Altcoins

 Altcoins

Tokens, cryptocurrencies, and other types of digital assets that are not bitcoin are collectively known as alternative cryptocurrencies,[27][28][29] typically shortened to "altcoins" or "alt coins".[30][31] Paul Vigna of The Wall Street Journal also described altcoins as "alternative versions of bitcoin"[32] given its role as the model protocol for altcoin designers. The term is commonly used to describe coins and tokens created after bitcoin. A list of some cryptocurrencies can be found in the List of cryptocurrencies article.

Altcoins often have underlying differences with bitcoin. For example, Litecoin aims to process a block every 2.5 minutes, rather than bitcoin's 10 minutes, which allows Litecoin to confirm transactions faster than bitcoin.[33] Another example is Ethereum, which has smart contract functionality that allows decentralized applications to be run on its blockchain.[34] Ethereum was the most used blockchain in 2020, according to Bloomberg News.[35] In 2016, it had the largest "following" of any altcoin, according to the New York Times.[36]

Significant rallies across altcoin markets are often referred to as an "altseason".[37][38]

Stablecoins

Stablecoins are altcoins that are designed to maintain a stable level of purchasing power.[39]

Architecture

Decentralized cryptocurrency is produced by the entire cryptocurrency system collectively, at a rate which is defined when the system is created and which is publicly known. In centralized banking and economic systems such as the US Federal Reserve System, corporate boards or governments control the supply of currency. In the case of decentralized cryptocurrency, companies or governments cannot produce new units, and have not so far provided backing for other firms, banks or corporate entities which hold asset value measured in it. The underlying technical system upon which decentralized cryptocurrencies are based was created by the group or individual known as Satoshi Nakamoto.[40]

As of May 2018, over 1,800 cryptocurrency specifications existed.[41] Within a proof-of-work cryptocurrency system such as Bitcoin, the safety, integrity and balance of ledgers is maintained by a community of mutually distrustful parties referred to as miners: who use their computers to help validate and timestamp transactions, adding them to the ledger in accordance with a particular timestamping scheme.[16] In a proof-of-stake (PoS) blockchain, transactions are validated by holders of the associated cryptocurrency, sometimes grouped together in stake pools.

Most cryptocurrencies are designed to gradually decrease the production of that currency, placing a cap on the total amount of that currency that will ever be in circulation.[42] Compared with ordinary currencies held by financial institutions or kept as cash on hand, cryptocurrencies can be more difficult for seizure by law enforcement.[1]

Blockchain

Main article: Blockchain

The validity of each cryptocurrency's coins is provided by a blockchain. A blockchain is a continuously growing list of records, called blocks, which are linked and secured using cryptography.[40][43] Each block typically contains a hash pointer as a link to a previous block,[43] a timestamp and transaction data.[44] By design, blockchains are inherently resistant to modification of the data. It is "an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way".[45] For use as a distributed ledger, a blockchain is typically managed by a peer-to-peer network collectively adhering to a protocol for validating new blocks. Once recorded, the data in any given block cannot be altered retroactively without the alteration of all subsequent blocks, which requires collusion of the network majority.

Blockchains are secure by design and are an example of a distributed computing system with high Byzantine fault tolerance. Decentralized consensus has therefore been achieved with a blockchain.[46]