Cryptocurrency is a digital currency, sometimes called “soft currency.” Cryptography is a decentralized mechanism that keeps track of cryptocurrency accounts. The first name that flashes in the mind when discussing cryptocurrencies is Bitcoin. And that is also evident. The most well-known cryptocurrency is Bitcoin.
The fluctuations in online investing continue to grow and shrink, which has an additional impact on the monetary value of digital currencies. If we put bitcoin aside, other viable currencies include Litecoin, Ripple, Ethereum, Bitcoin Cash, Zdash, etc. These are referred to as alternative currencies. In this article, let’s take a further look at them.
What is an altcoin?
An altcoin is a substitute cryptocurrency for Bitcoin that has stood solo among all other cryptocurrencies. Early on, Bitcoin dominated the market to the point where other competitors were compared to the primary cryptocurrency. After that, it was only Bitcoin, along with everything else. So, anything that was not Bitcoin, perhaps mockingly, referred to as altcoins, or even less charitably, shitcoins.
Therefore, an altcoin is any cryptocurrency other than Bitcoin. This kind of definition was very reasonable in the early days of cryptocurrencies when Bitcoin commanded the majority of market attention, and there were dozens or even hundreds of alternative coins.
Apart from Bitcoin, the nine most popular altcoins are as follows:
- USD Coin
- Binance USD
Pros & Cons of altcoins
Pros of altcoins:
- Altcoins are tokens that aim to outperform Bitcoin by addressing some flaws or issues that have plagued it since its inception.
- Stablecoins, a subcategory of altcoins, can achieve the objective that Bitcoin initially set out by enabling the use of cryptocurrencies for routine business transactions.
- When it comes to portfolio management, altcoins provide for diversity, which means that they give investors a variety of possibilities or options via which they can generate a return on their investment.
Cons of altcoins:
- The market capitalization of altcoins is not as high as that of bitcoin.
- Since there are various cryptocurrencies to choose from, making investment decisions can be significantly more difficult.
- Due to their potential for sharp price increases or decreases, altcoin prices can be significantly more erratic than the price of Bitcoin.
- There have been several instances of altcoins losing value after failing to achieve their original goals, which caused losses to investors.
Types of altcoins
With actually thousands of cryptocurrencies in existence, speculators looking for altcoins are spoiled for choice. There are multiple types of altcoins, including stablecoins, meme coins, governance tokens, security tokens, and many more. In this article, we have mentioned four significant types of altcoins that have gained popularity. These altcoins have gained different names because they have different functionality and purposes of serving.
Stablecoin is one of the unique and common types of cryptocurrency whose value is tied to another asset’s value, usually the US dollar. Stablecoins attempt to maintain a coin price that is equal to the value of the underlying item. Stablecoins frequently have a basis in actual money since assets like real dollars back them (though often bonds and other assets as well). Stablecoins like Tether and USD Coin are two examples.
Any coins that were produced as a direct result of a joke, pun, or sarcastic remark shared on social media are known as meme coins. These are often based on forks of more significant cryptocurrency tokens and typically have little functionality beyond serving as a means of transferring money from one crypto wallet to another. For instance, Dogecoin, one of the most popular meme coins, was produced as a result of the Shiba Inu meme that was popular on the internet at the time.
The digital assets known as governance tokens grant holders of such tokens the ability to vote. Through voting, the users have control over the future of the project they are using. These are typically voting and proposal-creating tokens for the crypto and blockchain in question, which contributes to its decentralization by giving all holders a voice and a role in how it develops moving forward rather than a single centralized authority. The two principal examples are Uniswap and Pancakeswap.
A type of coin known as a security token denotes a tiny stake in another asset. For instance, security tokens might be used to confirm ownership of a work of art and split ownership among its owners. Or, a business’s ownership may be represented through security tokens. Therefore, this kind of token may enable the securitization of more conventional assets.
Concluding thoughts: Should you invest in altcoins?
Altcoins should only be purchased if you are sure that you want to grow the diversity of cryptocurrencies in your portfolio and if you have taken the time to thoroughly examine each token you are interested in, its development team, and its potential for success in the future.
A few altcoins have large-scale projects underway that provide many more use cases than Bitcoin. This implies that if you purchase an altcoin when it is still in its early stages of development and broad appeal, the token’s price may rise significantly in the future. Altcoin purchases, however, come with risks and drawbacks as well. Always DYOR!
Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn’t represent any investment advice or WazirX’s official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.