Altcoins

Nithvik
3 Min Read

Right now, there are more than a thousand altcoins in existence! The majority of altcoins are just alternate versions of Bitcoin with minor changes. That’s how they got the name ‘altcoins’.

It’s important to understand, though, that not all altcoins are just alternate versions of Bitcoin. There are some that are very, very different from Bitcoin, and have very different goals/purposes.

Some altcoins use different algorithms for Bitcoin. For example, Factom is an altcoin that uses PoS (Proof-of-Stake). In PoS, there are no miners. Instead, there are stakers.

Altcoins
Altcoins

Stakers are people that verify transactions for rewards, just like miners. But instead of racing to verify a block before anyone else does, they selected one by one to take their turn. This uses much less electricity because they aren’t thousands of miners using their electricity to try and verify the same block. Instead, there is just one ‘staker’ per block.

How it works?

In fact, Ethereum and NEO are examples of altcoins that are super, super different from Bitcoin. Ethereum and NEO not to be designed to use as a digital currency. Instead, they designed as huge platforms for building apps on a blockchain.

On Ethereum and NEO, you can actually build your own applications. This is the most common way that new cryptocurrencies are created; they made on blockchains that allow app building, like Ethereum and NEO.

Ethereum introduced new technology to the crypto world when it launched in 2015. This technology known as smart contract. A smart contract can automatically execute transactions when certain things happen.

Cryptocurrency Types
Cryptocurrency Types

These ‘things’ (also called conditions) written into the smart contract when it created. For example, a condition could be something like “WHEN Peter sends 120 Ether into the smart contract, THEN John’s house will sent to Peter”.

Because of smart contracts, no third party needed. Bitcoin means there is no third party needed in direct payments, but smart contracts mean there is no third party needed in lots of things — like the sale of a house, the sale of electricity, or the sale of stock on the stock market.

Of course, you can’t actually put electricity into a smart contract, can you? So, instead, you put a token into the smart contract that legally represents the electricity. This is one of the best things about smart contracts on Ethereum, NEO, and similar altcoins — you can tokenize real things and put them on the blockchain.

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