As
cryptocurrencies strive to push the financial forward into the future, they further diversify as well. Bitcoin may have the stronghold of the crypto market now, but if cryptocurrencies have proven anything, it's that you can never tell what may happen in the future. Currently, there are now 10,000 different kinds of cryptocurrencies out there but Bitcoin remains as powerful as ever. Whether it's a good thing or not remains to be seen. However, the other cryptocurrencies referred to as 'Altcoins' have an important role too. Here's what you need to know about altcoins in general.
The Definition of Altcoins
In the simplest terms possible, altcoins are simply alternative cryptocurrencies to Bitcoin. Since the latter has grown so massive that it can very well monopolize the crypto market, the altcoins provide much-needed diversification for stability and growth. In many ways, they're similar to
Bitcoin in terms of their role as a digital currency and the technology they use. Only a few stand out in terms of different mechanisms or stable market values. Overall, however, altcoins are pretty much standard cryptocurrencies that help move the market forward. Though they still rank lower than Bitcoin, it's not impossible that some may eventually equal or even overtake the latter.
The Benefits of Getting Altcoins
Before delving deeper into altcoins, it pays to know how you'll benefit from getting them. Firstly, although Bitcoin remains the largest cryptocurrency so far, many are still unable to purchase them. At least, with altcoins, you get all the perks of getting Bitcoins with less hassle. Moreover, these cryptocurrencies promise more agency and movement within the digital financial world. Thanks to the market's overall decentralized nature, investors get to enjoy the digital currency with little to no interference from third parties such as banks, financial institutions, and even national governments. In many ways, you're free to use your altcoins as you wish.
The Different Kinds of Altcoins
All in all, there are five kinds of altcoins altogether. The first kind is the mining-based altcoin which, as its name says, are mined to existence. With the help of the Proof-of-Work (PoW) method, developers can mine these altcoins to increase the supply even though a number of them already have a set number of limited supplies.
Stablecoins, on the other hand, is the second kind of altcoin that promises stability in market value. Backed by real-world currencies and assets, their market capitalizations see little to no volatility at all. The third kind, the security token is an altcoin that can be traded in the stock market since they provide digital provenance.
Meanwhile, meme altcoins are those that started out as a joke but, because of their popularity, eventually grew into legitimate cryptocurrencies. The best example of this is
Dogecoin, a meme-born altcoin that bears the logo of the 'Doge' meme, an image of a Shiba Inu dog. Though it looks and feels humorous, it's become an actual cryptocurrency with real market value, as well as having its own community that strengthens its position in the market. And finally, the fifth kind is the utility token, a kind of altcoin that provides all sorts of services. Whether as a source of payment or to serve as collateral for a loan, utility tokens always have a purpose.
The Most Popular Altcoins
As for the mining-based altcoins,
Litecoin and
Ethereum serve as the top examples. Litecoin complements Bitcoin and serves as the 'silver' to the latter's gold. As for Ethereum, it provides its own blockchain system which makes mining and transacting them easier than Bitcoins. For stablecoins, the likes of Tether, Pax Dolar (USDP), Gemini Dollar (GUSD) all have the highest market capitalization. Backed by real-world currencies, particularly the US Dollar, they enjoy stable market values for risk and worry-free investment. The only drawback, however, is that they're more regulated compared to other cryptocurrencies in the market.
Although Bitcoin remains the biggest cryptocurrency to date, the market needs diversification in order to stabilize and survive. So it's thanks to these altcoins—like Litecoin, Ethereum, Dogecoin, and the like—that the crypto market stays afloat and thrives.
