When one talks about cryptocurrency, one name that comes to mind is Bitcoin. Bitcoin is such a popular digital currency that sometimes it is used interchangeably with cryptocurrency. This phenomenon has led some people to think that Bitcoin is the only authentic cryptocurrency. The reality is that there are more than 4,000 cryptocurrencies out there.
Altcoins, or alt for short, are all cryptocurrencies that are not Bitcoin. The word ‘altcoin’ is an abbreviation of ‘alternative coin’. Ethereum, Litecoin, XRP, and any other non-bitcoin cryptocurrency falls under this category.
According to statistics by CoinMarketCap, altcoins accounted for over 34% of the total cryptocurrency market by February 2020.
Why do we need altcoin?
You may wonder, “Why do we need altcoins when we have bitcoin – a universal decentralized finance?” A simple answer is Bitcoin is not perfect. Altcoins usually try to create a better version of bitcoin in a certain aspect. For example, Bitcoin might not be offering the best scalability and speed of the transaction. Litecoin is an altcoin that confirms transactions faster than Bitcoin. Ethereum offers better scalability than Bitcoin. Dash and Monero focus on the anonymity aspect by making the transactions virtually impossible to trace.
Each altcoin offers a unique feature – what it does best. Thousands of altcoins have been introduced to the crypto market but only a handful have managed to get significant popularity and following such as that of Bitcoin.
Types of Altcoins
Despite having many altcoins with unique features, we can still categorize them such as mining, stablecoins, utility tokens, and security tokens.
These are coins that have a mining process for generating new coins. The mining process entails solving challenging problems to unlock blocks. Such altcoins are more similar to Bitcoin which is also mined. Most of the altcoins such as Ethereum falls into this category.
Stablecoins improve on Bitcoin by reducing volatility. This course is achieved by tying the value of the digital coin to the existing currencies. The popular choices for backing altcoins are the U.S dollar, Gold, and Euro. Facebook Libra is the most popular stablecoin.
Security coins are linked to a business and are often launched in ICO (Initial Coin Offering). They resemble traditional stocks and often promise some type of dividend such as payout or ownership in a business.
These tokens provide a claim on services and are sometimes sold as part of an ICO. Filecoin is an example of a utility coin offered in ICO. This coin is designed to be exchangeable for decentralized file storage
Most Popular Altcoins
Litecoin (LTC) – is a clone of bitcoin but with a different algorithm. Litecoin adoption on the darknet marketplaces is only second to Bitcoin’s adoption. Litecoin is prepared for the Lightning Network. Litecoin may benefit from atomic trading – the secure peer-to-peer trading of coins without the need of a third party. While Litecoin does not bring a lot of innovation to the table, its security and adoption serve as a Bitcoin alternative.
Ethereum (ETH) – was introduced in 2014. The main purpose of Ethereum is a DIY blockchain platform and not a payment method. Ether, Ethereum’s coin, has gained extreme popularity. This altcoin has gained extreme attention from regulators. Additionally, many IEOs, ICOs, and STOs run on the Ethereum network.
Libra – Libra is the most anticipated cryptocurrency. Planed to be launched in 2021, Libra targets to serve Facebook’s 2.4 billion users. Libra is backed by some of the biggest names in the industry including Shopify, Uber, and Xapo. We expect adoption to be an easy task when several B2C companies are on board.
Now that you understand what altcoins are, you may be wondering what the best altcoins look like. Well, stay tuned here because we will be delving deeper into altcoins for a deeper and more practical understanding. Ensure you check in regularly.