The two options so far for addressing problems of Bitcoin scaling as a convenient medium of exchange have looked to either adapt the Bitcoin design, or build on top of it. The third area of innovation retained Bitcoin’s basic concepts but compromises on how it is implemented, creating what are now known as alternative coins, alt coins for short.
A commonly used term to refer to cryptocurrencies that came after Bitcoin; literally alternative coins, i.e coins that are designed to work differently from Bitcoin.
The most important cryptocurrency after Bitcoin is Ethereum. Though there are some similarities in their use as digital currencies, Ethereum has a much grander ambition – as a world computer – has a visible creator, in Vitalik Buterin, and less clarity on the crucial aspect of its money supply.
We’ll look in detail at Ethereum in a later lesson, but its relevance here is that – whether you agree with its design and approach to the trilemma – its function as digital money enables much faster transactions.
Beyond that, the ‘world computer’ concept means – in very simple terms – that Ethereum enables any application, which can be reduced to mathematical terms, to be built on top of it and supported by a decentralised network, not servers in New York or London.
Ethereum quickly inspired a wave of cryptocurrencies which were able to use it as a launchpad, along with a simple standard for generating new coins called ERC20. This enabled rapid innovation, opening the door to different approaches to the trilemma.
One of the crucial aspects of Ethereum was the way that it raised its initial investment. The team – based in Switzerland – established what is known as the ‘Initial Coin Offering’ or ICO. It was a shortcut to the traditional way of raising investment for a new business. Anyone with bitcoin, an email address and a willingness to take the risk could invest.
Once Ethereum was up and running, and increasing in price, the ICO approach (across 2017-19) saw insane amounts raised, for what amounted in some cases, to nothing more than ideas.
Some of those ideas never materialised, but many have established themselves providing potential solutions to the blockchain trilemma, as well as innovative new uses for decentralised networks beyond internet money.
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