Altcoins are known as an alternative cryptocurrency to Bitcoin and, in some cases, Ethereum as well. In its simplest definition, it is a term used to distinguish other cryptocurrencies from the existing and most established cryptocurrencies known as Bitcoin and Ethereum.
Therefore, Bitcoin is not considered an Altcoin, and it is the ‘opposite’ of the term. Some people also consider that Altcoins can also be other cryptocurrencies besides Bitcoin and Ethereum because most of the others are forked from the two.
With different platforms and exchanges created to manage Bitcoins for its customers, multiple platforms for Altcoins and their management have also sprung up. Most Altcoins provide different and unique consensus mechanisms for validating transactions and attempt to differentiate themselves from Bitcoin and Ethereum by providing additional capabilities and features.
What Is an Altcoin?
The term is the break-up of 2 terms ‘Alternative’ and ‘Coin.’ It’s generally operative only on the Blockchains that they were designed for. Most of these Altcoins are forks of Bitcoin and Ethereum.
While some Altcoins emerged as a competitor to the originals, most have been developed to either provide additional features to the original cryptocurrencies or to facilitate their customers in a better way.
Altcoins don’t follow the limit set that is set by other currencies. It normally breaks the line.
Types Of Altcoins
While thousands of Altcoins have emerged, they are being offered in different categories and facilitate customers differently. Here are some types that are created to facilitate or compete with the others!
Utility Tokens
Utility tokens are usually created to provide services within a blockchain network. It might be used to pay for services, to purchase them, or to pay network fees and redeem rewards. While utility tokens can be purchased and held by their owners, it has to be used within their blockchain to keep them functioning.
Ether and Filecoin and common types of Utility tokens that are used for storage facilities and to pay for transactions.
Security Tokens
These important tokens have been converted into tokens and are offered on the stock market. Tokenization is the process of the transfer of an asset’s value in the form of a token that can be held or can be ready for investors as per their request. Through tokenization, the assets such as real estate can be securely held for future use.
Stable Tokens
In a market of cryptocurrencies where they are considered to be the most volatile form of exchange and investment, stablecoins have been established. Stablecoins aims to reduce the overall volatility of cryptocurrencies by pegging their value with a universal basket of goods and their value such as FIAT currencies, precious metals, or other cryptocurrencies. Through these reserved banks and stabilized value of the goods, the stablecoins do not drastically lose or gain in value.
Payment Tokens
Lastly, the most widely available type of Altcoin is the payment coin. Payment coins, just like bitcoin are designed to be used as currency to be exchanged between different parties. With bitcoin being one of the most famous and highly valued Payment tokens, other altcoins that have sprung up are usually a competitor of Bitcoin or Ethereum.
Meme Tokens
Lastly, one of the most easily hyped tokens is meme coins. As the name suggests, meme coins were inspired as a comical take on other types of cryptocurrencies and were mainly backed up by influencers and investors who wanted quick returns on their investments. Meme coins were able to do this because they gained popularity in a very short time with quick returns.
What Should You Invest In?
While Bitcoin is a highly valued cryptocurrency that has gained the trust of many of its users, some altcoins have also facilitated their users in multiple ways. However, it is always advisable to take an expert’s opinion on what suits your financial conditions better!
In conclusion, Altcoins are complete opposites of Bitcoin. While they might facilitate or compete with Bitcoins or Ethereum, they are still very different in terms of facilitation, use, and value.
