The word ‘altcoin’ is a combination of two words: ‘alt’ and ‘coin’ where alt means ‘alternative’ and coin means ‘cryptocurrency’.
Together they indicate a category of cryptocurrency, which is an alternative to the digital bitcoin currency.
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What is an Altcoin?
Following the success story of bitcoin, several other peer-to-peer digital currencies have emerged to try to mimic that success.
Many altcoins are built on the infrastructure provided by bitcoin. Therefore, most altcoins are peer-to-peer, require a process of mining by which users solve difficult problems cracking blocks,
And provide secure and cheap ways to conduct web transactions. But with many overlapping features, Altcoins differ widely from each other.
Altcoin vs Bitcoin: Is Bitcoin & Altcoin Same?
Not all follow the same rules as bitcoin. For example, while Bitcoin will only mine, or produce bitcoin, every 10 minutes, an altcoin called Litecoin will produce coins every 2.5 minutes.
This enables Litecoin to process payments faster. Litecoin will also produce 84 million litecoins, while bitcoin will only produce 21 million bitcoins.
Litecoin also uses a different set of rules for mining than bitcoin. While bitcoin requires expensive hardware to mine, litecoin can be mined with normal computer hardware.
Litecoin is one of the thousands of altcoins on the market. Some altcoins stand out as popular alternatives to bitcoin, although they do not reach bitcoin’s $100 billion market cap. Some examples of altcoins include:
Why do we need Altcoin when we have Bitcoin?
Bitcoin was one of the first cryptocurrencies to be developed, but since then, its structure has had layers of improvements. Some altcoins have made trading cheaper and faster.
Some consume less energy for mining while others bring additional layers of privacy. While some have the same proof of concept, some altcoins operate on different proofs of concept.
There is a complex technical analysis that can be put forward, but we can keep it for later clarification. The key point is that these new coins have made the technology stronger, better, making transactions less expensive.
In addition, there was also a need for stable cryptocurrencies. Historically, bitcoin has been prone to massive price fluctuations.
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Therefore, there are also some stable coins in the market, which are pegged against other fiat currencies such as the US dollar.
Libra, which was to be launched by Facebook and other tech companies, was supposed to be one such stable coin.
What are the Advantages of Altcoin?
Room for Growth: The future of this system and processes is unique, so it offers a wide range of developments.
Unique Functions: Unlike Bitcoin, Altcoins are created with functionalities. Thus, these currencies are more than just a token.
Less price volatility than Bitcoin: This is one of the best advantages of investing in Altcoins, i.e., the price volatility of Altcoins is usually less than Bitcoin.
Therefore, due to this feature of Altcoins, your invested amount will not have much impact.
Accessible: Trading Altcoins is easier than Bitcoin. Hence, the competition to invest in Altcoins is low, so you can easily invest in this asset within minutes.
What are the Disadvantages of Altcoin?
Altcoin trading also has its “cons”. The volatility of the crypto market which we have mentioned above can cause you huge losses. What’s more, not many trading sites offer fiat money withdrawals.
This means you have to plan to convert any altcoin to bitcoin and only then they can be converted to USD. Of course, a merchant pays a fee for any transaction, the number of which can be surprisingly large.
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What is the Difference Between Altcoin & Crypto Token?
The term cryptocurrency is a misnomer because currency technically represents a unit of account, a store of value, and a medium of exchange.
All of these characteristics are inherent within bitcoin, and since the cryptocurrency space was kickstarted by the creation of bitcoin.
Any other coin conceived after bitcoin is generally regarded as a cryptocurrency, although most of the actual currency mentioned above. does not meet the characteristics.
The most common classifications of cryptocurrencies are:
- Alternative Cryptocurrency Coins (Altcoins)
- Crypto Token