Bitcoin and Altcoin technical aspects. Differences for miners, investors and traders. Scaling the network and expanding the functionality. Mining equipment and technologies.
Bitcoin is the first digital currency project that appeared at the dawn of the crypto industry. Its flaws and omissions have led to the rise of altcoins. The project continues to develop, improve and change, adopting the best from competitors and following its own philosophy.
In this article, you will find out how modern Bitcoin differs from altcoins from a technical, investment, trading and ideological point of view.
Bitcoin is a first-generation project. Its main problem is the high cost of transactions and the speed of operations. Among the advantages of Bitcoin are a stable blockchain, protection against hacking and the simplest interaction scheme. Key characteristics of the main cryptocurrency are as follows:
The block size is 1 MB
Fixed transaction size in blocks
Commission reward to miners
First-generation altcoins inherit the principles of Bitcoin emission, its interconnection and technical flaws. Scaling is done with patches that open new security holes.
Second-generation altcoins are based on Ethereum, smart gas and smart contracts. This is a much more complex financial and technical system that has not found wide application among ordinary users.
Bitcoin continues to evolve technically. There are already prototypes of smart contracts based on it. The introduction of Segwit and other technologies are being prepared, aimed at:
Expansion of functionality
Simplification of transactions
Reduced commission costs
Bitcoin is the benchmark for mining profitability. All coins are valued in correlation with Bitcoin, the profitability of which remains almost unchanged. Special programs are written for this cryptocurrency and separate devices (FPGA, Asic-processors) are created to decrypt SHA-256.
Some altcoins can be mined with video cards due to their low computational complexity. Modern projects are increasingly abandoning mining protocols in the direction of PoS emission. Projects using SHA-256 are mined only by enthusiasts due to low profitability.
Traders work with large cryptocurrencies such as BTC and ETH. They are easier to analyse, make predictions and profit from. Bitcoin’s profitability for traders is facilitated by:
Transit of cryptocurrency
Availability on platforms
Since the price of Bitcoin moves in the channel, classical technical analysis tools are effective. In particular, the pump of impulse movements.
Pump-like movements are a phenomenon of the cryptocurrency market. Instead of an oblique, calculated trend, the currency moves horizontally for a long time, making a sharp impulse to the point of trend convergence.
The phenomenon arose due to the correction of prices for cryptocurrencies when analysing quotations from different exchanges. The big players are balancing the price to avoid intermarket arbitrage.
Key characteristics of Bitcoin for traders:
Guided by the principles of technical analysis
Reacts well to news
Does not depend on altcoins
Good dynamics and excellent liquidity
Altcoins are less promising for trading. They are capitalised through transit to Bitcoin, which increases the correlation with the main cryptocurrency to 90%. Small projects can receive capitalisation from fiat sources, while maintaining the relative stability of the exchange rate.
Key characteristics of altcoins for traders:
High correlation with Bitcoin
In this regard, experienced traders choose the currency that is easier to analyse.
Large players periodically use assets with small capitalisations, squeezing the market liquidity with lots to extract a stable 3-5% profit per day. These are risky operations and, if unsuccessful, can lead to large losses.
Trading Bitcoin carries both advantages and disadvantages for traders. On one side:
BTC has shown steady growth over the past 10 years.
It regains its position even after heavy falls.
Bitcoin has the best chance of gaining regulation and derivatives.
Bitcoin has all the characteristics of a “conservative asset”. It is stable, profitable, promising. It is called a tool to save money during the devaluation of the domestic government currency.
On the other hand:
Technically, Bitcoin is becoming obsolete, and when a new major project appears, it may drop in price.
The coin has no fundamental pricing component. This means that Bitcoin may depreciate.
New projects can provide higher returns.
Bitcoin wins due to its transit status – new cryptocurrencies collect money for ICO in BTC or ETH. With the growth of the “subsidiary” currency, the “parent asset” also grows.
The most primitive and working strategy for making a profit remains rigid portfolio diversification: an equal share of ICO and Pre-ICO projects. The calculation is simple: 7 out of 10 new projects will fail, two will maintain their capitalisation, and the last one will grow in price by 10 to 100 times. This will cover losses and ensure profit.
New altcoins try to “solve the shortcomings of outdated cryptocurrencies” or be their “logical continuation”. New blockchain implementations create a unique offer through new features and benefits:
Solving scalability problems.
Strengthening anonymity (Monero and its followers).
Change of the emission system.
Improved security system.
Another type of interaction with the blockchain (all PoS currencies).
Refusal from the financial component (Medical ICO).
With one difference, altcoin often repeats the basics of Bitcoin’s blockchain architecture.
Bitcoin remains the founding cryptocurrency. With the largest reserves of capitalisation, a built-in mining infrastructure and a large number of admirers, it will continue to develop.
New altcoins on Blockchain 3.0 will use the principles laid down by Satoshi Nakamoto in the Bitcoin White Paper. Modern cryptocurrencies are fully funded by the main cryptocurrency, making BTC the most attractive proposition for investors, traders and aspiring crypto enthusiasts.