Bitcoin is considered a leader of the cryptocurrency world. It inspires more developers to create new cryptocurrencies over time, which in turn attracts investors and individuals interested in digital assets, such as cryptocurrencies. The question that puzzles them is how other cryptocurrencies differ from Bitcoin. In this article, we will explore this question and provide answers, discussing how cryptocurrencies are categorized, highlighting the key differences between Bitcoin and Other Cryptocurrencies, and mentioning the most important cryptocurrencies. Finally, we will answer the common questions accordingly. Let’s start by explaining how cryptocurrencies are categorised, so that we can move forward into more details.

How are cryptocurrencies categorised?

Cryptocurrencies are broadly categorised into three main categories: Bitcoin, altcoins, and tokens. This terminology is a little bit confusing for most beginner cryptocurrency holders and traders, so let’s clarify each one separately: 

1. Bitcoin: 

It’s the original and first cryptocurrency invented and traded among investors. It’s designed to be a virtual currency, a digital form of money, acting as money and a form of payment, but not centralized. All transactions are recorded in a technology system called blockchain, which is a public digital ledger that records all transactions and prevents tampering.  

2. Altcoins:

The term altcoins refers to (alternative coins), created to refer to cryptocurrencies and tokens that are created alternatively from the first invented cryptocurrency, Bitcoin. This means that altcoin refers to all cryptocurrencies except Bitcoin. Altcoin was invented to address the weaknesses of Bitcoin and enable new features, opening up new areas of application. Examples include Ethereum, Ripple, Litecoin, and many others.

3. Tokens:

A token is technically considered another word for cryptocurrency or cryptoasset; however, it has several meanings depending on the context. First meaning: it often refers to any cryptocurrency besides Bitcoin and Ethereum, as those are the two largest and oldest cryptocurrencies created. The second meaning: cryptoasset that runs on top of another cryptocurrency’s blockchain.

The difference between the three categories can be summarized into these points: 

• Bitcoin stands alone in its category due to its history, market position, and its design as a store of value.
• Altcoins are alternative coins, and many of them are run on their blockchains, such as Ethereum, Litecoin, Cardano, and Solana. 
• Tokens are considered a subcategory of altcoins with a key difference: They don’t have their own blockchain and are built on top of other blockchains.

After discussing how cryptocurrencies are categorised, it’s time to discuss the areas of difference between Bitcoin and other cryptos.

Cryptos Comparison: Key Differences Between Bitcoin vs Other Cryptocurrencies

Several aspects make Bitcoin different from other cryptocurrencies (which are called altcoins as we discussed above). Primarily, Bitcoin is designed to focus on being a decentralized digital currency and store of value, while many altcoins aim to address other aspects of blockchain technology. The key differences are as follows: 

1. Creation purpose:

Bitcoin was created to be a decentralized digital currency that allows peer-to-peer transactions without intermediaries, and also as a store of value similar to digital gold. Its design focuses on security, transparency, and resistance to censorship or control by any single entity. Moreover, it’s aiming to be a hedge against inflation because its value tends to rise over time. Conversely, most altcoins are designed to address other purposes, such as improving transaction speed and enabling smart contracts (which are self-executing computer programs). Bitcoin does not support the features of these altcoins.

2.  Technology Differences:

Bitcoin utilises a proof-of-work (PoW) blockchain, whereas most altcoins employ a Proof-of-Stake (PoS) blockchain, a delegated proof-of-stake (DPoS) blockchain, or a proof-of-history (PoH) blockchain. These are modern mechanisms that facilitate faster transactions and consume a lower amount of energy, but may come with trade-offs in terms of decentralization or security.

3. Supply Differences:

Bitcoin’s supply is capped at 21 million coins, making it a deflationary asset, and its issuance is predictable. Its scarcity plays a key role in its value propositions. Conversely, altcoins differ in that they offer an unlimited supply, such as stablecoins and meme coins.

4. Market position:

Bitcoin is the most widely recognized cryptocurrency worldwide. It has an increasing market capitalization and is readily accepted by merchants, financial institutions, and investors. On the other hand, altcoins have a rapid growth in popularity among investors, but are still limited in institutional adoption and have smaller communities.

After exploring how Bitcoin differs from altcoins, let’s learn more about the altcoins that exist in the cryptocurrency world, which are considered key players in altcoin markets.

The most popular altcoins you should know:

1. Ethereum (ETH): 

Ethereum is the first alternative to Bitcoin, a decentralized software platform. Ethereum is the name of the network, while “ether” is the name of the cryptocurrency token that is used by the Ethereum network. “ETH” is the most commonly used name in day-to-day usage. It functions similarly to Bitcoin, but with some notable differences. It benefits from energy efficiency, reducing consumption by over 99% thanks to its PoS (Proof-of-Stake) technology, which enables faster and more secure transactions. ETH becomes deflationary, making it attractive to long-term holders. While Bitcoin is regarded as “digital gold” among investors, Ethereum is seen as “digital oil”.

2. Tether (USDT):

Tether (USDT) differs slightly from other cryptocurrencies. It is a stablecoin designed to maintain its value within market mechanisms, making it an attractive option for investors seeking to hedge against cryptocurrency volatility. Tether is backed by a fiat currency like USD, CAD, AUD, and JPY, so it’s considered a fiat-collateralized stablecoin. It aims to bridge the gap between blockchain assets and fiat currencies. USDT offers security and stability because it is pegged against the U.S.Dollar at a 1:1 ratio. However, the USDT can’t be exchanged for USD through the Tether company.

3. Binance Coin (BNB):

BNB is a cryptocurrency used for trading and paying fees on the Binance exchange. As of 2018, the Binance cryptocurrency exchange processes more than 1.4 million transactions per second, making it the world’s largest cryptocurrency exchange. BNB can be exchanged for other cryptocurrencies, such as Bitcoin, Litecoin, and Ethereum. Initially, the Binance coin was based on the Ethereum blockchain, and later, it became the native currency of Binance’s blockchain. 

4. Solana Coin (SOL):

Solana is a high-performance blockchain platform that offers excellent scalability, speed, and low-cost transactions. It utilises the proof-of-history mechanism, supporting decentralized finance (DeFi), non-fungible tokens (NFTs), meme coins, and gaming. Solana is known as the “Ethereum killer” because it can process more transactions per second than Ethereum at lower fees. 

5. Dogecoin (DOGE):

Dogecoin is categorised as a memcoin for the media and entertainment sectors. Dogecoin has no supply cap; there are currently over 145 billion DOGE in circulation. Approximately 5 billion new coins are introduced annually. It supports microtransactions due to its fast transactions and low fees.

Discussing cryptocurrencies and their features is endless; new coins are created daily, making this market incredibly dynamic and fast-paced. From this point, many beginners wonder: How can we keep up with all these coins, and is there an easy way to invest in multiple cryptocurrencies simultaneously without becoming overwhelmed? After briefly discussing Bitcoin versus other cryptocurrencies, let’s move on to answering this question in the next section.

How is it possible to invest in more than one cryptocurrency?

The most practical way to invest in multiple cryptocurrencies without the hassle of managing numerous digital wallets is to trade crypto CFDs. Crypto CFDs (contracts for differences) allow traders to speculate on the price movements without holding the underlying cryptocurrency, so you can easily trade in Bitcoin, Ethereum, and many others. Your trading journey will be on a single trading platform. Trading crypto CFDs will allow you to make a profit in both ways, whether the price goes up or down, because you can go long if the price goes up and go short (short-selling) if the price goes down. This way, you can avoid potential losses that might occur if you are holding a cryptocurrency in your digital wallet and its price falls.

Crypto CFDs advantages: 

• No need for a large capital to start trading cryptocurrencies or to own a full amount of a cryptocurrency, thanks to the leverage offered by CFDs, which enables traders to trade with less capital. However, it involves risks, which can be managed through proper risk management and a suitable trading strategy.
• 24/7 access to the market, which offers numerous investment opportunities for traders. 
• No digital wallet needed as long as you’re trading crypto CFDs. 

How can I trade Bitcoin CFDs or any cryptocurrency CFDs?

To start trading Bitcoin CFDs or any cryptocurrency CFDs, you need a trusted CFD broker to open a cryptocurrency CFD trading account. Choose a reputable and regulated CFD broker with a strong international reputation and licensed by financial authorities. Most CFD brokers offer platforms such as MetaTrader 4 or MetaTrader 5 (MT4/MT5), which are user-friendly platforms featuring essential trading tools, including charting, pattern recognition, and technical indicators. Look for a CFD broker that offers competitive spreads and reasonable fees. You can also request a demo trading account to try out the services and ensure you’re prepared to start trading crypto CFDs. Once you’re confident, you can switch to a live trading account and begin your trading journey.

Summary:

After compare the key differences between Bitcoin and other cryptocurrencies and how cryptocurrencies are categorised, it’s essential to be aware of this information, whether you are a cryptocurrency holder or a crypto CFD trader. Because in both cases, your investment can be influenced accordingly, regardless of whether you are a CFD trader or a cryptocurrency holder. 

Understanding the nature of each cryptocurrency, major coins like Bitcoin or altcoins –, how it works, and its applications will help you anticipate whether this cryptocurrency has a promising future and whether its value will increase. This will enable you to make an informed decision before adding it to your investment portfolio.