In the world of cryptocurrencies, Bitcoin stands out because it is the first-ever cryptocurrency made. Since the creation and general acceptance of Bitcoin, alternative cryptocurrencies have been created. The term "Altcoins" refers to all other forms of cryptocurrencies created after the creation of Bitcoin.
Presently, there are over 5000 types of cryptocurrencies. A common factor among all Altcoins is that they can serve as a substitute for Bitcoin. However, each Altcoin has unique features and offers something different when compared to other Altcoins and Bitcoin. Just like Bitcoin, Altcoins offer investors opportunities to make money off them. You need to select the right cryptocurrency to buy in order to make a profit from your investment. Have a look at this review to find out the best cryptocurrency to buy in 2021.
As a cryptocurrency, all Altcoins can be used to pay outside the normal forms of payments; this is because Altcoins possess similar properties to money. All cryptocurrencies, including Altcoins, are scarce, easy to transfer, easy to store, and easy to access when needed.
Method of Operation
The method of operation for Altcoins is very similar to that of Bitcoin. In all cryptocurrency transactions, you need to use your private key to send coins (bitcoin or Altcoin) from your wallet to the wallet of another user. All transactions made are permanently recorded in a crypto ledger. These records help to prevent users from altering any transaction or denying a transaction. According to Bitcoin.org, all blockchain transactions are secured by mathematics proofs, which confirm transactions in blocks.
Categories of Altcoins
There are different types of Altcoins on the market. Some common types include:
- Mining-based coins
- Stable coins
- Security tokens
- Utility tokens.
Mining-Based Coins
Mining-based coins are cryptocurrencies that are created by solving computational math problems. math problems can not be solved by hand. As a result, high-powered computers carry out the mining process. The reward of solving a complex mathematical problems is the creation of new cryptocurrencies. Some cryptocurrencies that fall under this category include Bitcoin and Altcoins like Ethereum, Litecoin, Monero, Electroneum, Zcash, etc.
Stable Coins
This type of cryptocurrency is attached to an already existing fiat currency or an exchange-traded commodity like precious metals or industrial metal. The idea behind this attachment is to reduce the amount of price volatility the coin will experience. As a result, stable coins are generally non-volatile coins. An excellent example of a stable coin is the Libra coin by Facebook; this coin is attached to the United States Dollar (USD) to prevent price volatility.
Security Tokens
According to blockchain-council.org, "Security tokens are digital assets that derive their value from an external asset that can be traded." Security tokens are usually linked to a business or company and are controlled by security laws. When a company has an upcoming project that needs external financing, it may create a Security Token Offering (STO) to convince investors to provide the company's project funding. Security tokens are usually launched during initial coin offerings.
Security tokens are often used as a form of investment contract that rewards users with a percentage of the company's equity, profit sharing, even voting rights, or some other form of remuneration. Since security laws control security tokens, it is often difficult to purchase these tokens or transfer them to other people.
Utility Tokens
Utility tokens can also be described as app coins or user tokens. They are offered to users when a project is executing an Initial Coin Offering (ICO). Utility coins act like digital coupons that enable users to enjoy a special service or special access to a project. Utility coins can also be used to redeem gifts after the initial coin offering has taken place. An example of a utility token is the Filecoin token. This token allows users to access the Filecoin network. The Filecoin network is a decentralized, peer-to-peer network that stores files online.
Popular Types of Altcoins
There are over 5000 types of Altcoins in the world. Some of the most popular Altcoins include:
- Ethereum
- Litecoin
- Xrp
- Bitcoin Cash
Ethereum
Apart from Bitcoin, Ethereum is the next most valuable crypto asset in the world at the moment. Ether was launched in 2015 by Ethereum. Ethereum is a public. While Bitcoin aims to become a globally accepted currency that will replace fiat currencies, Ethereum aims to become a smart computer that offers quick digital contracts to users.
Litecoin
Launched in 2011, Litecoin aims to become an accepted standard of payment for users worldwide. As a result, users can send and receive Litecoin as a payment for goods and services. In comparison to Bitcoin, Litecoin provides a faster and cheaper means of payment. According to Techrader.com, "Litecoin processes payments four times faster than Bitcoin." Similarly, it takes lesser time to mine Litecoin when compared to Bitcoin. Litecoin offers a cheaper transaction fee than other traditional payment methods like PayPal, Skrill, and others. They charge just one one-thousandth of one Litecoin to process any transaction. In contrast, traditional payment options charge up to 3% of the total transaction sum.
XRP
Another popular altcoin is XRP. Commonly associated with US company Ripple, XRP is an independent open-source crypto asset. Xrp is known for providing a viable option for cheaper and faster cross-border transactions to its users. This crypto asset has its own crypto blockchain ledger and provides fast transactions that are completed within three to five seconds.
Bitcoin Cash
Despite bearing a similar name to Bitcoin, Bitcoin Cash is an altcoin. This Altcoin has its own blockchain. Bitcoin Cash's main objective is to become a globally accepted digital cash currency that facilitates cheap and fast transactions. This digital currency also aims to rival top payment platforms like PayPal and Visa in providing affordable services to its users.
When you use Bitcoin Cash, you are assured of a fast, secure, and cheap payment option for cross-border transactions.
Conclusion
Presently, Bitcoin is the largest and most valuable crypto asset in the cryptocurrency market. However, other cryptocurrencies provide a similar service to bitcoin, and these cryptocurrencies are called Altcoins. All Altcoins possess unique features and offer something different when compared to Bitcoin. Similarly, like Bitcoin, Altcoins offer investors opportunities to make money off them.