Bitcoin is not the only cryptocurrency you will see in the market.
There are many other alternative cryptocurrencies to Bitcoin currently, and each comes with its unique differences, functionalities, and purposes.
Bitcoin have had a tremendous impact on the entire world economy, as well as how financial transactions are being carried out in different parts of the world.
As a result of Bitcoin’s widespread impact, many have tried to follow in Satoshi Nakamoto’s footsteps and attempted to create and also release their own cryptocurrency.
Today, there are thousands of different cryptocurrencies, effectively making Bitcoin a catalyst of the crypto world. These alternate coins to Bitcoin are referred to as, “Altcoins.”
As a cryptocurrency investor, investing only in Bitcoin may not be a good strategy, because these these new altcoins do increase in value and then, you can make money off price fluctuations.
In this article, I will explain everything you need to know about alternate crypto coins (Altcoins), and their effects on the entire crypto world.
What is Altcoin?
Altcoin is a term coined for cryptocurrencies following Bitcoin’s success, and it came from two words: “alt” and “coin” – meaning “alternative coin.”
These are generally marketed as being strong alternatives to the first popularly known cryptocurrency, BTC, as they tackle what seem to be the Bitcoin’s limitations.
Despite that selling point, altcoins are still competing against Bitcoin, the most popular (and highest valued) cryptocurrency in the world, and must have competitive advantage to succeed.
Many altcoins are built using the basic framework of Bitcoin, giving most of them that much-desired aspect of being “peer-to-peer”.
Also, much like Bitcoin, they aim to provide a cheap and efficient means of transaction.
What is the first Altcoin?
The very first altcoin released to the public was actually Namecoin, announced in April 2011. Namecoin was actively used and mined even till today.
It was based on the Bitcoin code, and used the same proof-of-work algorithm – just like BTC, Namecoin is limited to 21 million coins.
Altcoin vs Bitcoin
In general, altcoins work very similarly to Bitcoin. However, there can be some minor differences between different coins.
Below is a list of the most important facts about altcoins:
- Bitcoin is, by far, the most popular and widespread cryptocurrency. As a result, the bitcoin market is extremely competitive and it’s difficult and expensive for beginners and amateurs to get into.
- Most altcoins on the other hand, are much less popular, much less competitive, much less expensive, and can offer even be mined by beginners with CPUs. There are even some CPU-only coins!
- There are thousands of different Altcoins! They vary mostly in popularity, price, and technical details.
- Many altcoins use the SHA-256 hashing algorithm (the hashing algorithm Bitcoin uses). The second most popular hashing algorithm is Scrypt (the hashing algorithm Litecoin uses). There a few other unique altcoins using different, specialized hashing algorithms (such as X11, X13, X15, NIST5, and 100% POS).
- One of the most popular altcoins as of 2017 is Litecoin – a Scrypt-based cryptocurrency that has a high market value and is more stable than bitcoin. Another popular choice is Ethereum.
- Bitcoin is not perfect! The system is powerfully designed, but it is the first widely-used cryptocurrency. As such, as it grows to a large scale crypto-commodity, we are beginning to notice problems and challenges that would have been next-to-impossible to predict when bitcoin was first designed and implemented. Many altcoins have been developed specifically to address concerns raised over the future and long-term viability of bitcoin.
- Altcoins can be a fun and profitable investment! Investing in altcoins can be a lot like trading penny stocks – you can invest very small amounts of money in a wide-reaching portfolio, and you can choose the coins that you think have the best chance of long-term success. Imagine if you had invested in bitcoin back when each cost only pennies! If you’d held on to the bitcoins for just a few years, you could have been pleasantly surprised when the coins peaked at over $1,000 USD each in 2013… then of course if you had held until 2017 you would have been even more surprised to find bitcoin trading as high as $5,000. Of course, cryptocurrency market is volatile, so be aware of the risk (not every coin makes it long term).
Types of Altcoins
As altcoins evolved over the years, categories within the “altcoin” umbrella have emerged. There is also some movement toward separating most of these concepts from altcoins.
If that trend continues, altcoins might refer only to mining-based cryptocurrencies other than Bitcoin in the future.
Below are a few different kinds that have been created over the years:
These are the Altcoins that followed the mining aspect of Bitcoin – the process in which new coins are created by solving challenging cryptographic equations to unlock blocks.
Some of the top altcoins on the market are mining-based, including the extremely popular Ethereum.
These are similar to traditional stocks, in the sense that they often promise dividends like ownership of a business or a pay-out. They’re often launched in an Initial Coin Offering (ICO) and are linked to businesses.
Utility tokens are sometimes sold on ICOs as well. However, unlike security tokens, they will provide a claim on services.
The main difference between a security token and a utility token is that security tokens pass the Howey Test, while utility tokens do not.
The major aim of Stablecoin, is to cancel out the volatility that comes from keeping your financial value in volatile cryptocurrencies.
They cancel out the volatility by keeping value of a coin to real-life assets like fiat currencies (such as the US dollar or Euro), resources (like gasoline), and some precious metals (like gold).
Tether is a popular example of Stablecoin, but there are some other Stablecoins in the crypto-market.
How to find Altcoin prices
Finding Altcoin price is similar to tracking the price of Bitcoin on the internet.
There are several tools online to follow up with the prices of different Altcoins, but my favourite is CoinMarketCap.
This service displays a complete list of different cryptocurrency assets available in the market, and with their respective prices.
How do I buy Altcoin?
Altcoins are available on many cryptocurrency exchanges, including some of the popularly known peer-to-peer marketplaces like; LocalBitcoins and Paxful.
On CoinSwitch, which is my favourite platform for buying Altcoins, you can trade your Bitcoin cryptocurrency for different Altcoins (with Ethereum Classic and Bitcoin Cash being most popular options).
How do I invest in Altcoin?
Altcoins are risky, but that doesn’t mean they aren’t worth investing in. It may be useful to first of all divide your portfolio into risk layers, especially if you intend to speculate on new crypto-coins.
I strongly recommend you get a portfolio tracker like KryptoGraphe, to keep track of your coins.
There are many factors to consider when looking to purchase an altcoin. A few important points to consider before committing are as follows:
- Is the official website still working and is the subreddit of the altcoin alive?
- Is there enough volume on at least one exchange to justify the purchase?
- Is the altcoin supported by the wallet you have or will you need a new cryptocurrency wallet?
- Can you actually make money on the crypto?
Have it in mind that most altcoins can’t be purchased with fiat currency – meaning you’ll want to purchase and swap Bitcoins for your desired choice of altcoin on the right exchange.
Some exchanges like Changelly, let you purchase BTC with a credit card directly on the exchange. After purchasing BTC, you’ll need to find an exchange that offer your altcoin.
I recommend CoinSwitch, as it hosts a list of the top currency exchanges, the “markets” or currency pairs these exchanges trade in, hourly trades, daily volume, and percent market share.
Unless you are a ninja cryptocurrency trader, steer clear of the less popular exchanges. More popular exchanges are more liquid.
Higher liquidity means you’ll be able to buy altcoins quicker and closer to the market’s clearing price.
Need a primer on liquidity?
Search the currency exchanges and do some research on exchanges that have your currency pair. Once you’ve settled on the best exchange, you’ll need to register.
It’s good to have separate crypto wallets for your altcoins and Bitcoin (respectively). Once you’ve bought any altcoin, just move it to a cryptocurrency wallet – hardware wallets are the most secured in the market.
Which exchange has most Altcoins?
Binance seems to have a large database of Altcoin so far, as they keeping adding new crypto coins in their marketplace.
Binance is one of the best cryptocurrency exchanges you can actually use to buy any coin of your choice for investment. They have up-to 500+ different Altcoins as at the time of writing.
Which is not an Altcoin?
Ethereum is now stable enough to have stood on its own blockchain, and is entirely independent of Bitcoin influence to an extent.
Nonetheless, alternative cryptocurrencies launched after the great success of Bitcoin, are known as “Altcoins”. Many of the altcoins are built up on the basic framework provided by Bitcoin and Ethereum.
Thus, Altcoins are peer-to-peer, involve a mining process by which users solve difficult problems to unlock blocks, and offer efficient and cheap ways to carry out transactions on the web.
Current leading examples of Altcoin include Litecoin, Ethereum, Ripple, Cardano, Neo, Eos, Monero, etc.
Bitcoin is still the top-father dog of all cryptocurrencies.
However, plenty of altcoins are beginning to make wave, since over 5,000 cryptocurrencies are currently on the crypto market (and more being introduced every day).
It will only be a matter of time before people find the next big cryptocurrency like BTC.