Altcoins, otherwise called alternate coins, are nothing but cryptocurrencies other than bitcoin. These cryptocurrencies are named because they were developed as an alternative for Bitcoin and traditional fiat currency.
The first ever altcoin came to light in 2011, and by now, there are numerous altcoins introduced to the cryptocurrency market. The primary objective behind the development of an alternate coin is to provide better energy usage efficiency and transaction speed. In general, we can say that altcoins have everything that bitcoin lacks, which is why they are increasingly popular and trusted by millions worldwide. However, although altcoins are alternate coins, the basic framework is derived from bitcoin.
Bitcoin is the king of cryptocurrency and was the first successfully launched digital currency. But news and predictions strongly suggest the chances of altcoins like Ripple to win over Bitcoin. People choosing altcoins over Biotin have increased tremendously, but there are certain things you need to know about altcoins before investing or buying. This article will take you through everything a beginner should know about altcoins.
What are the different types of altcoins?
There are several types of altcoins currently available in the cryptocurrency market. To increase the ease of usage and ease of choice, altcoins are classified into different groups, including stable, mining, staking-based, and so on. Here we will briefly discuss the significant altcoins you might have encountered during your research about altcoins.
- Stablecoins
Stablecoins, just like their name, are developed to maintain the same value over a long period. These crypto coins can be pegged into US dollars. In case of price fluctuations, the issuer will step forward to current the issue. Stablecoins are not a good investment option as they maintain the same value. But there are options where you can gain interest by lending Stablecoins via specific saving protocols.
- Mining based altcoins
Mining-based altcoins are the ones that utilize the mining process to validate transactions and drive more coins to the supply. Miners make use of advanced technologies to solve complex mathematical equations. The first miner to solve the problem will verify a block of transactions.
- Staking based altcoins
Staking-based coins are similar to mining-based ones, but these altcoins use staking to validate transactions. The holder of staking-based altcoins can pledge their coins for a certain period for transaction processing. In return for this action, they gain crypto rewards. This can be a smart passive income option.
What are the advantages and disadvantages of altcoins?
Now that we know the basic types of altcoins let us move on to the pros and cons of altcoins.
Pros –
- Altcoins have advanced aspects of Bitcoins
- They have better reward options
- You get to choose from a wide range of altcoin varieties, each with unique features, objectives, and competitive advantages.
Cons –
- They do not possess the first mover advantage Bitcoin offers and lack market share.
- Choosing altcoins can put you through risks, as many end up in failure, or some might be scams.
- Another huge challenge is that many altcoins are only available on specific platforms or websites, which makes them hard to purchase.
Should you invest in altcoins?
If you are looking forward to making crypto a part of your portfolio and have sufficient time to spare for researching, then you should consider investing in altcoins. Several altcoins offer high potential rewards and can be used as store value, unlike Bitcoin. However, no cryptocurrency provides you with a hundred percent profit. Likewise, there are many notable downsides for altcoins as well. Because of their sheer number, picking out the most suitable altcoins that fit one’s need becomes extremely difficult. Smaller altcoins could end up in failure or success, so investing in altcoins comes with huge risk.
To summarize, altcoins have much to offer and are worth checking out. However, before you invest, take your time and conduct research about altcoins, and choose the right one. Several other options like the cryptocurrency stokes come with minimal risks and are less time-consuming. Always remember that going for a high-risk option is not always recommended, and even if you opt for investing in altcoins, they should only take up a small fraction of your portfolio.