored in a cryptocurrency wallet.
The difference between Bitcoin BTC and altcoins
The difference presents itself through the differentiating:
- Proof-of-work (PoW) algorithms used
- Means by which users sacrifice energy to mine blocks, and
- Application enhancements.
Leading examples of altcoins include Ethereum (ETH), Ripple (XRP), Litecoin (LTC), Dogecoin (DOGE), Monero (XMR), etc. Although Ethereum is second to Bitcoin in terms of market capitalization, Litecoin is often called the ‘silver to Bitcoin’s gold’. This is due to Bitcoin and Litecoin being similar in functionality and code.
In terms of cryptocurrency mining, Bitcoin and altcoins use different proof-of-work algorithms. Many altcoins use the ‘SHA-256’ hashing algorithm and the second most popular being ‘Scrypt’. Scrypt is more memory-hard than most PoW algorithms as a result of its increasing memory space which reduces the mining speed; in turn, making it more difficult to generate Bitcoins and dominate the blockchain. There a few other unique altcoins using different, specialized hashing algorithms, such as X11, X13, X15, NIST5, and 100% POS.
Alternative cryptocurrencies also generally try to approve mining transactions faster than bitcoin and hold a much larger circulation supply of digital tokens. For example, Litecoin approves mining transactions every 2 and a half minutes and holds a circulating supply of 84-million LTC; compared to Bitcoin’s 10 minutes and 21-million circulating BTC supply.
Many cryptocurrency exchanges and peer-to-peer marketplaces also only support Bitcoin and Ethereum trades. However, the Coindirect peer-to-peer marketplace support over 40 altcoins; while its cryptocurrency exchange supports 15 Bitcoin and altcoin trading pairs, including USDT (Tether).
Coindirect is running a Cold Storage Hardware Wallet Giveaway for your BTC and altcoins
For the next 3 months, Coindirect will be hosting a series of competitions. Each month, you could win a selected cryptocurrency, and a cold storage, hardware wallet in partnership with Trezor and Ledger.
For the month of October 2018, we’re giving away 150 XRP* and one Nano Ledger S hardware wallet*.
Follow the below links for more information on how to enter each competition.
- 150 XRP: https://blog.coindirect.com/ripple-giveaway
- Ledger Nano S: https://blog.coindirect.com/ledger-nano-giveaway
Access our integrated platform and #OwnTheFuture with Coindirect.