What are altcoins? Learn more about them

2021-04-06 | CryptoCurrency.org

Cryptocurrency has become a hot button topic in trading and investment circles. While Bitcoins tend to occupy the limelight, there are multiple other coins or cryptocurrencies that are attracting eyes, too.

What are altcoins? The essentials

Altcoin is a combination of the words "alt" and "coin" and includes all alternatives to Bitcoin. The success of Bitcoin as the first peer-to-peer digital currency paved the way; however, many altcoins are trying to target the perceived limitations of Bitcoin. In order to succeed against Bitcoin an altcoin must have a competitive advantage over its ancestor.

Many of the altcoins have been built upon the basic framework provided by Bitcoin, therefore, most altcoins are peer-to-peer. They try to offer efficient and inexpensive ways to carry out transactions on the Internet. Altcoins vary widely from each other, even though most of them share many overlapping features.

Types of Altcoins

As soon as altcoins started to evolve, distinct categories began to emerge as well. Here are the main types you should be aware of:

  • mining-based: they have a mining process by which new coins are generated by solving challenging problems to unlock blocks. They are more similar to Bitcoin than other altcoins. 
  • stablecoins: they are altcoins that are designed to combat the volatility of cryptocurrency by tying their value to an underlying index, commodity, or security. Tether is one example of a stablecoin; Libra is a stablecoin under development by Facebook.
  • security tokens: they are linked to a business, and they often launch in an initial coin offering (ICO). These tokens resemble traditional stocks, and they are often launched with the promise of some type of dividend like payout or ownership in a business.
  • utility tokens: these altcoins provide a claim on services, and they are sometimes sold as part of an ICO. An example of this is Filecoin - it was designed to be exchangeable for decentralized file storage space.


Are altcoins just another form of Bitcoins?

Although there are some similarities between the different kinds of altcoins (see above) and Bitcoin, the answer is a definitive no. Altcoins don't all follow the same rules as Bitcoin and they are, by definities, an alternate to Bitcoin cryptocurrency. One example of this is Litecoin - Bitcoin will only ever mine / produce bitcoins in every 10 minutes, Litecoin will produce coins every 2.5 minutres making its payments proceses faster.

There is a sharp difference in the quantity as well: Litecoin will produce  84 million litecoins, while Bitcoin will only produce 21 million bitcoins. Additionally, bitcoins require costly hardware to mine, litecoins can be mined with common computer hardware.

Examples of altcoins

Here is a short list of altcoins and some information on how they position themselves with some additional message board reading - this is, of course, by no means an exhaustive list. 


The future of altcoins - conclusion

The future of altcoins is indeed promising, as many new altcoins saturate the market and pose their own challenge to the reign of Bitcoin. Altcoins are perfect for investors looking to diversify within the cryptocurrency space in order to boost portfolio returns. Especially when companies like Facebook are looking into rolling their own altcoins, there is plenty of space in the market as blockchain technology matures and evolves over time.

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