Modern technology is developing with incredible intensity. They also touched upon the financial market. Today we can purchase goods and pay for them over the Internet. You can send a money transfer to a friend or partner from your home or work computer. The demand for electronic payments has become incredibly high.
Special monetary units (cryptocurrency) designed for online settlements began to appear on the Web. The very first cryptocurrency that was introduced to users is Bitcoin.
Over the past six months, about 500 payment systems have been launched on the Internet, issuing their own digital coins. Many experts in the field of cryptocurrency believe that these are forks (offshoots) of Bitcoin. Virtual money, which was developed after Bitcoin, is commonly referred to in the Internet community as "altcoins" (an alternative to Bitcoin).
One in a hundred will survive
About half a thousand altcoins work on the Web. And this is not the limit. Almost every day, new digital money appears in the financial market, the authors of which have ambitious plans and hope that their coins will be able to compete with the worlds most expensive cryptocurrency - Bitcoin.
Many of the altcoins are no different from Bitcoin: they have the same quality characteristics, the same source code, the same architecture, and a very similar mining scheme. Even the process of issuing money and the number of coins are accurately copied from Bitcoin.
More conscientious (or ambitious) developers have changed one or two characteristics in their cryptocurrencies, for example, transaction speed, mining scheme. But these changes can hardly be called significant, since they did not affect the effectiveness of virtual coins in any way.
Most of these currencies cannot adapt to the real conditions of the financial market. Unable to withstand stronger competitors, they disappear from the users sight.
Among the altcoins that have managed to withstand the fierce struggle of competitors is Litecoin. It is one of the very first cryptocurrencies that appeared after Bitcoin. Many users compare Bitcoin to gold and Litecoin to silver. Litecoin has its own characteristics that distinguish it from the first electronic money:
the number of issued currency units (more than in Bitcoin);
the scheme by which coins are "mined".
There are also some altcoins, during the creation of which global changes were made. The Bitcoin source code has been completely redesigned. The creators of cryptocurrencies are trying in every possible way to attract the attention of the community and introduce various kinds of innovations:
Dash system specializes in confidential transactions and guarantees its users non-disclosure of payment and personal information;
Bitshares developers have declared their system as an online version of Wall Street;
Ripple uses a simplified currency transactions scheme.
Many cryptocurrencies operate on the Bitcoin blockchain. These altcoins include CountepParty, MasterCoin.
Is it worth wasting time creating altcoins?
Bitcoin adherents argue that people are wasting time creating altcoins, they say, the newly minted digital money will not be able to compete with the powerful infrastructure of Bitcoin. Is this opinion correct? Lets try to figure it out.
Altcoins are one of the most important components of the electronic financial market. Several factors prove their necessity:
Bitcoin developers set themselves the goal of creating a decentralized network, and it is altcoins that contribute to this.
The creation of a new cryptocurrency is, first of all, an experiment involving specialists in various fields: cryptographers, programmers, financiers, lawyers, etc. Developers choose characteristics for their currency, combine them in various combinations, create programs for mining, changing the scheme mining coins and so on. As a result of this experiment, safe and effective digital money appears on the virtual market.
Users who have no experience with cryptocurrency can get it when working with altcoins. And this is a more profitable option than the test version of Bitcoin, which is not profitable. Working with altcoins, a person can earn.
Altcoins create healthy competition in the cryptocurrency market. And this is a good incentive for developers of all electronic money (including Bitcoin) to make their currency even more reliable and efficient.
Altcoin that appeared first
The very first Bitcoin fork is NMC (Namecoin). The developers aimed to create a cryptocurrency with decentralized domain name registration. This will help limit access of government agencies to the service in general and to the financial transactions of the system participants. The programmers have completed their task. At the moment, Namecoin is safe, efficient and demanded online money. NMC ranks 11th in the ranking of the most popular cryptocurrencies.
Are investors at high risk when investing in altcoins?
Investing in cryptocurrency is subject to certain risks. Digital money is an innovation that is still imperfect and not fully understood. And the mood of the cryptocurrency market is extremely volatile. Today, the strongest and most stable digital currency is Bitcoin, but even its price changes periodically.
Altcoins have a smaller capitalization than Bitcoin. Their rate is constantly jumping, then rising very high and jumping over the most expensive currency, then falling down and deceiving the expectations of coin holders.
The exchange rate can be influenced by "Whales" (people who trade currency). They are trying to buy large volumes of altcoins in order to artificially raise the price and create panic. And when the value of one or another digital rises to the limit, "Whales" quickly "throw" altcoins on the exchange. This method brings large profits to currency traders. The altcoin price is falling sharply.
If you approach investing correctly, then the user will be able to increase the invested amount several times. In order not to fall into the trap, you must follow the rules:
It is worth investing in long-term projects.
It is necessary to thoroughly study the cryptocurrency market, get complete information about the altcoin in which you are going to invest.
Do not take part in HYIPs - projects that were launched by scammers. On the Internet, you can often find Internet communities that attract naive users.
You cannot make money on what you do not understand. Therefore, before you start working with an altcoin, study it thoroughly.
Investors attention deserves digital money, which:
positively characterized by large Internet communities;
highly rated on electronic coin exchanges;
improve, periodically changing and renewing.
If you follow these guidelines for altcoin investing, you can easily choose the right course.
Several ways to get altcoins
There are several methods used by Internet users to obtain electronic currency. The most popular and simplest is getting paid. Many online stores and sites that provide services online accept payments in cryptocurrency from their customers.
The second way to get digital coins is to buy an altcoin on a cryptocurrency exchange. Altcoin is usually exchanged for Bitcoin. That is, first you purchase Bitcoin for dollars, and then exchange the BTC for the desired cryptocurrency.
You can also get altcoins as sponsorship. This is more an advertisement than a gesture of goodwill: the creators of a new currency want to make themselves known, spread information about their system and attract users. But for people who do not have the means to buy coins, this is the perfect solution.
Getting altcoins through mining
You dont have to spend money to buy altcoins. Do you want to become the owner of virtual coins? Then generate them yourself. There are special programs (miners) for "mining" cryptocurrency. Programs solve complex math problems and find hash blocks. The more power of the computer used for mining, the faster and more efficiently the program will work. The profitability of mining directly depends on these indicators. Performance is measured by hashes found within 1 second. The money is transferred to the users account after each recognized block.
There are several types of programs with similar settings. The most common are cgminer, cudaminer, sgminer. But for the "extraction" of some altcoins, original programs are used. You can download them on the websites of cryptocurrency issuing systems.
Cryptocurrency mining is carried out in several stages:
The choice of equipment (graphics processor or video card) on which the coins will be "mined". This point should be approached thoroughly, since your income will depend on the power of the devices.
Selection of pools. Pools practically do not differ from each other, so you can choose any.
Downloading the miner program and setting basic parameters.
Exchange virtual coins for Bitcoin.
Selling Bitcoin for dollars, rubles or euros.
Electronic coin algorithms
If you are going to make money on the "extraction" of virtual coins, the user must purchase special devices. For mining some altcoins require video cards, others require GPUs, and still others require ASICs. This equipment is used only for cryptocurrency mining. ASICs are expensive. The cost of the devices reaches $ 500.
Processors and video cards are much cheaper. These devices are more popular with miners than ASICs. We will consider algorithms for "mining" coins using video cards and processors:
SHA-256 is one of the first algorithms. It was developed by employees of the US National Security Agency. Bitcoin is based on this algorithm. The Scrypt algorithm is used on Radeon video cards. It is multifunctional as it allows you to mine various cryptocurrencies. The performance is affected by the frequency and amount of video memory.
Scrypt-n is used on 5th Gen Radeon cards. The algorithm is characterized by high stability and energy efficiency. It works at a lower speed than, for example, Scrypt, but the blocks calculated by it are estimated an order of magnitude higher.
Algorithms X11, X13, X15 are designed to work on Nvidia cards, although they will work with more powerful processors. The advantage of these algorithms is economical energy consumption and high mining speed.
The CryptoNight algorithm requires a lot of memory. But, using this algorithm, the user will be able to save on energy consumption. CryptoNight is suitable for mining virtual coins of the Monero system.
Which video card is better?
The main parameters when choosing a video card are hardware performance and energy efficiency. It is these factors that will determine the cost of the altcoin and the profitability of its production.
Most miners prefer Radeon video cards. These devices are affordable, have a high level of performance and are energy efficient.
There are many sites on the Web that talk about cryptocurrency mining. These resources have calculators designed to calculate the profit from mining. In special columns, you should indicate the power of the equipment, the amount of electricity consumed and its cost per 1 kW. The calculations will be done automatically and the user will see the net profit.
What do you need to mine?
There are so many altcoins on the electronic market that it is not surprising to get confused. Pay attention only to liquid digital money that is highly valued by cryptocurrency exchanges. Those coins for which a simple scheme is used will bring good profit.