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Best Bitcoin Alternatives 2018
Bitcoin, the leading cryptocurrency, is slowly fading away as other digital coins take up the industry with better and improved performances. Bitcoin developers conceived the idea of having a digital currency operating on the blockchain technology. This currency was to eventually replace the traditional fiat currency that is both limitings in terms of individual’s financial freedom and transaction costs.
Bitcoin promised to allow a peer to peer transactions without the need of an intermediary such as banks or governments that institute many restrictions limiting free trade as a result. Bitcoin has, however, failed to live up to its expectations. For instance, it takes too long to confirm and record bitcoin transactions on the blockchain.
Additionally, bitcoin’s transaction costs are so high that it wouldn’t make sense to use it as a means of small exchange. Developers have identified these challenges and are working hard to come up with alternatives. However, it remains unclear as to what other crypto developers will eventually bring to this industry. Let’s see why we really need bitcoin alternatives.
Why do we need Bitcoin Alternatives?
Bitcoin is, without doubt, the most valuable cryptocurrency by market value. Despite being the leading crypto, users find it difficult and expensive to use this digital coin for transactions. It is also plagued by a myriad of other problems that we shall discuss in a while. Below are some of the major bitcoin drawbacks;
This is one of the major problems facing the bitcoin network. This challenge revolves around the manner in which transactions on the bitcoin network are confirmed while preventing double spending. All transactions are decentralized meaning that no individual user on the block has absolute control of the network.
For a transaction to be confirmed, all the peers on the network must agree that a particular miner has successfully solved the complex mathematical equation required to mine a block and that they have followed the set rules to the letter. While this is good for security since it ensures that no one can create their own coins fraudulently, it limits the speed at which transactions take place on this network.
Currently, the bitcoin network can process just about 3 to 7 transactions per second. Bitcoin network is currently at 1 megabyte which is too small compared to the number of users it has. The more users increase, the more the congestion and the more time it takes to process transactions. The slow bitcoin speed compared to thousands of transactions that alternative payment methods can process in the same time period limits the use of bitcoin. The slow transaction speed makes it impractical to use bitcoin for everyday retail transactions. The bitcoin community needs to scale up the network if they want the coin to be useful for the masses, but they also need to ensure that they do not allow centralization of the network, otherwise, the whole concept will be vague.
High Transaction Fees
Ideally, bitcoin payments were supposed to be cheap, fast and convenient when the concept was conceived. Initially, this was possible before the blockchain bitcoin network became too congested. Transactions fees were way below $1, sometimes going as low as $0.10.
Due to the congestion within the bitcoin network, however, transactions have been slow, raising the cost of those transactions as a result. The more you pay, the faster your transaction gets processed. Bitcoin transaction charges have been fluctuating from time to time. The transaction fee has been as low as $0.0011 as of 18th of November, 2011, and as high as $54.901 as of 21st of December, 2017. Considering that there are coins whose transactions are instant and free, users may still find this fee a little on the higher side.
The high fees are also affecting the manner in which refunds are sent. Since miner fees are continuously increasing, users who have mistakenly made the wrong payments receive refunds less in value than what they paid. The users receive their funds less the miner fees which are currently too high.
Bitcoin is not ecofriendly. Mining bitcoins requires specialized miners that consume a lot of energy and release harmful greenhouse gases to the environment. Bitcoin uses a consensus mechanism known as Proof of Work (PoW). This mechanism requires miners to solve complex cryptographic equations to win blocks and get rewarded with bitcoins.
The total distribution of bitcoin is capped at 21 million coins. As more and more bitcoins get mined, the level of difficulty in mining increases. When this process was at its initial stages, it was possible to use a normal home PC (Personal Computer) to mine bitcoins. Miners soon discovered that graphics cards (GPU) could solve the equations faster than the ordinary processors and soon started assembling machines with spec specialized graphics cards. Today, these machines have been upgraded to specialized miners called ASICs that run throughout consuming a lot of energy.
Let us break down to what really happens when miners are mining bitcoins. Every 10 minutes, a new set of blocks are added on to the bitcoin ledger blockchain. When these blocks are added on to the blockchain, each node or miner has to independently confirm whether that block adheres to the rules set in that network. If all the miners confirm, then that block is added on to the blockchain and the miner who mined that block is rewarded with some fee. Mining this block is very difficult and requires high hashing power to solve the complex equations. It is this solving of the equation that is known as PoW. Once all miners confirm and add a block to the blockchain, they have to discard every other block they were working on and start a fresh.
It is this competition for solving equations and getting a block reward that has led to miners using heavy mining machines that consume a lot of energy. Unfortunately, in some countries like China, bitcoin machines are powered by coal-fired power plants that release a lot of carbon into the atmosphere. This is in a bid to lower down the cost of electricity and make more profits.
Limited Opportunities and Uses
Another problem facing bitcoin is the limited number of users and opportunities for growth it presents to users. Currently, bitcoin can only be used for peer to peer transactions to pay for goods or services. Even then, bitcoin is yet to be accepted as a mainstream currency for retail transactions. Many users consider the digital currency as an asset to speculate upon. Other networks have since moved to other uses allowing developers to startup companies and applications on their networks.
In a bid to protect the security of bitcoin transactions and to remain anonymous, users of this network have made it difficult for new ideas to take root. That, coupled with the fact that bitcoin does not have any underlying or intrinsic value, renders the coin useless to some extent. If bitcoin developers don’t face up to the challenges and make the coin more useful, then it might eventually fizzle out. At the moment, bitcoin’s main use is just a speculative asset. But is it really bad as such? Let’s find out.
Is Bitcoin Really that Horrible?
Bitcoin is not as terrible as critics may want us to believe. It is true that the coin in itself does not have any intrinsic value neither is it backed by any assets or government, but it is at least free from inflation and illegal manipulation. Much as it remains an asset in terms of its uses at the moment than a currency, the blockchain technology that the coin is based upon is sure going to revolutionize not only the financial system but also how corporations will interact with each other and with other entities in the future.
Yes, bitcoin has challenges like the issue of scalability and volatility. There is also the issues of slow transaction speeds and a high cost of operations. However, just like Microsoft had challenges when it was starting out, you’d expect bitcoin’s technology to also face some challenges and overcome them with time.
That is normal for any new innovation to realize some challenges as it morphs into something better. Bitcoin might lose out on the way, but the underlying blockchain technology has shown positive growth considering the number of altcoins and systems that have been developed due to this technology.
For 10 years now, bitcoin has sustained the pressure, remaining in the top position consistently. It is now still the biggest and the most popular coin. This is simply an amazing fete.
Top Bitcoin Alternatives Today
Bitcoin has remained as the biggest and most valuable coin, but other coins have come up to try and solve the errors inherent in bitcoin. Some have developed their own unique networks giving alternative services and opportunities. These other coins are collectively referred to as altcoins. Altcoins are so many that we cannot cover all of them in one article, but we will go through some of the most popular.
In its most basic form, Ethereum is a platform based on the blockchain network that allows the development and deployment of Decentralized Applications (dApps). Like bitcoin, Ethereum is also decentralized and distributed blockchain network. However, its purpose and capability differ from that of the bitcoin network.
Ethereum was launched on July 30th, 2015. Unlike most other cryptos including bitcoin whose purpose was to operate as a peer to peer payment system, the Ethereum platform brought out a whole new concept to the blockchain. Ethereum is powered by ether enables the running of other applications codes on its network. The network allows the running of smart contracts. These are self-operating computer programs that facilitate the creation of contracts and exchange of digital properties without the need for a third party. These contracts execute automatically when set conditions are met by the participating parties.
This is another altcoin that seeks to change the manner in which users of bitcoin approach the privacy issue. Developed on April 18th, 2014 by Nicolas van Saberhagen, the coin is anonymous by default and seeks to solve the privacy problem that bitcoin could not. Bitcoin attempt to shield users’ identities by using pseudonymous addresses failed since every bitcoin transaction is recorded permanently on the blockchain. The possibility of one’s pseudonymous address attaching to multiple transactions makes it easy for one’s identity to get traced.
Monero is a private cryptocurrency. It uses ring signatures and stealth addresses to hide users’ identities. The ring signatures create a mix of users’ accounts keys with Monero’s blockchain public keys to form a ring of possible signers. This ring of possible signers makes it difficult to link a signature to any specific user. The mixing concept is available with several other altcoins, but in which users only mic coins when they want to hide something in a transaction from a third party. With Monero, coins from all transactions are mixed by default leaving no suspicion of coin mixing. Monero users, however, have the avenue to share their transaction activities selectively using the view key.
Nano was developed to try and solve the challenge bitcoin was facing of slow transaction speeds. It also promised that unlike bitcoin, whose transactions costs have skyrocketed in the recent future, Nano transactions would be free.
Nano is basically a payment coin. It uses the DAG-based block-lattice technology that enables it to remain decentralized, secure and extremely scalable. This technology has transactions in a network of chains rather than in one long chain as in the case of bitcoin. Sending coins from one Nano wallet to another is instant and free.
Nano allows an infinite number of transactions per second but is limited by bandwidth and hardware which might slow down the processing speed to some extent.
The Nano system has an issue with decentralization though it has managed to reach the levels of most other coins. The use of dPoS in which nodes hold a kind of election process to determine which block to accept limits Nano’s decentralization since the system assigns more weight to a node that more tokens at the time of voting. This majority control defeats the essence of decentralization that is key to any digital coin. Nano seems to have a promising future, but it has to deal with its challenges first before it can even conceive of competing with bitcoin.
Zcash, like Monero, is biased towards privacy and anonymity. It utilizes zk-SNARKs, the zero-knowledge proof constructions that enable users to exchange data without exposing their actual identities. It also never discloses the value of any transactions carried out within its network. The coins are usually either in a shielded or transparent pool
Zcash was developed by Zooko Wilcox O’Hearn, who also acts as the chief executive officer of the company. Its developers include Matthew Green and Roger Ver. Zcash transactions are all published on a public blockchain like bitcoins’ but there is a special feature that enables users to conceal their identities and the value of the transactions.
This feature is optional. There is also the option of “selective disclosure” in which users are enabled to prove payments for auditing purposes. This feature enables the user to comply with tax regulations and anti-money laundering restrictions. The coin has a fixed supply of 21 million units.
As more and more people embrace the world of cryptocurrency, people are looking for investment opportunities outside of Bitcoin and Ethereum and Litecoin has lately become one of the most popular choices.
Litecoin like many other digital currencies is a peer-to-peer network. It allows instant and almost free transactions, presenting itself as one of the most viable money transfer networks in this industry. In addition to being completely decentralized, it also uses mnemonic to secure its network and enable users to have full control of their finances.
On October 7TH, 2011, litecoin was released via an open-source client on GitHub. The Litecoin Network went live on October 13TH, 2011.
In a nutshell, Litecoin a cryptocurrency like many others. It’s built on a similar framework and ideal as bitcoin itself. This coin was developed by an ex-Google employee and is now one of the most commonly traded digital currency out there, with a market value in the billions.
Bitcoin is stronger than Litecoin only in terms of storing value over time. Charlie Lee, Litecoin’s developer, foresaw the weakness in the bitcoin system and set to find a solution. He realized that bitcoin would hit a snag after getting to a particular number of users. Litecoin came as a solution to this to enable users to make payments and transfer money without the delays inherent in bitcoin and the possibly high transaction fees.
Bitcoin’s block confirmation time is 10 minutes. In comparison, Litecoin’s block time is a quarter of that, with an average of 2.5 minutes, which makes transactions on its network faster, avoiding backlog and maintaining transaction fees at the minimal. For the time being, Litecoin will be a faster and cheaper way of transacting online, even if there aren’t quite as many outlets available for its usage.
EOS is a blockchain platform used for creation decentralized applications (dApps) and is similar to Ethereum in function. It enables dApp development easy by providing an operating-system-like set of services and functions that dApps can make use of.
EOS was launched in July 2017. It is the token or digital currency that is used on the EOS.IO platform. This platform enables developers to create and maintain decentralized applications, decentralized autonomous corporations, and smart contracts. EOS developers are looking forward to releasing the app-creating software in June 2018, but the tokens are already in distribution.
Among the most pressing challenges facing blockchain platforms is the lack of scalability i.e. the ability to handle a larger number of transactions per second as the network grows. EOS Blockchain is aiming to become a decentralized operating system which can support industrial-scale decentralized applications. The EOS.IO network is programmable and scalable for easy deployment of dApps.
The crypto industry is growing at a very fast rate as more and more people get onboard. The once mysterious world of digital currencies is now becoming commonplace as people continue to learn and understand the need and importance of this industry. Soon, a lot of daily activities will get integrated into the digital world.
Bitcoin, being the leading crypto, has opened up avenues for more and better developments. It is important that all involved in this industry continue working hard solving the gaping challenges presented by predecessor coins to establish the most plausible solution.
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