What are altcoins?
Altcoins is a short form for alternative coins. Altcoins is a term that describes all other cryptocurrencies than Bitcoin.
Why other than Bitcoin? Because Bitcoin is considered the first, original cryptocurrency. That means that alternative coins are coins that were created after Bitcoin was.
What is the purpose of altcoins?
Altcoins are being created with the same belief as bitcoin was. To provide the general public alternative payment system. That is more secure and can operate outside the existing financial system. Operate in a decentralized way. Creating a healthy competitive alternative to central banking.
Due to the large number of altcoins that exist, their specific objectives may vary. Some can be used as in-game payments, others may want to offer everyone the ability to pay for goods and services with low or no transaction fees and fast transactions in a matter of hundredths of a second at most.
How do altcoins differ from Bitcoin?
Alternative coins to bitcoin share some characteristics with Bitcoin, but also a lot of differences. Individual altcoins may differ in their system depending on their specific purpose.
Altcoins are thus improving things in which Bitcoin lags behind. For instance, Bitcoin uses Proof of Work which is a very energy-intensive process of creating new blocks and validating transactions. Because with Proof of Work, only the participant who solves the “puzzle” gets the reward. And the other participants have wasted electricity without a reward at the end. Meaning Proof of Work severely limits the small miners who don’t have supercomputers that could solve the “puzzle” the fastest.
That’s why many creators of alternative coins have decided to go the Proof of Stake route which allows all participants to be rewarded for their participation in the verification process, ensuring that not much energy is wasted.
So investors can choose from a wide variety of altcoins with a wide variety of purposes and technology. n the other hand, gives us a very wide choice, which can be quite confusing.
What are some popular altcoins and their categories?
According to CoinMarketCap, which is the world’s largest online price-tracking crypto assets site, there are now nearly 19,000 altcoins. This only adds to the confusion about which altcoin to pick and invest in.
For this reason, we can divide alternative coins into several categories. Primarily based on their purpose and the technology they use.
Mining Based altcoins
As the name suggests mining-based altcoins are created by mining. Most often using Proof of Work technology. Which I mentioned at the beginning of this article as being very energy inefficient.
An example of a mining-based altcoin is Litecoin or Zcash.
Alternatives to mining-based altcoins are Pre-mined ones. This means that a certain amount of coins (or tokens) are being mined by a group of insiders before the cryptocurrency itself is even released into the world.
For example XRP. Where creators pre-mined 100 billion XRP at launch.
Stablecoins are assets that are pegged to reserve assets. Reserve assets are those assets that can be converted to cash very quickly. Stablecoins are thus tied to assets like gold or the U.S. dollar.
Their aim is, therefore, as the name suggests, to be stable. Thus, to reduce volatility.
For example, USDT, backed by U.S. dollars. Or PAXG, backed by gold. This means that if you buy 1 PAXG as if you bought one oz of gold.
Security tokens are digital forms of traditional securities – Stocks, Bonds, ETFs, etc…
Crypto token that serves some specific use in a specific ecosystem.
They are used to pay for network fees or purchase services.
For example, you may know BAT. Which is used within the Brave browser and pays publishers for their content.
Memecoins are inspired by a joke or meme. They usually don’t serve any special purpose.
For example Dogecoin or Shiba Inu.
As I mentioned, in the metaverse a lot of alternative coins to bitcoin exist. Among the most popular cryptocurrencies are:
- Cardano (ADA)
- Solana (SOL)
- Litecoin (LTC)
- Polygon (MATIC)
- Cronos (CRO)
- Bitcoin Cash (BCH)
And many others…
Are altcoins worth investing in?
Today’s crypto market hosts almost 19 thousand different altcoins. They differ from each other according to the purpose for which they were created. That’s why every type of investor can find an altcoin that suits them. That suits their investment goals and strategies.
So, of course, it is worth considering an altcoin for your portfolio. After all, the basic investment principle is to diversify – don’t put all your eggs in one basket. Altcoins tend to be more volatile; Stablecoins, for example, are good for reducing volatility.
Do you like blockchain games? Then you can reach for its native crypto coin and get the opportunity to further earn free cryptocurrency.
And so on and so forth… altcoins offer a huge range of investment options and it’s up to you which one you choose.
Altcoins is a term that describes all other cryptocurrencies than Bitcoin. So for example Litecoin, Bitcoin Cash, Cardano, or Polygon.
Altcoins are being created with the same belief as bitcoin was. To provide the general public alternative payment system, that is more secure and can operate outside the existing financial system. Operate in a decentralized way. Creating a healthy competitive alternative to central banking.
You should definitely consider investing in altcoins. There are many types of altcoins on the crypto market so everyone can find a coin that suits them – their investment goals and strategies.