Altcoins Explained

Cryptocurrency has without a doubt caught financial technology with a storm. There has never been a time when fintech nerds have put their best of minds in trying to create purely virtual currencies with no risk of double spending as today. Without necessarily excluding the older generation from the whole issue, so many will agree that the young people know a thing or two about cryptocurrency in general. Cryptocurrency includes the concept of blockchain technology and reading news of people making big money from crypto investing.  But,  ambitious investors do more-they try to learn altcoins as well as other cryptos in detail.  

For anyone harbouring the ambitions of transitioning from a passive reader of cryptocurrency news to an active investor, knowing about altcoins can’t be avoided. Most starters know a lot about bitcoins, all for a good reason because it occupies its position as a pioneer cryptocurrency. But since 2009 when bitcoin was ushered into the market, the best of fintechies have wrapped their brains around more virtual currencies. So today, we have alternative currencies from bitcoin which almost play at the same league as it does. So what do altcoins really mean? 

Cryptocurrency landed with a thud and is already soaring high

At a mind-blowing rate that no one ever expected, financial technology shows the greatest achievements in modernisation of currencies. Cryptocurrency has greatly moulded into a household necessity among the young generation getting the essence of the great possibilities in financial technology. In the streets of cryptocurrency, you must often come across fintech, as regarded by the young ambitious traders. This is no fiction as countries such as the Central African Republic and El Salvador have already made bitcoin a legal tender alongside their respective currencies. 

The most popular known cryptocurrency is Bitcoin. Whenever cryptocurrency is mentioned among the informed, what sets to every mind is Bitcoin. Why? I know a newcomer would probably have this question mumbling in their mind and lips begging for simple answers. Well, Bitcoin was the very first digital currency to be created and launched in 2009.

As a matter of fact, it is just prudent that it paved the way for many other cryptos to emerge. Bitcoin is the pioneer of it all and the definition of where it all began. So, any other cryptocurrency that came after Bitcoin fall into the category of altcoins. Altcoins are currently numerous.

A Brief yet complete definition of altcoins

Admittedly, no single person can claim full knowledge about cryptocurrency, note even the pioneer crypto investors. Everyone needs to start from a point of accepting that finding a way through the jungle of expressions involved with advanced technology like crypto isn’t a mean thing. To understand and figure out how everything works in the field of cryptocurrency, it is common you would come across words like “altcoins”. But this should not be of any worry to you as I am ready to give a glimpse into your future with altcoins.

Another way of saying alternative is “alt” and in the realm of cryptocurrency, altcoins simply refer to an alternative digital currency to Bitcoin. The term Altcoin is a phrase from two words ‘alternative’ and ‘coin’ that have been put together to form ‘altcoin’. The other group of cryptos other than Bitcoin are all considered as altcoins.

Altcoins have inherited lots of characteristics from Bitcoin but there are also a number of factors that set them apart. Most altcoins adopt a different technology from what Bitcoin uses, especially with transaction validation. However, this can also be possible when dealing with other things. 

The very first altcoin was launched in 2011. But today, there are over 5000 species of alternative currencies that have been created all over the world. Even at that, there are just a few most popular altcoins that are used as the alternative to Bitcoin. Altcoins have also been presented in various types. 

Types of Altcoins

As an individual who wants to invest in cryptocurrency or just simply be at par with such interesting knowledge, familiarity is key. Cryptocurrencies are numerous and all you have to do is to familiarise with the one which is of interest to you. Today, there are some common Altcoins in the crypto market.

If Bitcoin is not for you, then Altcoin must sure be. Your choice and interest in altcoins will basically depend on the fact that they are either produced through mining, are Stablecoins, or Tokens. Let’s have a glimpse of what this really means.

1. Stablecoins 

Altcoins can also be in the form of stablecoins which are a more stable form of cryptocurrency. Stablecoins have been designed in a manner which follows the price of another asset. Most the largest stablecoins are attached to the US dollar and all they do is imitate its value. So, it means that if the price of the main coin fluctuates, the issuer of the coin must take steps to stabilise it.

The intention behind stablecoins is to have them maintain the same value as that of the main coin. On many occasions, most traders in cryptocurrency will not choose stablecoins for their crypto investment. But instead, stablecoins are used as savings or simply a means of sending money. You have the possibility of earning interest on your stablecoins if you lend them out and also through a saving protocol.

2. Altcoins from Mining

Altcoins that are considered mining-based are created through mining just like Bitcoins which employ the Proof of Work (PoW) method. According to the PoW drive, new cryptocurrency is generated by computer systems to solve advanced issues which in turn creates blocks. These blocks are what results in blockchain.

A number of altcoins created through mining exist. These are the most popular forms of altcoins that exist in cryptocurrency. The common ones being;

  • Litecoin
  • Zcash
  • Monero

3. Tokens 

This defines yet another set of crypto in the form of altcoins divided into either utility and security tokens. One example of altcoin in the form of utility tokens is Ethereum performing a utility function in the overall blockchain. However, there is a huge possibility that Ethereum doesn’t carry an intrinsic value.

But should you need an altcoin that can act as a security token, Bitcoin got your back. Basically, when talking about a cryptocurrency that has an underlying intrinsic value, Bitcoin comes into the picture. 

Investing in Altcoins

From a general perspective, the cryptocurrency market for altcoins is a popular one presently. With the current flow of events, market fluctuations, and uncertainties that crowd the crypto market, many people have developed interest in buying altcoins. The norm in cryptocurrency trading has most traders buy when the altcoin value is low and sell when the value goes up.

Such decisions would generate profits which clearly indicate that investing in altcoins can be a good thing. However, when you become unlucky in the streets of cryptocurrency, such an investment can be a huge loss. Altcoins have a very high volatility save for the stablecoins. Therefore, their value fluctuates hugely given a short period of time.

But as long as you know how to play the game, investing in altcoins can still be the best decision you make. Just stick to the principle of investing only what you are ready to lose. With mindset, it is a very exciting and educative process.