Everything You Need To Know About Altcoins – Cryptocurrency 101. As of today, there are over 14,000 cryptocurrencies out there. Altcoins are also cryptocurrencies that share the same characteristics as Bitcoin, and they essentially do the same thing with slight variations. But what exactly are they?
In this post, we’ll be learning about how altcoins came about, what they are, the several types, and whether they’re good investments.
The Origin of Altcoins
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Launched after Bitcoin in 2009, altcoins quickly transitioned from becoming projects that are replacements for Bitcoin and instead as currencies that can co-exist with it. Altcoin originated two years after Bitcoin was launched, but the rate of Altcoin began to rise around 2013 and has grown exponentially.
In 2017, at the peak of cryptocurrency’s hype, over 600 new cryptocurrencies were introduced. At the time, this was an extremely high number of new altcoins, but today we have over 14,000, and this number is looking to increase even more in the coming years.
What Exactly Are Altcoins?
Altcoins—as the name suggests—are alternative coins. Like Bitcoin, they are still digital cryptocurrencies, but they differ in certain aspects. Some altcoins are no longer decentralized currencies like Bitcoin and are being handled by banks or governments, but they’re still cryptocurrency.
Some altcoins like Ethereum and XRP are also decentralized, but they differ in other aspects. Ethereum claims to be Bitcoin 2.0, with a lot of potential for building decentralized applications. XRP, on the other hand, boasts faster and more reliable processing compared to its competitors, and its consensus system consumes less energy than a Bitcoin transaction would.
How Many Types of Altcoin Are There?
There are many types of Altcoin in the market today, but they can be classified into five categories: mining-based, Stablecoins, Utility Tokens, Security Tokens, and Meme Coins.
Mining-based coins usually utilize Proof-of-Work systems. They generate new coins by solving difficult problems to create blocks, and these coins can then be traded. Most altcoins like Litecoin, ZCash, and Monero have been around since 2020.
Stablecoins are generally the safest because they aim to reduce volatility by staking their value on goods like metals or other cryptocurrencies. PAX Gold and Tether Gold are two examples of stablecoins.
Utility Tokens are used for in-network services. They can be used to purchase services, pay network fees, or redeem rewards. Filecoin, an altcoin used to purchase storage space, is an example.
Security Tokens are similar to stocks in the stock market, but they have a digital provenance. They promise equity through ownership or a dividend payout, and they appreciate whenever investors put more money in them.
Last but not least, Meme Coins like Dogecoin and Shiba Inu. These coins, coined from jokes or other well-known things on the internet, result from hype and popularity. These coins are typically the most volatile and high-risk high-reward coins.
Are Altcoins Good Investments?
Even with the drops and the spikes, the potential of altcoins is at an all-time high because of their volatility and the activity of the cryptocurrency market. However, cryptocurrencies are not mature yet, and this may sometimes result in losses, but like all forms of investments, risks will always be part of opportunities.
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