Bitcoin’s wild ride has gotten a huge amount of attention. But over
the past two weeks, some of its crypto cousins, like litecoin and
Bitcoin Cash, have muscled their way into the spotlight.
On Tuesday, for instance, bitcoin-services company Coinbase announced it would list and support Bitcoin Cash, which is an alternative version of bitcoin that launched on Aug. 1. The news sent prices of bitcoin down and Bitcoin Cash skyrocketing.
Plenty of people are confused enough about bitcoin. Alternatives to bitcoin, or “altcoins,” muddy the waters further. Here are answers to some basic questions about them.
Altcoins? What are altcoins?
Altcoin is a nickname given to currencies that are a variation on bitcoin. The way bitcoin itself was created encourages this. When bitcoin’s anonymous creator Satoshi Nakamoto released bitcoin in 2009, he or she did it as an open-source software project. That means that, unlike say the code for Microsoft Windows, anybody could take the program, reconfigure it and launch their own version. Litecoin was the first to do this, in 2011.
Are there many of these altcoins?
Yep. A research website called coinmarketcap.com recently listed 1,374 altcoins. Most are marginal at best. About 300 of them, with names like PinkDog, MagicCoin and BitSoar, have no measurable market. But there are a handful that have a legitimate shot at becoming viable online currencies.
Which ones seem viable?
Ethereum, also known as ether, is probably the most popular. As of Friday, it had a $60 billion market value, second only to bitcoin, and has attracted a sizable community of developers and entrepreneurs. Ripple and litecoin are also popular. And Bitcoin Cash grew far bigger this week; it rose 60% in one day, and its market value stood at about $40 billion, after Coinbase said it would list the coin.
How do these other coins compare in size and performance to bitcoin?
All of them are smaller than bitcoin. Some have larger circulating supplies—there are 38 billion ripple tokens, for example—and some have had larger gains this year on a percentage basis. Ethereum’s up 7,600% this year, and ripple has risen about 15,000%. Bitcoin is up about 1,200%.
Why do people even want altcoins if they have bitcoin?
© Provided by The Wall Street Journal.
It is a bet on the future. For all the success of bitcoin, there is
no guarantee it will remain the dominant cryptocurrency. Everything in
this market is highly speculative.
Who created these other currencies?
Some have known creators, some don’t. Charlie Lee created litecoin. Vitalik Buterin created ethereum. In the case of Bitcoin Cash, it was a group of developers and businesses who weren’t satisfied with the existing configuration of bitcoin. Prominent and early supporters included Roger Ver, an early bitcoin investor nicknamed “Bitcoin Jesus,” and Jihan Wu, the co-founder of a big Chinese mining company called Bitmain. A developer named Amaury Sechet wrote the initial code that allowed the fork.
Fork?
A fork is a term for a new version of a software program. Bitcoin is really nothing more than software, a program that allows two people to make an exchange of value. Because nobody owns that software, anybody can “fork” it, can create their own version of it. Bitcoin Cash and all these other altcoins are really just versions of the bitcoin program.
How is Bitcoin Cash Different from bitcoin?
In most respects, it is similar to bitcoin. It works the same way, and it has the exact same transaction history as the original bitcoin, up to Aug. 1, 2017. Its primary difference is that it is designed to allow more transactions to pass through, on a per-second basis, than bitcoin, which leads to lower user fees. And, of course, because it is a different market, Bitcoin Cash’s price moves independent of bitcoin itself.
Why do I care?
Some people have looked at Bitcoin Cash as a virtual dividend for bitcoin holders. Some see it as an easy arbitrage play. Others see Bitcoin Cash in a pitched philosophical battle against bitcoin. Indeed, its existence is the result of a fight within the bitcoin industry that at times has been more like a religious war. It has grown only more partisan and bitter as bitcoin has become more valuable.
Do we need another version of bitcoin?
Well, cryptocurrency is the epitome of an open market. Anybody can come along and offer a product. Bitcoin’s backers created this opening for Bitcoin Cash by not allowing any changes in the underlying code that would have allowed more transactions to fit through the network.
They have their reasons for that. But as bitcoin has grown in popularity, the result has been a situation where transactions get stuck in a bottleneck. If you want to get your transaction processed fast, you need to attach a voluntary fee.
Those “voluntary” fees have reached an average cost of about $30 per transaction. That makes bitcoin virtually unusable for all but very large transactions. The Bitcoin Cash crowd is just trying to offer a solution to that problem.
Are there other differences among the different altcoins?
Ethereum is a platform for hosting apps, a decentralized operating system. Ripple is designed for interbank payments. Even more than the design itself, though, the big difference is in the communities around each asset. Bitcoin has a community that has been growing over nine years. It has experienced developers, and virtually every business in the industry recognizes it. Bitcoin Cash, among others, doesn’t have that yet. For altcoins, expanding the base of developers and supporters is almost as important as the code.
Ethereum and litecoin have their own groups of developers and supporters, working to build and expand their own networks.
I just got into bitcoin. Do the altcoins affect me?
The existence of these other coins doesn’t necessarily have anything to do with bitcoin, and you can buy and sell any of them independently. On the other hand, while there is a competition among these coins, at times they move in tandem, like stocks on a day when the whole market is way up.
How important was the Coinbase move with Bitcoin Cash?
Coinbase has emerged as the biggest bitcoin exchange, and it has become a company that is closest to the mainstream. Its app has become one of the most downloaded, and it has one of the largest user bases in the industry. So what it does carries weight.
Does Coinbase support any other altcoins?
Coinbase allows trading of bitcoin, Bitcoin Cash, litecoin, ethereum and ethereum classic.
What happens now?
The price and market value of Bitcoin Cash, ethereum, litecoin and others will probably get the most attention. But what matters much more to their future is adoption.
Will people and businesses frustrated by bitcoin’s high fees migrate to these other currencies? Will software developers start working on them, and will businesses use and build apps for them or one particular altcoin?
Meanwhile, bitcoin will always be the original, and still has the largest “network effect” around it, but in tech, being first or best doesn’t always tell you who succeeds. Anyone remember Betamax or Netscape?
Write to Paul Vigna at paul.vigna@wsj.com
On Tuesday, for instance, bitcoin-services company Coinbase announced it would list and support Bitcoin Cash, which is an alternative version of bitcoin that launched on Aug. 1. The news sent prices of bitcoin down and Bitcoin Cash skyrocketing.
Plenty of people are confused enough about bitcoin. Alternatives to bitcoin, or “altcoins,” muddy the waters further. Here are answers to some basic questions about them.
Altcoins? What are altcoins?
Altcoin is a nickname given to currencies that are a variation on bitcoin. The way bitcoin itself was created encourages this. When bitcoin’s anonymous creator Satoshi Nakamoto released bitcoin in 2009, he or she did it as an open-source software project. That means that, unlike say the code for Microsoft Windows, anybody could take the program, reconfigure it and launch their own version. Litecoin was the first to do this, in 2011.
Are there many of these altcoins?
Yep. A research website called coinmarketcap.com recently listed 1,374 altcoins. Most are marginal at best. About 300 of them, with names like PinkDog, MagicCoin and BitSoar, have no measurable market. But there are a handful that have a legitimate shot at becoming viable online currencies.
Which ones seem viable?
Ethereum, also known as ether, is probably the most popular. As of Friday, it had a $60 billion market value, second only to bitcoin, and has attracted a sizable community of developers and entrepreneurs. Ripple and litecoin are also popular. And Bitcoin Cash grew far bigger this week; it rose 60% in one day, and its market value stood at about $40 billion, after Coinbase said it would list the coin.
How do these other coins compare in size and performance to bitcoin?
All of them are smaller than bitcoin. Some have larger circulating supplies—there are 38 billion ripple tokens, for example—and some have had larger gains this year on a percentage basis. Ethereum’s up 7,600% this year, and ripple has risen about 15,000%. Bitcoin is up about 1,200%.
Why do people even want altcoins if they have bitcoin?
© Provided by The Wall Street Journal.
It is a bet on the future. For all the success of bitcoin, there is
no guarantee it will remain the dominant cryptocurrency. Everything in
this market is highly speculative.Who created these other currencies?
Some have known creators, some don’t. Charlie Lee created litecoin. Vitalik Buterin created ethereum. In the case of Bitcoin Cash, it was a group of developers and businesses who weren’t satisfied with the existing configuration of bitcoin. Prominent and early supporters included Roger Ver, an early bitcoin investor nicknamed “Bitcoin Jesus,” and Jihan Wu, the co-founder of a big Chinese mining company called Bitmain. A developer named Amaury Sechet wrote the initial code that allowed the fork.
Fork?
A fork is a term for a new version of a software program. Bitcoin is really nothing more than software, a program that allows two people to make an exchange of value. Because nobody owns that software, anybody can “fork” it, can create their own version of it. Bitcoin Cash and all these other altcoins are really just versions of the bitcoin program.
How is Bitcoin Cash Different from bitcoin?
In most respects, it is similar to bitcoin. It works the same way, and it has the exact same transaction history as the original bitcoin, up to Aug. 1, 2017. Its primary difference is that it is designed to allow more transactions to pass through, on a per-second basis, than bitcoin, which leads to lower user fees. And, of course, because it is a different market, Bitcoin Cash’s price moves independent of bitcoin itself.
Why do I care?
Some people have looked at Bitcoin Cash as a virtual dividend for bitcoin holders. Some see it as an easy arbitrage play. Others see Bitcoin Cash in a pitched philosophical battle against bitcoin. Indeed, its existence is the result of a fight within the bitcoin industry that at times has been more like a religious war. It has grown only more partisan and bitter as bitcoin has become more valuable.
Do we need another version of bitcoin?
Well, cryptocurrency is the epitome of an open market. Anybody can come along and offer a product. Bitcoin’s backers created this opening for Bitcoin Cash by not allowing any changes in the underlying code that would have allowed more transactions to fit through the network.
They have their reasons for that. But as bitcoin has grown in popularity, the result has been a situation where transactions get stuck in a bottleneck. If you want to get your transaction processed fast, you need to attach a voluntary fee.
Those “voluntary” fees have reached an average cost of about $30 per transaction. That makes bitcoin virtually unusable for all but very large transactions. The Bitcoin Cash crowd is just trying to offer a solution to that problem.
Are there other differences among the different altcoins?
Ethereum is a platform for hosting apps, a decentralized operating system. Ripple is designed for interbank payments. Even more than the design itself, though, the big difference is in the communities around each asset. Bitcoin has a community that has been growing over nine years. It has experienced developers, and virtually every business in the industry recognizes it. Bitcoin Cash, among others, doesn’t have that yet. For altcoins, expanding the base of developers and supporters is almost as important as the code.
Ethereum and litecoin have their own groups of developers and supporters, working to build and expand their own networks.
I just got into bitcoin. Do the altcoins affect me?
The existence of these other coins doesn’t necessarily have anything to do with bitcoin, and you can buy and sell any of them independently. On the other hand, while there is a competition among these coins, at times they move in tandem, like stocks on a day when the whole market is way up.
How important was the Coinbase move with Bitcoin Cash?
Coinbase has emerged as the biggest bitcoin exchange, and it has become a company that is closest to the mainstream. Its app has become one of the most downloaded, and it has one of the largest user bases in the industry. So what it does carries weight.
Does Coinbase support any other altcoins?
Coinbase allows trading of bitcoin, Bitcoin Cash, litecoin, ethereum and ethereum classic.
What happens now?
The price and market value of Bitcoin Cash, ethereum, litecoin and others will probably get the most attention. But what matters much more to their future is adoption.
Will people and businesses frustrated by bitcoin’s high fees migrate to these other currencies? Will software developers start working on them, and will businesses use and build apps for them or one particular altcoin?
Meanwhile, bitcoin will always be the original, and still has the largest “network effect” around it, but in tech, being first or best doesn’t always tell you who succeeds. Anyone remember Betamax or Netscape?
Write to Paul Vigna at paul.vigna@wsj.com
