What are Altcoins? A history of failure
After an uncoordinated phase of virtual currencies, finally Bitcoin came around. It is not as if there were no dark-markets before Bitcoin. People used E-Gold and Liberty Reserve coins. However, Bitcoin was the first truly decentralized virtual currency with a very low probability for a double spend.
Lets try this!
It took some time and people saw the opportunity to use blockchain for other services than money. Some people even disagreed with Bitcoin itself and forked the software.
With Name-Coin the first alternative coin (Altcoin) was born. Name-Coin was launched in April 2011 and was used as a decentralized domain name registration service.
The good thing was that Name-Coin could be merge-mined together with Bitcoin.
The advent of Litecoin
After Name-Coin we saw technologies with the goal to prevent hash-power centralization like Tenebrix which was a GPU resistant protocol. In September of 2011 Litecoin was born.
Litecoin used a memory-hard puzzle and was also intended to be GPU-resistant. Litecoin came with 4 times faster block-rate. Soon Litecoin was the most forked chain.
PeerCoin (first proof-of-stake scheme in 2012)
DodgeCoin (Community Coin for culture, tipping and charity – launched in December 2013)
the biggest strength of altcoins was their biggest weakness
One of the biggest problems for small altcoins was mining-compatibility. When big Bitcoin miners disagreed with the coin, they could come, join and attack the coin. Since it was merge-mining there wasn’t even a risk for the attackers.
- Jan 2012 CoiledCoin was attacked by Elegius Pool
- Jul 2013 TerraCoin attacked by unknown
- Nov 2013 WorldCoin attacked by unknown
When there is merge mining a mining pool can point their hashpower to the coin they want to destroy, like the death-star in Starwars is pointing its weapon on planets which the imperium wants to destroy.
Why certain Altcoins will moon
simply because they can explore new use cases. This is evolution at play –> thousands of trials and error. One does not have to argue which coin is the best, the free market will explore the good projects anyways. The crypto space is the prime example of an anti-fragile system.
