Most people associate the word “cryptocurrency” with Bitcoin. For those that are not so knowledgeable yet about the vast cryptocurrency space, they might mistake Bitcoin as the only cryptocurrency that exists. While we can’t deny that Bitcoin’s mainstream popularity has arguably put the blockchain on the map, there are a lot of other cryptocurrencies that have been making waves and building a name for themselves—these are the altcoins.
Altcoins, short for alternative coins, are any cryptocurrency other than Bitcoin. As of today, there are over 20,000 cryptocurrencies listed on Coin Market Cap, with Bitcoin dominating almost half of the total market cap. Currently, some of the top altcoins based on market cap are Ethereum (ETH), Tether (USDT), Binance Coin (BNB), Ripple (XRP) to name a few.
So how did altcoins come about and what makes them collectively worth more than Bitcoin?
In the history of altcoins, some of the more well-known ones that lived to be relevant enough today are Ethereum (ETH) and Litecoin (LTC). Ethereum is arguably the most popular altcoin, coming in second to Bitcoin in terms of market cap. Litecoin, on the other hand, currently sits in the top 20s in terms of market cap.
Litecoin (LTC) was one of the first altcoins. Created back in 2011 by Charlie Lee, it was coined the “silver to Bitcoin’s gold,” as Lee created it to be a faster and cheaper version of Bitcoin. Its proof-of-work system is around four times faster in terms of block creation (2.5 minutes instead of 10 minutes) and has four times more units in terms of supply (84 million instead of 21 million).
And while most of the altcoins that were created between 2011-2013 went obsolete, Litecoin was one of the few to survive and even take off. An active community and Lee’s eventual job at crypto exchange platform Coinbase have helped the coin reach new highs in 2013 and 2017, with bull runs like that in 2021 also helping the coin.
Aside from that, Litecoin’s relevance today is rooted in its ability to be a test network for Bitcoin because of its similarities. An example of this was when SegWit (segregated witness), a feature that reduces the size needed to store transactions in a block, was first tried and tested in Litecoin before it was used on Bitcoin.
The highly popular Ethereum (ETH) was the brainchild of Vitalik Buterin and went live back in 2015. It started as an idea Buterin had in 2013, as his interest in Bitcoin and early blockchain technology led him to see what he believed were gaps in its applications. With a team of other co-founders, Buterin and friends tried to raise funds in 2014 to get their initial product off the ground. By 2015, they were able to launch and eventually become the famous altcoin they are today.
Ethereum was created with the vision for it to be the solution for all blockchain uses, beyond just transferring money. It allows developers to create various types of decentralized applications, with a more popular use case of ETH being non-fungible tokens (NFTs). Ethereum has had a lot of growth over the past few years (up more than 13,000% in 2017), and it is still constantly being improved on. Ethereum is working on switching from a proof-of-work consensus mechanism to a proof-of-stake consensus mechanism, ideally to make the chain faster, scalable, and usable.
Fast forward to a few years after the first few altcoins were made, the finance world was introduced to a new concept—ICOs (initial coin offerings). Instead of just traditional IPOs (initial public offerings), companies now had another option for raising funds, which was via ICOs. It was a form of sourcing funds from people through the selling of tokens for blockchain projects that rid the need for lawyers, banks, and regulators. In the span of Q1 to Q4 of 2017, the ICO market grew almost 100 times, with this growth continuing through the first few months of 2018.
It is important to note though that these funds were all raised in cryptocurrency, usually in either BTC or ETH. This created financial issues when bearish sentiments approached 2018 and lots of companies ended up losing funds. Some founders even had to focus on becoming more like asset managers rather than developers, to ensure that the company can withstand the volatility of crypto.
It also eventually became an issue when companies weren’t delivering on what they promised to do with the funds. A project named Polybius aimed to create a crypto finance service and raised 32 million USD through their ICO. Years later, there was yet to be any tangible product and their token price plunged drastically.
With most tokens eventually losing value after their offering date, the ICO boom eventually turned into a bust as funds being raised have diminished significantly from their peak.
Today, there are still many ICOs happening for various projects related to P2E (play-to-earn) games, NFTs, and other Web3 companies. Although, other alternatives such as IDOs (initial dex offerings) and IEOs (initial exchange offerings), which derived from ICOs, are also being considered as a potentially safer and fairer way of raising funds. Would you be open to investing in any of these?
Note: Market cap and price references are as of August 5, 2022 and are subject to fluctuations.
We are making crypto knowledge-sharing even more accessible to everyone by giving an avenue for Filipinos to connect about all-things crypto in Facebook. Be part of our community today.