By now, everyone should have heard of Bitcoin. It is the Cryptocurrency that was created back in 2009 by Satoshi Nakamoto. Bitcoin is the largest digital currency in the world by market capitalization. However, there are many other digital currencies other than Bitcoin that are also gaining recognition and acclaim. These “other coins” are commonly referred to as Altcoins.
Despite their contributions, few people know about these other Altcoins and why they should invest in them. Hence, this article would help to explain what Altcoins are and how they work.
Altcoins: What Are They?
As mentioned earlier, Altcoins are all digital currencies other than Bitcoin. They are manufactured using different tools to serve different purposes. For example, Ethereum is a digital platform essentially created to serve development purposes on the blockchain. Every Altcoin is created to solve a problem.
Presently, there are about 5000 Cryptocurrencies that different developers have created. Altcoins take over 40% of the total digital currency market and are expected to increase over time.
There are several types of Altcoins, such as stable coins, security tokens, utility tokens, and even mining-based Cryptocurrencies. Interestingly, the most prominent Altcoins in 2021 so far are Ethereum and Binance coin.
How They Work
In truth, many Altcoins were derived from Bitcoin. Due to that reason, they possess many features that are similar to Bitcoin. Additionally, they also run on the same framework Bitcoin does; Blockchain.
Some Altcoins are created to address the flaws of Bitcoin. For example, Bitcoin Cash was created to solve the issue of scalability present in Bitcoin. Other issues such as the ineffectiveness of the Proof-of-work feature and the lack of support for complex smart contracts operations are also addressed by Altcoins.
Most Altcoins are created to serve a special purpose and they are designed with distinguishing features to serve that purpose. These distinguishing features have made Altcoins have their separate market, attracting potential investors and displaying a massive hope for development.
Types of Altcoins
There are four main types of Altcoins, and each of them is equally useful to society. They are:
MIning-based Altcoins
Mining-based Altcoins are more or less automatically generated. It is a type of Altcoin that popularly uses the proof-of-work feature to generate new coins by solving challenging problems to create blocks. Some examples include Litecoin, Monero, and Zcash. Interestingly, many quality Altcoins were mining-based.
Stablecoins
These are Altcoins created to reduce the volatility of Cryptocurrency. They do this by attaching their value to other goods like fiat currencies and precious metals. A viral example of this stablecoin is Facebook’s Diem coin.
Security tokens
Security tokens are Altcoins mainly used for equity in the form of ownership or a payout to holders of dividends.
Utility tokens
Simply put, these are Altcoins that are used to give services in a network. An example of this type of Altcoin is Filecoin. This coin is used to buy storage space on the desired network.
Fanspel token is the new blockchain innovation that provides gamified experience for user to earn cryptocurrency. This token used for to play on fantasy sports app and for payment for pools and to rewards the skillful Players.
Final Words
‘Altcoin’ is a general term used to describe digital currencies other than Bitcoin. Since the launch of Bitcoin, over 900 Altcoin currencies have been created.
