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 following Satoshi Nakamoto’s footsteps, and attempted to create their own cryptocurrency.
Today, there are thousands of different cryptocurrencies, effectively making Bitcoin a catalyst of the crypto world.
Hence, 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 are those tokens aside popularly established cryptocurrency (like; Bitcoin and Ethereum).
The term itself was formed from two words: ‘alt’ and ‘coin’ – with altcoins meaning alternative cryptocurrencies.
These are generally marketed as being strong alternatives to the popularly known crypto-coins, as they seem to tackle its limitations.
Despite that selling point, altcoins are still competing against Bitcoin, 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 P2P (i.e. Peer-to-peer).
Also, much like Bitcoin, they aim to provide a cheap and efficient means of transaction.
Altcoins vs Bitcoin
In general, altcoins work very similarly to Bitcoin, but there are minor differences between these 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 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 established altcoins on the market are mining-based, including the our popular Ethereum.
They are similar to traditional stocks, in the sense that they often give dividends like ownership of a business and pay-outs.
They’re often launched in an Initial Coin Offering (ICO) and are linked to businesses.
Utility tokens are sometimes sold on ICOs as well, but 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
There are several tools to follow up with the prices of different Altcoins, and my favourite tool is CoinMarketCap.
Finding altcoin price is similar to tracking the price of Bitcoin on the internet.
This service displays a complete list of different crypto assets available in the market, and with their respective prices.
Frequently Asked Questions
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).
However, Bitcoin is still the top-father dog of all cryptocurrencies.
It will only be a matter of time, before people find the next big cryptocurrency like BTC coin.