Being a digital alternative for conventional financial transactions through banking, different types of cryptocurrency share the same purpose. Moreover, most cryptocurrency strives to be a decentralized digital asset.
However, not all cryptocurrency is created the same in terms of features, functionality, and applications. Being the first and most famous cryptocurrency in the world, Bitcoin stands out from the others. But, besides its popularity, Bitcoin has distinct features that differentiate it from other cryptocurrency types.
In this article, we will explore the unique features of Bitcoin and highlight them through comparable analysis.
Contrasting Bitcoin with Other Cryptocurrencies
It’s no wonder that for many people, Bitcoin is an entry door to the world of cryptocurrency and crypto trade. Since it’s the first cryptocurrency ever created and the most heard of cryptocurrency asset, Bitcoin’s popularity isn’t going down any time soon.
Bitcoin has better investment and trading fundamentals than the vast majority of cryptocurrency. BTC is the most popular cryptocurrency ever bought, traded, or sold. Its market capitalization is more than $1 trillion, and its daily digital trade volume exceeds $30 billion, indicating that it is a highly liquid asset with good trade potential.
When Bitcoin rises in value, other cryptocurrency usually rises too, and when it falls, they typically fall too. However, the ups and downs of cryptocurrency are much more volatile than the ups and downs of the initial cryptocurrency.
There’s a multitude of cryptocurrency out there, with new ones appearing on an almost weekly basis. Many claim to be secure and transparent, but their claims, just as cryptocurrency transactions, should be verified.
Bitcoin offers unmatched transparency since it’s built on code everyone can see. Everyone can get a share of the mentioned code and set up and run a Bitcoin node as a private way of issuing transactions. Each node is independent of another, but each offers capabilities of contributing to the share of Bitcoin code within the node. Thus, people who run Bitcoin nodes (can be literally anyone) are equal participants of the decentralized network.
One aspect that sets Bitcoin apart is that it’s the epiphany of decentralization. Nobody runs Bitcoin – no party, organization, or authority figure; the blockchain technology manages itself. This fact also contributes to how secure Bitcoin is. Since there’s nobody behind the Bitcoin technology, there’s no one to restrict a user’s access to it. Accounts and digital funds cannot be blocked or ceased because the owner is the only one who has the necessary keys to access both.
These aspects alone set Bitcoin apart from other cryptocurrency. It doesn’t mean the latter is less significant. But, in the wording from the Cointelergraph website, “Not Bitcoin only, but Bitcoin first”.
Visual Comparisons: Bitcoin vs. Cryptocurrency Infographics
Exploring the Technology Behind Bitcoin
Now, different types of cryptocurrency use blockchain technology; however, Bitcoin was the one the blockchain was created for.
In a blockchain, the data from cryptocurrency transactions is stored in the so-called “blocks”, a set of which creates a “chain”, thus the name.
Every new block surrounding the previous ones makes the already existing blocks (transactions’ data) more secure over time. Once the data is extracted from transactions and put into a “block”, the block gets marked with the time of the transaction for identification purposes. By the way, the history of cryptocurrency transactions is available to anyone within the blockchain.
The blockchain embodies the concept of decentralization. The network isn’t stored on one server, computer or run through one website; it’s spread out through many, each running its own blockchain “node”.
Understanding the Technology Behind Cryptocurrencies
Other cryptocurrency, altcoins, also use blockchain technology, only its variations. The variations of the blockchain technology utilized by altcoins differ in design and consensus mechanisms used to verify and secure cryptocurrency transactions.
The common blockchain variations include Proof-of-Work (PoW), Proof-of-Stake (PoS), and private technology.
Regarding the PoW technology, Bitcoin issues transactions through it as well. The integral part of PoW is mining, which utilizes computer power to verify and keep track of cryptocurrency transactions. Mining requires completing mathematical puzzles (proofs of work) to verify transactions and add them to the blockchain. PoW blockchain technology can issue one transaction in a specific time period; for example, for Bitcoin, it’s one transaction in ten minutes. Thus, PoW networks have certain limitations in terms of the speed of transactions, but offer a higher level of security, since transactions are properly verified before they’re added to the blockchain. Altcoins that operate on PoW technology include Litecoin, Dogecoin, Ethereum Classic, and others.
PoS is a speedier alternative to PoW. A higher speed of cryptocurrency transactions, low scalability, and smart energy consumption characterize this technology. PoS works through validators or node operators that confirm the transactions, requiring them to stake their own tokens. Altcoins that issue transactions through PoS include Ethereum 2.0, Cardano, Polkadot, and others.
Private blockchains are managed by a centralized entity that chooses who can operate and view the data inside the blockchain. This type of blockchain is also called Distributed Ledger Technology (DLT). Private blockchains are commonly used by enterprises that want to keep certain information confidential. This type of blockchain technology is potentially used by different industries and even for banking prototypes. An example of a private blockchain is the Enterprise Ethereum Alliance (EEA).
A Detailed Comparison: Bitcoin vs. Cryptocurrencies
Bitcoin was created back in 2009 as the original cryptocurrency asset. Since then, Bitcoin has remained the most prominent cryptocurrency on the market, contributing to it holding the largest share. In this light, Bitcoin has a “central player” quality to it; other cryptocurrencies, commonly referred to as “altcoins,” create a diverse landscape of Bitcoin alternatives.
Bitcoin was created to replace fiat money; thus, being the resource for financial transactions was and remains its main property. Bitcoin utilizes a peer-to-peer system to verify transactions by adding them to the “chain”, which, in turn, is built from blocks of already verified transactions.
On the contrary, other types of cryptocurrency can be used for different purposes. Some of them, like Ethereum, utilize the so-called “smart contracts,” allowing developers to build apps within the blockchain network. Other altcoins focus on the speed of the transaction: Dash, for example, claims to process transactions as quickly as 1 second for one.
Read more: Dash Cryptocurrency: Features and Advantages
Bitcoin remains one of the most secure positions on the market. In addition, it has a reasonably high value. Above all, Bitcoin is characterized by a high level of reliability and is available for investment for everybody. It should also be noted that Bitcoins have some significant disadvantages. It’s essential to take into account the high fees, as well as the low speed of transactions.
As for the altcoins, they have gained a lot of popularity because they pose as a solution to Bitcoin’s drawbacks. At the same time, this type of cryptocurrency is considered a risky long-term investment because they are subjected to a higher volatility rate. Investing in altcoins is an endeavor for experienced cryptocurrency users who know how to evaluate the long-term potential of digital assets. However, stablecoins that offer price stability also belong to altcoins. Stablecoins have seen a rise in investment because they are tied to a real-world currency, which makes them a secure option for storing digital funds.
Regarding mining, altcoins are much more approachable from this perspective, as they can be mined virtually from any computer, unlike Bitcoin.
Since all other cryptocurrency is a derivative from Bitcoin, Bitcoin is capable of the most features that altcoins offer. However, each market requires diversity to function properly, and altcoins have laid a foundation for the freedom of choice.
To Sum Up
In the world of cryptocurrency, there’s no universal “better option”; the choice of cryptocurrency depends on the financial goals, individual needs, and transactions’ features. And while there are many differences between Bitcoin and other types of cryptocurrency, both have their own advantages and implementations. Which ones are more crucial to you is your choice.