Just the name “altcoin” evokes a feeling of disdain–altcoin, as in “option to Bitcoin,” a copycat late to the scene. Why do we persist in using such terminology when altcoins and Bitcoin are cryptocurrencies of exactly the same basic category? Many long-time Bitcoiners accuse altcoin developers of pump and dump schemes, longing to be early adopters, and envious of these fortunes.
There are the right reasons to cover focus on emerging cryptocurrencies, however. Like any tool, one size doesn’t fit all, and various cryptocurrencies function pretty much effectively in various scenarios. For instance, while Bitcoin’s pseudoanonymity strikes an excellent balance, periodically a citizen might want total anonymity; conversely, we would want to work with a more traceable solution with regards to investment firms and tax agencies.
Already, we are able to see currencies for different purposes emerging. CryptoNote, for instance, yields near-total privacy via built-in one-time wallets and group signatures. Dogecoin works great as a mainstream promotional tool for cryptocurrency. Freicoin can be utilized in situations where deflation isn’t ideal, and currencies like 4C may be used to tackle political issues like global warming (whatever your situation on that one issue could be).
There are lots different niches for cryptocurrencies to fill, but even though two currencies aren’t readily differentiable, there’s plenty of value in having competition in the cryptocurrency field. In a monopolistic scenario, the developers influential on the leading cryptocoin could become lazy, or worse–corrupt. Most cryptocurrency enthusiasts would concur that the free market is normally probably the most efficient system, so shouldn’t that connect with Bitcoin, aswell?
Critics argue a plethora of coins will result in confusion, however the beauty of crypto is that it’s nothing like traditional infrastructure-based industries: multiple competing power networks results in a tangled mess, but cryptocurrency wallets are not at all hard programs. You can easily hold varying currencies within a wallet application, and paying in various currencies at a point-of-sale terminal is yet another press of a button. You can conceivably detect which currency is requested by the QR code displayed, rendering it a straightforward process.
Another point of criticism is that will result in an excessive amount of volatility in crypto, as investors jump between one coin and another. Although it hasn’t become a concern, yet, that’s arguably because altcoins haven’t swept up in market share. While that may be changing soon, you can find already a lot of traditional currencies on earth, so you might think this issue could have already manifested itself in the fiat realm. Such volatility would make investment in and usage of cryptocurrency difficult, but that could be a straightforward problem for a fresh coin to resolve.
The emergence of multiple competing cryptocurrencies will probably result in the development and usage of basket cryptocurrencies. As Bitcoin decreases in dominance, people will still want a method to invest generally in cryptocoins, without fretting about variances within the marketplace. By making each basket coin redeemable for a variety of significanat coins on the market–each in a quantity proportional to the amount of that coin on the market–you can efficiently store a fraction of the full total cryptocurrency market share.
If that’s still too volatile for everyday transactional use, we are able to create a coin for that, too–just program its coin production rate to improve or decrease whenever it deflates or inflates (respectively), and set the confirmation time only possible. People use them if they’re essential to buy things, with or without their investment potential. Unlike traditional industries susceptible to monopoly, it’s in the type of crypto to market the free market; Bitcoin needing to cope with competitors isn’t a matter of if, but when–and how.
The post The Role and Future of Altcoins appeared first on Bitcoin Magazine.