Altcoin - Meaning, Types and Examples

Cryptocurrency is a form of digital money or soft money. The account of cryptocurrency is maintained by a decentralized system known as cryptography. Whenever we talk about cryptocurrency, the first name that comes to our mind is Bitcoin. And that’s obvious too. Bitcoin is a leading name in crypto currency. 

 

The spikes in online investing keep on increasing and decreasing, this further affects the money value of digital currencies. Currently, when we are writing this blog, the value of Bitcoin is around INR 32 lakhs and 66 thousand. 

 

But it might change when you are going to read it. This is how online investments and crypto currencies work. If we keep bitcoin aside, there are several other currencies available, like Litecoin, Ripple, Ethereum, Bitcoin Cash, Zdash, etc. Some of you might have been invested in these. Right? 

 

These currencies are known as alternative coins. But now, the question is which altcoins are more stable? Advantages or disadvantages of altcoins on bitcoin. Best altcoins to invest in 2021-22. Don’t worry. We are here to solve your queries related to financials. In this article we will learn what altcoins are in cryptocurrency. 

 

(Suggested blog: top 10 cryptocurrency 2021)

 

 

What are Altcoins?

 

The word Altcoin is a blend of two words, ALTernative COIN, this is how the word got its meaning. Altcoins are basically alternative coins of Bitcoin. All other digital currencies except bitcoin come under alternative coins. 

 

(Suggested Read - Bitcoin Mining)

 

Some strong examples of altcoins are Litecoin, Ethereum, Ripple, Bitcoin Cash, NEO, etc. These altcoins are like bitcoin with few other characteristics. For example, like bitcoin, altcoins also validate and secure transactions, but the mechanism can be different than blockchain mining. 

 

Like bitcoin their price is volatile too, but altcoins are more affordable when compared to bitcoin. Altcoins are basically built on the success of Bitcoin. Though, as mentioned earlier, there is a slight modification in the intermediate process. According to investment records of March 2021, altcoins occupy almost 40% of total crypto currency web.

 

 

Types of Altcoins

 

Altcoins are classified under various categories. These categories are described based on their functionalities and mechanisms. Few altcoins fall into more than one category. Here is the list of major types of altcoins.

 

ON THE BASIS OF MECHANISMS

 

1. Mining-Based

 

Based on mining, altcoins are classified into two categories:

 

1. Proof-of-work altcoins

 

2. Pre-mined altcoins

 

Proof-of-Work altcoins are those coins which are generated by solving difficult mathematical queries. 

 

For example, Litecoin, Zcash, etc.

 

Pre-mined coins are those coins which aren't generated by the means of an algorithm query.

 

For example, Ripple, XRP, etc.

 

2. Stablecoins

 

Stablecoins as the name shows are stable in nature. That doesn't mean, they don't go up and down the trend of the market. But stablecoins aim to reduce the volatility of value. Fluctuations do happen, but it never exceeds a narrow zone.

 

Few examples of stable altcoins are USDC, MakerDAO, etc.

 

ON THE BASIS OF FUNCTIONALITIES

 

On the basis of functionalities, altcoins are divided into two tokens. 

 

1. Security Tokens

 

Security tokens are usually issued to investors, they deliver a dividend payout to holders. This form of ownership attracts investors to invest money.

 

 

2. Utility Tokens

 

Utility tokens are used to purchase services or gain rewards. Like security tokens they don't provide any ownership in any kind. 

 

For example, Filecoin, it is used to buy a network storage space.

 

 

Are altcoins trusted?

 

Altcoin’s market is quite unstable. The trends change several times a year. The status of different altcoins is unstable and fluctuates. Different altcoins have different values, their mechanisms and algorithms are different, though they often mimic Bitcoin. 

 

In the last decade, plenty of altcoins have registered in the market. This introduction has attracted many investors and betting. The altcoin market lacks liquidity due to insufficient capital. 

 

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Case study: In January 2018, ETHER price reached its zenith, by December of the same year, its price was reduced to almost half. And, after two years, it was increased to four times.

 

This is the trade inconsistency in altcoins. Fluctuation is always there. But this fluctuation is responsible for profits and wealth for traders.    

 

Examples of Altcoins

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Different examples of Altcoins

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There are a variety of Altcoins available in the market. Different altcoins have different values. For example, the current cost of Ethereum is around 2.25 lakhs INR, on the other hand, ripple is just 80 INR. Here is the list of some top 10 Altcoins which can be invested in : 

 

1. Ethereum

 

2. Zcash

 

3. Cardano (ADA)

 

4. NEO

 

5. Bitcoin Cash

 

6. Ripple

 

7. Solana

 

8. USD Coin

 

9. Litecoin (LTC)

 

10. Dash

 

Reference blog, Different types of altcoins

 

Which is the most stable Altcoin?

 

Just as Bitcoin, altcoins are also subjected to investment risk. Their success and application almost mimic the Bitcoin action. Among all altcoins, Ethereum is the most stable one, and is almost similar to Bitcoin in certain ways.

 

Which is the oldest altcoin?

 

The earliest altcoin in the market is Namecoin. It almost mimicked the action and algorithm of Bitcoin. The benefit of Namecoin over Bitcoin was that it allowed the users to mine and register by using their own domain.

 

 

Advantages of Altcoins

 

Now, let us study about the factors that make altcoins more worthy than Bitcoin. 

 

1. Better version of Bitcoins

 

Altcoins are easier to use and decrypt when compared to bitcoin. Also, they are filling the cryptocurrency shortcomings.

 

2. Stablecoins

 

Altcoins such as USDC are a good medium in daily transactions.

 

3. High Valuations

 

Certain altcoins like Ethereum are already at the top of the list of cryptocurrencies.

 

4. Variety

 

Investors can choose altcoin according to their requirements, as plenty of altcoins are available in the market.

 

Disadvantages of Altcoins

 

1. Immature market

 

Cryptocurrency and altcoins are still not mature. There is no defined set of rules or regulations to evaluate the online trade market. Even it is not verified by a central authority

 

2. Cases of dead cryptocurrencies

 

Several cases of dead cryptocurrencies have been raised in the last few years. Crypto currencies which are not able to gain sufficient investors and transactions, have collapsed with the existing investors’ money. So, there is always a risk.

 

3. Smaller investment market

 

Bitcoin still shares 60% of the market, which is quite large when compared to altcoins investment market.

 

4. Thin liquidity

 

As explained in the above case, altcoins have thinner liquidity. Due to absence of certain criteria, altcoins prices are more volatile than bitcoin.

 

(Related blog - Bitcoin vs Bitcoin Cash)

 

5. Available in plenty of numbers

 

As the trade market is flooded with a variety of altcoins. It is hard for the investors to choose the right one.

 

6. Vulnerable

 

Altcoins are vulnerable to public use as compared to bitcoin.

 

 

What is the future of Altcoins?

 

There are more than 1800 Altcoins registered in the trade market. They have less liquidity and high volatility. Still, they challenge bitcoin, Ether and Litecoin are the leading names in cryptocurrencies. According to senior investors and traders, altcoins can be profitable when invested keeping risks and market factors in mind.

 

(Refer to the article Future of Altcoins)

 

If you are thinking of investing in altcoins, it is a great idea for sure, all you must keep in mind is the market and trading trends. Also, invest in stable altcoins to minimize the fear of collapsing. If you are an investor, you should know how to manage your stress during the fall. Up and downs are part of trading. 

 

Happy investing!