Bitcoins Vs Altcoins: Comparing The Different Types Of Cryptocurrencies

Cryptocurrencies have become increasingly popular worldwide, with digital currencies like Bitcoin and Ethereum leading the charge. These cryptocurrencies are usually referred to as either bitcoins or altcoins, depending on their characteristics and features.

We will explore the differences between these two types of digital currency so that those who wish to invest in cryptocurrency can better understand which one is right for them. We’ll also examine different distinctions between bitcoins and altcoins, including their origin, purpose, supply, community support, regulation and cost.

Origin

The most apparent difference between Bitcoin and altcoin is their origin. Bitcoin was created by Satoshi Nakamoto in 2009 as a decentralised digital currency with no single authority or government controlling it. It has made Bitcoin the most widely used and accepted cryptocurrency today.

On the other hand, altcoins are all other digital currencies created since then. They can be divided into three main categories: clones of Bitcoin, forks of Bitcoin, and new coins with their unique blockchains. Additionally, altcoins are usually created to improve Bitcoin’s shortcomings, such as transaction speed or privacy.

Purpose

The purpose of each cryptocurrency is also distinct. Bitcoin was created as a store of value and payment method, whereas most altcoins are created for specific functions, such as innovative contract platforms or decentralised applications. It gives them the ability to perform tasks that Bitcoin cannot do.

For example, Ethereum is used for smart contracts and tokenisation, allowing developers to create tokens like a crypto ETF on its platform. Additionally, altcoins often have unique features like staking, privacy, and controller nodes. Moreover, some altcoins are designed to have a limited supply and are used by miners as rewards for verifying transactions on the blockchain.

Supply

Another difference between Bitcoin and altcoin is the supply of each currency. The total supply of Bitcoin is limited to 21 million coins, meaning there will never be any more created beyond this amount. On the other hand, altcoins generally have no limit on the number of coins that can be created, meaning that their supply is unlimited and can be increased at any time by the developers who create them.

Additionally, some altcoins have a finite supply, which is determined by their protocol and is usually lower than that of Bitcoin. Furthermore, the inflation rate of altcoins may also be higher than Bitcoin, depending on their protocol.

Community support

The level of community support for a cryptocurrency also varies between bitcoins and altcoins. Because Bitcoin was the first digital currency to emerge, it has the largest and most active community of users.

Therefore, it has a large and loyal following and a significant amount of resources supporting its development. On the other hand, altcoins have smaller communities, but they still support their respective cryptocurrency through discussion forums, development teams and fundraising initiatives.

In addition, some altcoins have communities that are large enough to rival Bitcoin in terms of size and activity. Moreover, some altcoins even have dedicated fanbases actively working to spread awareness and adoption of the cryptocurrency.

Regulation

Cryptocurrencies are highly regulated in The UAE, with different rules and regulations governing Bitcoin and altcoin transactions. For example, Bitcoin is treated as a commodity by The UAE’s Financial Authority of UAE (DFSA).

Therefore, it is subject to taxes when profits are made from trading or holding them. Any specific regulations in The UAE do not currently govern altcoins; however, they are still subject to the same Anti-Money Laundering (AML) and Countering Financing of Terrorism (CFT) laws as Bitcoin.

Furthermore, altcoins may also be subject to additional regulations depending on their function, such as securities laws if they offer tokenised securities or derivatives trading.

Trading platforms

The trading platforms where Bitcoin and altcoin can be bought, sold and exchanged differ. Most exchanges only accept Bitcoin for purchasing other cryptocurrencies; however, some support both Bitcoin and altcoins. Some exchanges even specialise in specific types of altcoins like stablecoins or privacy coins.

In The UAE, cryptocurrency exchanges must register with MAS before operating, and only a handful of exchanges are currently registered in the country. Moreover, investors should know that some altcoins may only be available on some exchanges or have minimal trading options.