Altcoin is an alternative cryptocurrency, that is, any other digital coin that is not Bitcoin. Currently (as of April 2024), there are more than 14,000 different altcoins in the cryptocurrency market, whose value represents nearly 49% of the total capitalization of the cryptocurrency market.
Different types of altcoins
As we have already mentioned, there are more than 14,000 altcoins on the cryptocurrency market, which gives you many options to choose from. However, which ones to choose and what is worth investing in? To answer this question, let’s take a look at the different types of altcoins available on the market:
- Mining Altcoins: Include all cryptocurrencies (except Bitcoin itself) based on the Proof-of-Work algorithm, which are mined by miners. They are most similar to Bitcoin in their structure and functionality.
- Stablecoins: We will discuss the topic of stablecoins in detail in the next lesson. Now we’ll just mention that stablecoins were created to prevent cryptocurrency price fluctuations and ensure stability in the cryptocurrency market.
- Security Token: These are altcoins that represent a stake in some asset, which makes them treated like securities. They are usually marketed in what is known as STO (Security Token Offering).
- Utility Token: These are so-called utility tokens and are used to manage cryptocurrency projects, between to pay rewards, pay out dividends, and even loyalty programs. Utility tokens are also used to raise investment capital, through processes such as Initial Coin Offering (ICO)or Initial Exchange Offering (IEO).
Investing in altcoins
The altcoin market is very unpredictable. They can be a great investment, but it can also be the other way around. All altcoins have very high volatility. Their value can fluctuate greatly in very short periods of time (unless you consider stablecoins). Thus, it can be seen that, on this basis alone, the investment involves a very high level of risk. Based on the above, however, don’t think that it’s not worth investing in alts at all. If it were true, they would not have appeared on the cryptocurrency market. Invest only as much as your finances allow. Investing in altcoins can be broken down into a few basic principles that crypto-experts follow:
1. Expect risk and be ready for a small return on your invested capital. As we have already mentioned – altcoins are risky, but he who doesn’t take the challenge doesn’t drink the champagne, right? However, if you are not prepared to lose some funds, don’t invest in alts.
2. Invest in altcoins and related projects that you understand. Don’t push your funds into a project that a colleague told you was cool. Reminder again – alts are risky. Read and understand a project or a new cryptocurrency before you invest.
3. Do your own research. Don’t listen to pseudo-investing gurus or fall for FOMO. It’s your money. Seek information from sources, white papers, or social media.
Altcoins are high risk, but through their fluctuations, they can yield a substantial rate of return. Of course, by doing a sizable amount of research, you come across altcoins that will definitely not be worth the effort. But there are those uncut diamonds that will be worth the risk.
The most popular altcoins
1. Litecoin (LTC) – a cryptocurrency based on open-source code. It is very similar to Bitcoin, but is much faster and more scalable than BTC.
2. Ethereum (ETH) – a platform built on the blockchain that supports smart contracts, with its own native ETH token. It was created at the initiative of Vitalik Buterin.
3. Monero (XMR) – was established in 2014. It is based on PoW and the CryptoNightV8 algorithm. It provides privacy to its users and is considered the most anonymous cryptocurrency in the world.
4. Ripple (XRP) – who hasn’t heard about the recent adventures of Ripple and the SEC… Nevertheless, the cryptocurrency was created to improve and facilitate the bank payment system.
5. Tether (USDT) – which is currently thriving and looking to connect with a growing range of currencies. It is the world’s third largest (in terms of capitalization) cryptocurrency. It is mostly backed by US dollars.
6. Polkadot (DOT) – a multichain network that can collaborate with other blockchains. The network was founded in 2017, but has only recently become very popular. Due to its innovation, we will devote a separate lesson to the project.
7. Binance Coin (BNB) – the creation of the world’s largest exchange, Binance. One of the most popular utility tokens, which you can use to trade, pay for travel, shop purchases or even a gift for a loved one.
8. Decentraland (MANA) – is a virtual world in which you buy and sell pieces of land, on which you build properties at the same time. Of course, you make money through this. The platform is based on the Ethereum blockchain.
9. Cardano (ADA) – this is also an extensive platform, based on the blockchain. It has its own cryptocurrency, its own source code, and is based on Proof-of Stake consensus.
Summary
As you can see from today’s lesson, the world does not end with Bitcoin. When you hear the word ‘cryptocurrency‘, don’t just think of the most well-known asset. There are many other variants that can yield a profitable return. Altcoins and stablecoins can be excellent choices.
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