When Bitcoin was launched in 2009, it raised eyebrows and evoked a sense of confused curiosity. Digital currency, cryptocurrency and other buzzwords made the rounds on the internet. Since then, the way people look at wealth and investing has changed.
Bitcoin’s phenomenal success paved the way for many other types of cryptocurrencies. These became known as altcoins. Derived from two words, “alt” means “alternative” and “coin” means “cryptocurrencies”.
Here’s everything you need to know about altcoins
What are altcoins?
Simply put, all cryptocurrencies except Bitcoin are referred to as Altcoins. They were developed on a similar blockchain structure to replicate the track record and therefore follow a peer-to-peer system. Altcoins also require a specific mining method for users to conduct secure web transactions.
According to price tracking website CoinMarketCap, as of January 19, 2022, there are over 16,900 types of cryptocurrencies. Of these, Bitcoin and Ethereum make up 60 percent of the crypto market, while the rest is taken up by altcoins.
Difference between bitcoin and altcoins
Although they are quite similar and work on the same mechanism, Bitcoin and altcoins differ from each other in many ways.
Bitcoin is quite difficult to implement and use because proof-of-work – the mechanism used to create the crypto blocks – is extremely power consuming, intensive and restrictive.
However, altcoins have gone beyond that. Instead, they use the Proof-of-Stake mechanism to gain a competitive edge, making the process less energy-intensive and reducing the time it takes to validate a transaction. Additionally, Bitcoin’s smart contract capabilities are very limiting.
Playing on the lines of sustainability and scalability, altcoins have smoothly addressed these criticisms of Bitcoin.
Ether (ETH) is used as gas or to pay transaction costs in smart contracts on the Ethereum blockchain. As they create a separate identity for themselves, the launch of the highly anticipated Ethereum 2.0 is gaining attention for these reasons.
How do investors view altcoins?
Altcoins are constantly striving to become independent of the Bitcoin structure, allowing them a value that is not affected by the volatile Bitcoin prices.
Their growing popularity in the non-fungible token (NFT) market has also boosted their value. In fact, at the time of writing, Ethereum has a market capitalization of over $377 billion.
However, they are always accompanied by skepticism. Nelson Merchan, CEO of blockchain events company Light Node Media, believes that one needs to take things slow and not see altcoins as a medium to make a quick buck. If one has to invest in cryptocurrency, it is always advisable to do so in the two most established currencies.
What Are the Different Types of Altcoins?
Photo credit: Kanchanara/ @kanchanara/ Unsplash
There are different types of altcoins.
Stable Coins are the ones with the lowest volatility. It does this by pegging their values to a more real asset or to fiat currencies or precious metals, helping to redeem users and holders when the currency falls.
Well-known altcoins in this category include Tether (USDT), MakerDAO’s DAI, and USD Coin (USDC).
security token are similar to a digital liquid contract, which is a part of a larger asset or deal, much like a regular financial security. They become helpful in recording crypto transactions and their price prospects attract investors.
same corners are hyped cryptocurrencies that only gain traction on the internet for a short period of time, which is usually due to a celebrity or famous person trading cryptocurrencies joking about it.
For example, Elon Musk often shares cryptic tweets on Dogecoin. Whenever such a stock is trending, its stock and price will explode, but mostly temporarily.
utility token Assistance in providing services within a network. Purchasing NFTs, trading, minting, redeeming rewards, paying network fees, and other services within a blockchain setup are done with utility tokens. Ethereum is perhaps the most widely used utility token capable of performing these functions.
Some noticed altcoins
There are numerous altcoins on the market. Some of the most prominent are Ethereum (ETH), Litecoin (LTC), Stellar (XRM), Cardano (ADA), Polkadot (DOT), Bitcoin Cash (BCH), and Dogecoin (DOGE), according to an Investopedia report. .
(Main and featured image: Kanchanara/ @kanchanara/ Unsplash)
This story first appeared on Prestige Hong Kong.