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What are Altcoins?

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In 2008, Bitcoin introduced the cryptocurrency era, and it has been a long rollercoaster ride full of prices soaring and plummeting. Bitcoins is the world's largest cryptocurrency, and it began with a 70% share of the market. This is no longer so as it has fallen to 40% due to Ether's continued popularity. Bitcoin was the first decentralized digital currency founded by an unknown person or group of people using the alias Satoshi Nakamoto. It operates free of any central control or the oversight of banks or governments.

 

Since Bitcoin is the world's cryptocurrency, it is okay for the world to view every other cryptocurrency as an alternative. Altcoin stands for Alternative coin, and the most popular altcoin is Ether. Other altcoins include Litecoin, Ethereum, Doge, Cardano, Solana, Polkadot, Uniswap, etc.

 

What Are AltCoins?

The basic framework for all cryptocurrencies is alike as they are decentralized digital currencies not controlled by a bank, government, or person. Altcoins use the Blockchain as an incorruptible public ledger that allows and records transactions only if there's agreement that the transaction is true.

 

According to CoinMarketCap, As of Feb 2022, there are over17,337cryptocurrencies with a market capitalization of  $1,631,548,450,456where Bitcoin holds 41.7% while Ether holds 17.5% and altcoins make up the rest. Altcoin price movements tend to follow Bitcoin's path because they are often derived from it. Analysts believe that as cryptocurrency investing ecosystems mature and new markets emerge for these coins, price fluctuations for altcoins will become independent of Bitcoin's trading signals.

 

Types Of Altcoins

Altcoins categorization is done based on their functionalities such as transaction time, uses such as Ether, the world's second-largest cryptocurrency by market capitalization, is utilized as gas (or payment for transaction expenses) in Ethereum smart contracts. Do you know an altcoin can fall into more than one category? Here are some of the current types altcoins fall into:

 

Mining-based coins

As the name suggests, these sorts of altcoins are mined into existence using the Proof of Work. PoW is used in cryptocurrency mining to validate transactions and mine new tokens. PoW is a process through which systems generate new coins by solving challenging problems to build blocks, which is used by the majority of mining-based altcoins. The majority of the top altcoins in early 2020 were mining-based such as Bitcoin, Litecoin, Monero, and ZCash are examples of mining-based altcoins.

 

When a Bitcoin transaction is made, it is subjected to a security check and then gathered into a block to be mined. The block is then hashed using Bitcoin's proof-of-work mechanism. Bitcoin employs the SHA-256 algorithm, which always generates hashes of 64 characters.

 

Miners compete to generate a target hash that is lower than the block hash. The winner will get the privilege of adding the most recent block of transactions to Bitcoin's network. They are also rewarded with Bitcoin in the form of newly created coins and transaction fees.

 

Stablecoins

Since its inception, cryptocurrency trading and usage have been plagued by volatility which can be a blessing or a curse depending on what side of the market you are at a particular time. Stablecoins are a sort of cryptocurrency whose value is linked to a less volatile asset. Stablecoins are most frequently associated with a fiat currency, such as the US dollar. The value of stable coins might be linked to precious metals or other cryptocurrencies. Whatever asset a stable coin is connected to makes the coin less volatile. Tether's USDT, MakerDAO's DAI, and the USD Coin are all notable stable coins (USDC).

 

Utility Tokens

A lot of people believe in the enormous potential of Blockchain technology, which serves as the foundation for all cryptos. According to industry experts in the crypto realm and beyond, Blockchain might one day be as widespread as the internet, with some even referring to it as "Web 3.0."

 

With all of this added capability, users will need the means to pay for transactions, such as fees for publishing art, minting tokens, trading services, and gaining access to select areas of a blockchain network. Utility tokens are a type of altcoin created specifically for this purpose.

 

Within a network, utility tokens can be utilized to pay for services. They could be used to buy services, pay network costs, or redeem prizes. Utility tokens, unlike security tokens, do not pay dividends or require an ownership investment. A utility token is something like Filecoin used to buy storage space on the Filecoin blockchain network. Some people think of blockchain file storage as a more decentralized version of popular cloud storage solutions like Google Drive.

 

Ether is another utility token that is the most adaptable utility currency. It allows users to pay for digital art, create currencies, and more on the Ethereum network. Ethereum is recognized for collecting a "gas fee" as a service fee to cover the cost of data processing.

 

Meme Coins

Meme coins are based on a joke or a caricature of other well-known cryptocurrencies. They usually gain popularity in a short period of time, with renowned crypto influencers and ordinary investors aiming to profit from short-term gains generally hyping them online.

 

For example, When Dogecoin, or "doge," first appeared on the market in 2013, it was a joke. Dogecoin is a popular satire coin based on a viral image of a Shiba Inu dog. The joke was part of the appeal, and Dogecoin has since soared to a market valuation of roughly $30 billion. Dogecoin is supposedly owned by high-profile celebrities such as Elon Musk, the CEO of Tesla Inc, and Snoop Dogg.

 

Memecoins, no matter how famous they are, are all about timing and 15 minutes of fame, making them even riskier bets than Bitcoin and other cryptocurrencies. Elon Musk, the CEO of Tesla Inc. (TSLA) and a cryptocurrency aficionado, routinely sends out cryptic tweets concerning popular meme coins Dogecoin (DOGE USD) and Shiba Inu, which have a significant impact on their pricing. Shiba jumped 91 percent in 24 hours in October 2021 after Musk posted an image of his Shiba Inu puppy, Floki, riding aboard a Tesla.

 

Some cryptocurrency investors try to predict which meme coins will endure the test of time by looking for variables other than popularity that could give them long-term value, but this is mostly guesswork. Even Dogecoin's co-creator has spoken out against it, citing the possibly detrimental influence of social media "get rich quick" fads.

 

Why Should You Care?

Cryptocurrency might be here to stay and will continue to shape the way we transfer, receive, and use money. It is becoming easier and easier to imagine a future in which users swap altcoins for services such as paying for service fees or storing files as blockchain technology becomes more widely adopted. Some years ago, the concept of digital payments would be unimaginable, but technology keeps making a lot of wild imaginations reality.

 

You can diversify your investment portfolio today with Bitcoin Depot by making your first purchase. You can exchange Bitcoin, Litecoin, and Ethereum with cash by walking into any of our 7,000 Bitcoin ATMs scattered all over the US and Canada today.


March 17, 2022