Hard forks and Altcoins- What’s the difference?
December 11, 2018
For those of you who are new to the cryptocurrency world, hard forks and altcoins may be alien words. However, the logic behind this is actually quite simple. All of this has started with the launch of Bitcoin a decade ago. To understand what Hard forks are, you need to know how Bitcoin works first.
Bitcoin is a decentralised currency which is not regulated by any central regulator. Its value is determined by the demand and supply forces. The more the demand, the lesser Bitcoins are released in the mining process. A unique algorithm is used to mine Bitcoins, miners try to solve this algorithm to get their coins. However, with rising demand and popularity of Bitcoins, the chances of getting the coins get slimmer. To negate this, those who manage Bitcoin propagated a Bitcoin fork which means that there is an upgrade to the crypto currency. It is a divergence from the cryptocurrencies main blockchain. This occurs when a investor or a party wants to change something but has opposition from other parties.
An alternative coin or ‘altcoin’ is a cryptocurrency that is simply an alternative to Bitcoin. There are many cryptocurrencies that are based on Bitocoins open sourced protocol with various changes to its original code, giving investors a greater variety of crypto coins to trade on Instant Cryptocurrency Exchanges so that they can take part in the crypto story without worrying about too high valuations of vitrtual currencies like Bitcoin.
Generally hard forks are done when the cryptocurrency in question has a smaller user base. But in the current scenario, this has become increasingly difficult.
If seen together, altcoins and hard forks are new crypto assets which ensure that investors and traders have a better variety of cryptocurrencies to invest in. Just like how Bitcoin cash was the most successful hard fork that happened, with Bitcoin cash emerging as one of the top 10 most valued cryptocurrencies, there are many such hard forked coins which can be popular and can generate handsome returns for the investors. On the other hand, there can also be great altcoins which can generate great returns- Ethereum, Dogecoin, Monero are some of the popular ones.
Failure of a hard fork results in an altcoin
If there is a hard fork and the resultant response is poor, but people anyway move to the new cryptocurrency, it is then deemed to be an altcoin. This is because the hard forked coin is completely independent from its old cryptocurrency, it has new nodes, a new client network which then means that everything is independently run, becoming an altcoin altogether.
As newbie investors, many prefer to invest in these altcoins or hard forked coins by Bitcoin Exchange or paying with fiat currencies. There is a growing interest amongst people to invest in other cryptocurrencies rather than just being limited to Bitcoin.