What is an altcoin?
The dawn of the crypto world began sometime in 2009, when Satoshi Nakamoto, a still yet to be identified person or people published the digital cash Bitcoin whitepaper. The movement began with Bitcoin as an obscure fringe digital currency that only hardcore cyberpunk adherents knew of. About a decade later, Bitcoin has risen in value and is up for consideration by multinational banks and governments. However, Bitcoin is no longer the only player in the field today. Welcome to the world of Altcoins, where there are thousands of more crypto assets, tokens, and coins with a wide range of names, uses, and proposed futures. In this piece, we are taking a full dive into what they are just about.
An Altcoin is ANY crypto product, asset, coin, or token other than Bitcoin. See, Bitcoin was the original digital currency based on blockchain technology. As such, anything that comes after, be it, Ethereum or Tether, are all considered as alternative coins, or Altcoins for short.
Types of altcoins?
There are over 8,400 unique cryptocurrency assets as of the time of writing this article. With such huge numbers and more coming online by the day, it is quite hard to keep up. This is why Altcoins are divided into several broad categories, depending on their target usage, means of creation, and nature of market behavior. Let’s take a look at the different types of altcoins;
- Stable coins
Stable coins as their name implies, are coins meant to establish some form of stability in the crypto market, thereby eliminating every form the volatility. Stable coins achieve this by pegging their value to that of a stable commodity or currency e.g.; Oil, Gold, US Dollars, Euros, etc. Examples of these stable coins include USDT, DIGX, CarbonUSD, BUSD, GUSD, Libra, etc.
- Mining Based coins
These are altcoins that can be generated through the mining of the coins. These mining processes can be carried out by solving problems that verify transactions on the blockchain. Most altcoins fall under this category. Examples include Ethereum, Litecoin, etc.
- Utility Tokens
This is mainly owned by businesses and companies. Utility tokens, otherwise known as usage tokens, are normally created for a particular purpose. They are not meant for transactions but are instead used to gain access to services rendered by a particular system or company. Examples include Siacoin, Civic, etc.
- Security Tokens
Security coins, also known as Governance coins, are used to symbolize a form of equity of an individual in a business, company, or even a digital asset. The security token can also be used to establish the voting rights of the individual who owns the equity. The higher the number of tokens owned by the individual, the higher the voting tight. Considering the laws and security these coins are exposed to, they are regulated by strict laws.
Pro’s and Con’s of Altcoins
- Lesser transaction Fees and time;
Altcoins generally have a lesser transaction fee than Bitcoin. They also take lesser time to complete verifications on the blockchain. Bitcoin can take up to 10 minutes to verify a transaction, whereas most altcoins take at most 3 minutes to do that.
In as much as these Altcoins are improvements of Bitcoin, they also have a high volatility rate. Most of them are unstable in value and can go from 100 to 0.
Altcoins are fundamentally blockchain clones and variants of the original Bitcoin idea. Some have proven valuable over the years while thousands get dismissed as scams on investors. Whatever Altcoin you get interested in, make sure to do your research. Know who is behind it, what is the mission, and what technologies do they have in delivering their target use. The fact is, even proven crypto assets like Bitcoin suffer from high volatility, therefore, make sure you do your due diligence and always make an informed decision whenever it comes to any Altcoin you want to be involved with.