Digital currency has the potential to completely change how society thinks about money. The rise of Bitcoin, Ethereum, and thousands of other cryptocurrencies that exist only in electronic form has led global central banks to research how national digital currencies might work.
Bitcoin is the star when it comes to cryptocurrencies. It was the first established crypto in the world and it holds tight on to its status as the highest-priced currency on the market. However, there are alternative cryptocurrencies, also known as Altcoins. Right now, you will find more than 5000 alternative cryptocurrencies, which have the ability to bring something exciting to the table.
Altcoins have their own unique offerings; everything from faster payment to more efficient cross-border transactions, providing a various selection of benefits that might be better for individuals’ needs, when you compare it to the star of the family, Bitcoin. Well, of course, it depends on what you’re looking for.
Nowadays, alternative payment methods outside of traditional currencies, including Altcoins, are on the rise. Altcoins combines modern cash as a new type of gold into a strong advantage, which makes it both rare but also easy to transfer. It is really simple to store them; they cannot be taken from their holder without approval and are reachable for you anywhere in the world.
In 2021 Altcoins have been going through some remarkable increases, which is no surprise as the market is looking for low-priced Altcoins that might make new “crypto millionaires.” As a result of the latest sell-off in digital currencies, cheaper Altcoins might look more attractive due to the potential increase of value.
Bitcoins have for a while tended to take a lot of the attention in the crypto market, but there are numerous of other coins or cryptocurrencies which we must not forget. In this case; there is no doubt that Altcoins is one of the favorites. Altcoins are a great alternative payment method, which becomes more and more popular every year, so it might be a good idea to take a closer look at Altcoins.
Cryptocurrency
A cryptocurrency is a digital currency, which is protected by cryptography making it almost impossible to copy or double-spend. Lots of cryptocurrencies are reorganized networks based on blockchain technology that is a distributed archive required by a huge network of computers. An important feature of cryptocurrencies is that they are normally not distributed by an authority, which makes them immune to government interference or influence.
What are Altcoins
Altcoin is a cryptocurrency or digital currency. It is an alternative to Bitcoin. Altcoins works much like the original Bitcoin, where you use a private key and have a payment sent from one digital wallet to another digital wallet. With a cryptocurrency like Altcoins, you will have a blockchain or archive, where all the transactions are permanently and publicly verified, so exchanges cannot be changed or refused. The blockchain is secured by mathematic results, which confirm the transaction within a block.
In March 2021 there were almost 9,000 cryptocurrencies. According to experts, Altcoins were considered more than forty percent of the total cryptocurrency market in March 2021. Altcoins are a result of Bitcoin, which means that their change in prices tends to follow the same path as Bitcoin.
However, analysts believe the development of the cryptocurrency investing systems and increase in the new markets for these coins will sooner or later change the price development for Altcoins. It will make Altcoins more independent when it comes to Bitcoin’s trading signals.
Types of Altcoins
Altcoins are occasionally projects from enthusiasts or a basis for a whole new business. They can are sometimes more than just coins as they are developed into a completely new context with everything from applications to big marketplaces online.
Altcoins will often have the satisfaction of changing some of the rules that Bitcoin follows just to do something unique and spectacular, which might have a specific application included in the offer.
Whether functions or mechanisms, Altcoins come within different tastes and categories. Here is a summary of which Altcoins are the most important:
Mining-Based
As the name implies, mining-based Altcoins are mined into reality. Almost all mining-based Altcoins are used for Proof-of-Work (PoW). This is a method that generates systems into new coins by solving tough mathematic problems to create blocks. An example of mining-based Altcoins is Litecoin, Monero, and Zcash. The most popular Altcoins are pre-mined coins. Coins like these are not created through an algorithm, but they are circulated within the cryptocurrency market before they are even listed. Ripple’s XRP is an example of a pre-mined coin.
Stablecoins
Stablecoins are Altcoins that are designed to combat the unpredictability of cryptocurrency by attaching their value to an underlying index, service, or security. There are two well-known examples of stablecoins, which are Tether and Libra that is being developed by Facebook.
Trading and used cryptocurrency have been noticed from the start because of their unpredictability. Stablecoins aim to reduce the unpredictability of cryptocurrencies by securing their value on a box of goods, like fiat currencies, precious metals, and other cryptocurrencies. The box will act as a backup to pay the necessary money back to holders if the cryptocurrency crashes or experiences problems. Price variations for stablecoins will not exceed a narrow range.
Behemoth Facebook’s Diem is the most recognized example of a stablecoin, which is a dollar-backed coin. More examples of stablecoins are USDC and MakerDAO.
Security Tokens
Security tokens are related to securities traded in stock markets except they are of a digital origin. Security tokens look like traditional stocks and they often assure equity when it comes to ownership or extra payment for the users. This will have the potential of great success for tokens like this where investors can put their money in a secure way. Security tokens are normally offered to investors via initial coin offerings or ICOs.
Utility Tokens
Utility tokens are used to offer services within a network, they can for example be used to secure services or get rewards. Different from security tokens, the utility tokens will not pay out extra bonuses or part of the price. Filecoin that is getting storage space within a network is an example of utility tokens.
Is it a Good Idea to Invest in Altcoins?
Well, how can you know that Altcoins are a good investment? The simple answer is that you cannot. The chief marketing officer at Docupace, who works within digital processes in the finance and investment industry, says that anyone should be suspicious of a person who tries to give you a complete answer.
When you invest in the security offered on a regulated exchange like the NYSE and Nasdaq, you have dozens of protections that have been built over hundreds of years within trading, like for example SIPC insurance. While some initial coin offerings are securities that fall under the U.S. Securities and Exchange Commission’s jurisdiction, a lot of them are not. Furthermore, even those who do fall under SEC regulation will still take a huge risk when it comes to fraud.
In a lot of cases, you will not know where all your money is going when you invest in Altcoins and you might not know who is on the other side of the transfer. You only need to do a quick Google search for “SEC and cryptocurrency” to see the constant stream of complaints on fraud or other schemes that are happening to people.
Any user of cryptocurrencies should not ignore risks like this when it comes to investing. The fact is that no one can be a specialist at investing in Altcoins. The cryptocurrencies are still too new, diverse and in constant development to make anybody an expert.
I good piece of advice is that you should only invest in an Altcoin that you understand and believe to be the right choice for you. An investor who looks to buy Altcoins should certainly do their research and thoughts about the investment including thinking about who is behind the value proposition.
With the proper research and some well-balanced thoughts, it should be possible to find an Altcoin that is worth an investment.
A good Altcoin investment will provide a service that you think is unique for that specific coin. Do you want to make a safe investment but still want to get involved with Altcoins then you can start with the top five ranking coins on the market right now, for example, Altcoin like Litecoin.
Altcoin vs. Bitcoin
Altcoins doesn’t follow all the same rules as Bitcoin. For example, while Bitcoin will only mine or produce Bitcoins every ten minutes, where an Altcoin like Litecoin produces coins every 2,5 minutes. In that way, Litecoin is able to process its payments faster. Because of that Litecoin produces about 84 million coins and Bitcoin will only produce around 21 million Bitcoins.
Litecoin also uses another set of rules for mining compared to Bitcoin. Bitcoins need expensive hardware to do mining, but with Litecoins you will be able to do mining with normal computer hardware.
Litecoin is just one of a thousand Altcoins within the market of digital currency. Certain Altcoins stand out as great alternatives to Bitcoin, even though they cannot reach Bitcoin’s 100 billion dollars.
Here are some examples of Altcoins:
- Ethereum
- Ripple
- Dash
- Litecoin
- NEM
- Monero6
Altcoins: Pros and Cons
There is both pro and cons when it comes to Altcoin, as for any cryptocurrency. One of the advantages is that you can store Altcoins for a longer period and hope that their value will rise significantly. One of the disadvantages is that lots of experts say that Bitcoin is leading the Cryptocurrencies in the market as the strength is related to high return on investment. Well, let’s have a closer look at all the pros and cons of Altcoin.
Advantages
- Advance on Bitcoin’s mistakes: Altcoins are designed to address flaws with the framework of Bitcoin, which can be everything from speed, mining, expenses, or other factors.
- To create competition: By modifying the rules, which Bitcoin operates under, Altcoin designers make room for new competitors within the Bitcoin system.
- Low charging fees: One of the good things, when you use Altcoins is that there is a rather low transaction fee for each transaction in addition to other blockchain technologies.
- A better version of Bitcoin: Altcoins aim to gather the cryptocurrency’s weaknesses, in that way become a better version of them all.
- Altcoins do what Bitcoin promised: Altcoins are like stablecoins, therefore they have the potential to achieve Bitcoin’s original promise about a medium for transactions every day.
- Altcoin gets high evaluations: Specific Altcoins, like Ethereum’s Ether and Ripple’s XRP, have already increased power within mainstream institutions, which results in high valuations.
- A huge variety: Investors are able to select from a great variety of Altcoins that have different functions and roles in the crypto economy world.
Disadvantages
- The value is unstable: As an investment, Altcoins are new to the crypto field and their value can change significantly.
- Potential of fraud: Altcoins, as well as Bitcoin, are often the subject of fraud and false plots
- A smaller market: Altcoins have a small investing market compared to Bitcoins. In April 2021 Bitcoin had a 60% segment of the complete cryptocurrency market.
- Unstable prices: The lacks of regulation and criteria definitions are a result of the Altcoin market being considered by fewer investors. In that way, the prices are unstable compared to Bitcoin.
- A difficult decision: It is not easy to differentiate between all types of Altcoins and their individual cases, which makes the decision of investing more challenging and complicated.
- A smaller market: Altcoins have a small investing market compared to Bitcoins. In April 2021 Bitcoin had a 60% segment of the complete cryptocurrency market.
- Unstable prices: The lacks of regulation and criteria definitions are a result of the Altcoin market being considered by fewer investors. In that way, the prices are unstable compared to Bitcoin.
- A difficult decision: It is not easy to differentiate between all types of Altcoins and their individual cases, which makes the decision of investing more challenging and complicated.
- There are some “dead” Altcoins, which made investor dollars decrease.
Future of Altcoins
Talking about the future of Altcoins and other cryptocurrencies has an importance in the situations, which led to the issue of a governmental dollar in the 19th century. At that time, there were various types of local currencies around the United States. Each of them had a unique feature and was supported through different instruments. Deposits at the Treasury supported gold certificates, and the government supported US notes, which were used to provide money to the Civil War.
Local banks were also issuing their own currency, in some cases supported by false investments. The huge variety of currencies and financial tools do have some similarities to the current Altcoin market. There are thousands of Altcoins presented at the market today, each of them insists to provide something different to the market with a specific purpose.
With the current situation in the Altcoin market, it will not be possible to combine all the cryptocurrencies into a single one. In the same way, it is possible that a majority of the more than 1800 Altcoins will not survive. The Altcoin market will merge around a group of Altcoins those, which have a strong advantage and lots of used cases will lead the markets.
For investors looking to expand within crypto markets, Altcoins are a reasonable way to increase their perspectives when it comes to Bitcoin. Reassembles within the cryptocurrency market have made returns, which are multiples of those made by Bitcoin. Thus there are still risks to be involved in Altcoin investments, which typically is the lack of regulation. The growth of the cryptocurrency market will probable bring some more style and wealth into the industry, which will guide the way for regulation and less unpredictability.
Conclusion
The number of exciting cryptocurrencies in the world will only grow. There are a lot of new developers who want to take advantage of the increasing popularity of the cryptocurrency market, as a response to gaps and flaws within Bitcoins and other essential coins. Different coins have different functions, purposes, and usages, which depend on the setting. Each Altcoin comes with a unique offer that intends to do something else or even better than the other cryptocurrencies.
Has this article inspired your interest in Altcoins? Then it is always a good idea to do some research before making the jump and making an investment. There are several factors to consider, for example, market unpredictability, which might be the biggest impact on the cost of any cryptocurrency.
Hope this will help you jumpstart the journey into Altcoins or other cryptocurrencies.