There is an “architectural shift” in technology and in the world brought upon by cryptoassets, which many crypto supporters miss, according to Marc Andreessen, co-founder of venture capital powerhouse Andreessen Horowitz (a16z), and founder of Netscape Communications Corporation.
Today, a16z announced a new USD 2.2bn fund to continue investing in crypto networks.
Meanwhile, in a recent interview with economic blogger Noah Smith, Andreessen compared the topic of crypto with the parable of the blind men and the elephant, allowing people to interpret many different parts in many different ways, or use it to make their point. As an example, he gave people seizing on “the money part,” then either glorifying crypto as a new type of monetary system that brings freedom from the nation-state, or “crucify[ing] it as a danger to economic stability and the ability for governments to tax.”
However, while these are interesting arguments, Andreessen stressed,
“I think they all miss a more fundamental point, which is that crypto represents an architectural shift in how technology works and therefore how the world works. That architectural shift is called distributed consensus — the ability for many untrusted participants in a network to establish consistency and trust.”
According to him, the Internet has never had this until now and it will take thirty years to work through all of the things that can be done as a result. While money is the easiest application of this idea, other things that can now be built in theory include Internet native contracts, loans, insurance, title to real-world assets, unique digital goods aka non-fungible tokens (NFTs), and online corporate structures such as digital autonomous organizations (DAOs), among others, the investor said.
This also presents a great impact on and shift in incentives – which further impacts reaching these applications.
Collaborative human effort online so far was either in the form of a literal adoption of real-world corporate norms, such as a company with a website, or an open-source project like Linux that didn’t have any money directly attached to it, said Andreessen.
“With crypto, you can now create thousands of new kinds of incentive systems for collaborative work online, since participants in a crypto project can get paid directly without a real-world company even needing to exist,” he said.
While open-source software development has been great, people are generally willing to work more for money than for free, “and all of a sudden all those things become possible and even easy to do.” And though it will take a few decades to see the results of this as well, “I don’t think it’s crazy that this could be a civilizational shift in how people work and get paid,” said Andreessen.
He also discussed the idea that AI is somewhat a left-wing idea, having centralized machines making top-down decisions, but that crypto is a right-wing idea, having many distributed agents, humans and bots, making bottom-up decisions, he said, citing another prominent venture capitalist Peter Thiel, co-founder of PayPal.
The tech industry has historically been dominated by left-wing politics and today’s big tech companies are intertwined with the US Democratic Party, Andreessen said, noting,
“Crypto potentially represents the creation of a whole new category of technology, quite literally right-wing tech that is far more aggressively decentralized and far more comfortable with entrepreneurialism and free voluntary exchange. If you believe, as I do, that the world needs far more technology, this is a very powerful idea, a step function increase in what the technology world can do.”
As for a16z becoming known for innovating in the space of venture capital itself, Andreessen said that there is something old and something new about venture capital – and this something new includes crypto.
“So we sit at the vortex of this combination of the very old and the very new. It’s certainly possible that venture capital itself gets pulled into this vortex and comes out the other side radically transformed, and in fact, this is what some of the smartest crypto experts are predicting,” Andreessen concluded.
The rise of the cryptocurrency industry has captured the attention of many, prompting questions like “What is Bitcoin?” and “How does it differ from other cryptocurrencies?” With over 8,000 different cryptocurrencies in existence, it can be overwhelming to understand the nuances of each one. However, one of the most notable and influential cryptocurrencies is Bitcoin, which has paved the way for other digital currencies, commonly known as “altcoins”. In this article, we will explore the key differences between Bitcoin and altcoins, and how they have impacted the world of finance and technology.
What is Bitcoin?
To understand altcoins, it is essential to first grasp the concept of Bitcoin. Bitcoin is a digital currency or cryptocurrency that operates independently of a central authority, such as a bank or government. It was created in 2009 by an unknown individual or group using the pseudonym Satoshi Nakamoto. Bitcoin is based on blockchain technology, a decentralized and transparent system that records all transactions on a public ledger. It can be bought, sold, and exchanged for goods and services, just like traditional currencies.
What are Altcoins?
Altcoins, or alternative coins, are any cryptocurrencies that are not Bitcoins. Simply put, they are alternatives to Bitcoin. These digital currencies operate similarly to Bitcoin, but have their own unique features and purposes. Altcoins were created to address some of the limitations and challenges faced by Bitcoin, such as slow transaction times and high fees. They also offer various use cases and cater to different audiences, making the cryptocurrency market more diverse and accessible.
Key Differences Between Bitcoin and Altcoins
1. Purpose and Use Case
The main difference between Bitcoin and altcoins lies in their purpose and use case. Bitcoin was created as a decentralized peer-to-peer digital currency, designed to be a store of value and a medium of exchange. It offers an alternative to traditional currencies, enabling individuals to make borderless and secure transactions. On the other hand, altcoins cater to different niches and industries. Some are focused on improving payment systems, while others aim to disrupt specific industries such as banking, healthcare, or gaming.
2. Blockchain Technology
While both Bitcoin and altcoins are based on blockchain technology, they may use different consensus mechanisms or protocols. Bitcoin uses Proof-of-Work (PoW) algorithm, where miners compete to solve complex mathematical algorithms to validate transactions and add blocks to the blockchain. In contrast, altcoins may use different methods such as Proof-of-Stake (PoS), Delegated Proof-of-Stake (DPoS), or Directed Acyclic Graph (DAG). These variations affect the speed, scalability, and security of the network.
3. Supply and Emission
Another key difference is the supply and emission of these digital assets. Bitcoin has a finite supply of 21 million coins, which are gradually released through mining. This scarcity and demand have contributed to its significant value and increase in price over time. Altcoins, on the other hand, may have a larger or unlimited supply, making them more susceptible to inflation and price fluctuations. This also means that altcoins are generally more affordable and accessible to a wider audience.
4. Popularity and Market Capitalization
Bitcoin is the most popular and dominant cryptocurrency, with a market capitalization of over $1 trillion. This makes it the most valuable, stable, and recognized digital asset in the market. Altcoins, however, may have a smaller market share and fluctuate in value based on their demand and utility. Some altcoins, such as Ethereum, have gained significant traction and have a large market cap as well. However, many others are still emerging and may have a higher risk associated with them.
Benefits of Altcoins
Now that we have explored the key differences between Bitcoin and altcoins, let’s discuss the benefits of investing in altcoins.
1. Diversification
Investing in altcoins offers investors the opportunity to diversify their portfolio, reducing the overall risk associated with cryptocurrency investments. By holding a mix of different digital assets, investors can potentially offset potential losses and optimize returns.
2. Potential for Higher Returns
Some altcoins, particularly newer ones, have a lower entry barrier compared to Bitcoin. This means that investors can potentially buy a larger quantity of altcoins with their investment, increasing their potential for higher returns.
3. Innovative Technology
Altcoins often offer innovative technology or unique features not found in Bitcoin. This provides an incentive for investors to diversify and explore different cryptocurrencies that may have a high potential for growth.
Practical Tips for Investing in Altcoins
1. Do Your Research
Investing in altcoins requires thorough research and understanding of the project, team, technology, and market potential. Make sure to read the whitepaper, check the credibility of the team, and examine the use case and potential adoption.
2. Always Use Reputable Exchanges
To purchase altcoins, it is essential to use reputable and secure cryptocurrency exchanges. This will help protect your investment and ensure a smooth buying and selling experience.
3. Diversify Your Investments
As mentioned earlier, diversification is crucial when investing in altcoins. Consider spreading your investments across different projects and cryptocurrencies to reduce your risk exposure.
Final Thoughts
In summary, altcoins are alternative cryptocurrencies that differ from Bitcoin in purpose, technology, supply, market capitalization, and potential for growth. While Bitcoin remains the dominant player in the market, altcoins offer an opportunity for investors to diversify and potentially gain higher returns. By understanding the key differences, benefits, and practical tips for investing in altcoins, you can make informed decisions and navigate the dynamic and rapidly evolving world of cryptocurrencies. So, keep exploring and stay informed to make the most out of your investments in this exciting and disruptive industry.
