Since the induction of Bitcoin, everyone has got their attention on it, the oldest cryptocurrencies of all of them is also the most valuable digital currency on the current market. Altcoins, on the other hand, are more like offspring of the former while being different in its own way. Altcoins also known as Alternative Cryptocurrencies are everywhere in the market that are usually offering investors many different advantages to it.
With currently over 5000 Altcoins to choose from, one might be wondering which to choose and which to invest, as each offer is different and but might not work towards the same goal for everyone.
As alternative payment methods get increasingly popular these days, so does Altcoins, as they offer different approaches that combine properties of modern currencies and the likes of gold into new assets which are easily transferable like the traditional fiat currencies. They are easy to store, cannot be taken without consent from holders, and most importantly, easily accessible to everyone.
What are Altcoins?
This term was created by the community to refer to all alternative cryptocurrencies that are based on Bitcoin’s blockchain. They were created by developers with the help of Bitcoin’s open source, which is a form of source code, using the Proof of Work (PoW) algorithm, whereas some uses the Proof of Stake (PoS) algorithm. Developers use the advantage of the blockchain technology to improve a certain blockchain in order for them to quickly replicate the codes to create more coins.
Altcoins are usually copies of another cryptocurrencies under different attributes and offers binding to it, it is also important to understand if there are credibility pegged to the Altcoins created. By looking up on their company and webpage to ensure that all information is truthful and checking on the professional background of the development team behind the new coins. It is also good to check on their white paper usually referred to as roadmap, this is a document where they outline their team plans to achieve certain goals in the creation.
There are different categories of altcoins, that includes stablecoins, mined-based coins, security tokens and utility tokens.
Stablecoins are coins that are pegged to an existing asset and the popular example will be Tether (USDT) which is pegged to the USD. The main idea for stablecoins to peg to an existing asset is to reduce the price volatility which we will see commonly in Bitcoin.
Mined-based coins are more straight-forward, they are coins that are being mined by the user or miners to validate the transaction and updating the blockchain accordingly, with their rewards in the form of coins, the example of such will be mining-based altcoin, Ethereum.
Security tokens are essentially a regulated offering of securities using blockchain technology. It involves the creation of digital blockchain tokens, which can be created, transferred, bought, sold, or destroyed based on the computer code rules of their blockchain.
Utility tokens are provided to access to future products or services. Typically, a tech company developing an online game could issue utility tokens to fund their development of the game.
How is it different from Bitcoins?
Though Altcoins creation contains Bitcoin’s code, they have some difference in attributes and functions. The important matter here is that the infrastructure plays a great role in creating and maintaining different Altcoins.
Certain altcoins will need different crypto wallets and thus to hold those certain altcoins, there will be a need to download applications that is in a form of wallet that allows you to store and access your coins whenever and wherever you want. That will ease investors away from all the KYC where more established wallets will conduct, thus not so private for some investors.
In traditional exchanges where you can purchase Bitcoin using fiat currencies like USD or EUR, some of the altcoins in the market are only available with a different exchange platform. Different investors have different goals in their investments, and depending on the end goals they have, they are different course of altcoins platform that enables them to fulfill their objectives in the end.
In conclusion, it is important to say that each altcoins are classified based on their purpose by the investors. Alternatively, they are either branded to be of stored value investment or a medium of exchange. The main differences are still the usage of the coins, you can take them as stores of value where you hold them and not using them for any means of payment or otherwise a medium of exchange where investors trade different altcoins to make full advantage of different payments. Of course, we are also able to take certain altcoins as both methods as mentioned.