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#bitcoin #ethereum #cryptocurrency
- The invention of Bitcoin led the way for other cryptocurrencies
- Thousands of similar Bitcoin like cryptocurrencies were introduced to be the next Bitcoin
- Most of them use Bitcoin source codes
- Hundreds of cryptocurrencies died due to:
-- lost interest of the users/miners
-- software bugs
-- 51% attack
-- cryptographic weaknesses in the used algorithms
Reasons for introducing Bitcoin alternatives:
1. Higher coin cap
2. Faster transactions
3. Coin introduction rate
4. More transactions per second
5. Smaller transactions fees
6. GPU-friendly mining
7. Scripting language with more capabilities
1. Higher coin cap
- Total Bitcoin amount is fixed to 21 million (actually 20,999,999.9769)
- Scarcity of the Bitcoin results in high prices
- Circulating Bitcoin is much less due to
-- burned bitcoins
-- lost private keys
-- wrong P2SH transactions
- Many alternative cryptocurrencies have higher supply limit
- Some alternative cryptocurrencies have no supply limit (e.g. Ethereum)
2. Faster transactions
- Bitcoin block addition time is 10 minutes
- A common practice is to wait for 6 blocks (1 hour) to be sure that the transaction is included in the blockchain
- For maximum safety, it is recommended that for the irreversible sale of items with value comparable to the block reward, a large number of confirmations (144 blocks = 1 day) is required before completing a Bitcoin exchange
- Such long waiting times prevent Bitcoin to be used as fast payments
- Almost every alternative cryptocurrency have average block addition time less than 10 minutes, some as small as a few seconds (12 seconds for Ethereum)
3. Coin introduction rate
- Bitcoin coin introduction rate is halved in every 4 years
- Some alternative cryptocurrencies have halving in every 1-2 years because halving sometimes causes a hype
- Some alternative cryptocurrencies use fixed coin introduction rate
4. More transactions per second (tps)
- Bitcoin guarantees around 5 tps which depends block addition time and block size
- Some alternative cryptocurrencies reduce block addition time to increase tps
- Some alternative cryptocurrencies increase block size to increase tps
Some alternative cryptocurrencies do both
5. Smaller transactions fees
- Bitcoin transaction fees depend on the network demand and Bitcoin price
- e.g. Transferring $5 worth Bitcoin may require $5 or $50 worth Bitcoin transaction fee which makes it hard to use in daily life for small purchases
- Some alternative cryptocurrencies require very small amount of transaction fee but this may encourage selsh miners to avoid including these transactions in a block
6. GPU-friendly mining
- Bitcoin mining is based on double SHA-256 computation which requires negligible memory
- Thus, GPUs cannot compete with ASICs in Bitcoin mining
- Some alternative cryptocurrencies like Litecoin (2011) promise ASIC resistant mining algorithm
- However, many ASICs were built in the past for mining algorithms that were claimed to be ASIC resistant
- e.g. Memory intensive Scrypt algorithm is used in Litecoin to be ASIC resistant but Scrypt ASICs are available for current parameters
- One can modify Scrypt parameters to prevent building efficient ASICs but this also makes mining solution verification inefficient
- There are ASICs for Ethereum's ethash mining algorithm but GPU miners also prot from mining ETH
Some cryptocurrencies use multiple hash functions in the hopes of ASIC
resistance
X11: Blake, BMW, Groestl, JH, Keccak, Skein, Lua, Cubehash, Shavite, Simd, Echo
X13: BLAKE, BMW, Groestl, JH, Keccak, Skein, Lua, Cubehash, Shavite, Simd, Echo, Hamsi and Fugue
X15: Blake, BMW, Groestl, JH, Keccak, Skein, Lua, Cubehash, Shavite, Simd, Echo, Hamsi, Fugue, Shabal, and Whirlpool
X16: the same 15 algorithms used in X15 model + SHA512
X16r: rotates through 16 dierent algorithms in random
X17: Blake, BMW, Groestl, JH, Keccak, Skein, Lua, Cubehash, Shavite, Simd, Echo, Hamsi, Fugue, Shabal, Whirlpool, Loselosei and Djb2
7. Scripting language with more capabilities
- Bitcoin scripting language is a sequential language simply called Script
- Bitcoin deliberately avoided for/while loops to avoid infinite loops
- Thus, it is very limited in terms of programming (i.e. not Turing-complete)
- Ethereum scripting language Solidity is an object-oriented programming language that is Turing complete
- Solidity makes it possible to create and run decentralized applications and smart contracts
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