What is an altcoin? Introducing the best altcoins for investment

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1 year ago

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By now, you probably know what digital currency is and its types.

One of the common terms of the digital currency market is altcoin. Altcoins generally refer to cryptocurrencies that have attempted to replace Bitcoin in some way.

In the continuation of this article, we will answer these question: What is an altcoin and why were altcoins created?

At the end of the article, we will briefly introduce the top 5 altcoins of the digital currency market.

Let’s dive in and explore together:

What is an altcoin?

The word Altcoin is a combination of two words: Alternative meaning alternative and Coin meaning coin or currency. In general, all cryptocurrencies except Bitcoin are called altcoins.

Altcoins are cryptocurrencies that use blockchain technology to enable peer-to-peer transactions. Altcoins have emerged on the back of Bitcoin’s success and are trying to attract the attention of users by changing the rules of Bitcoin and improving it.

Why were altcoins created?

Since the start of Bitcoin activity, some of the weaknesses of this popular cryptocurrency have attracted the attention of market participants.

First, the slow speed of mining coins and confirming transactions became an issue for many users, and then the low capacity of Bitcoin to process the volume of transactions per second caused many programmers and experts to think of a better digital currency that would overcome the negative features of Bitcoin.

These experts decided to introduce better cryptocurrencies to the market users by making various minor or total changes to the Bitcoin code or simply taking ideas from it.

Many of these ideas did not remain only as a cryptocurrency and were presented to users as a set of services.

How do altcoins work?

Altcoins usually work exactly like Bitcoin. That is, each user has a private key in which his property is stored and a public key with which he performs his transactions.

Every user needs a digital wallet to manage their assets, which works very similar to Bitcoin wallets.

Finally, every transaction made in the network of altcoins is also irreversible like Bitcoin, and the security of the blockchain of each cryptocurrency is provided by encrypted codes.

Comparison of Bitcoin and an altcoin

Altcoins don’t exactly follow Bitcoin’s rules. For example, read some of the features of Bitcoin below:

There are only 21 million bitcoins in total.
Each block of the Bitcoin blockchain takes about 10 minutes to be mined.
The block reward in the mining process is halved every four years during the halving process.

But these rules do not necessarily apply to other cryptocurrencies.

An altcoin may be similar to Bitcoin in some features, but there is no compulsion in this regard. For example, in the cryptocurrency Litecoin, which is one of the most popular altcoins in the market:

There are 84 million Litecoins in total.
The mining time of each Litecoin block is approximately 2.5 minutes.
The block reward in the Litecoin mining process is halved every four years during the halving process.

This comparison shows that although some of the rules of an altcoin and Bitcoin may be similar, this does not mean that this similarity is necessary.

Advantages of altcoins

Altcoins were originally created to compensate for the weaknesses of Bitcoin. Therefore, compared to Bitcoin, they have several general advantages:

Altcoins usually process transactions faster. By processing only 7 transactions per second, Bitcoin does not have the capacity to become a cryptocurrency for everyday transactions. But many altcoins, such as Tron, can process up to 2,000 transactions per second.
The presence of altcoins makes the cryptocurrency market more competitive and, in other words, hotter. By operating in different markets, users of different cryptocurrencies find more motivation to invest more and earn profit.
Reduced transaction fees are one of the most important advantages of altcoins over Bitcoin. Currently, with the significant increase in the price of Bitcoin as well as the increase in network traffic, the payment of Bitcoin transaction fees is practically unaffordable for ordinary network users.

Disadvantages of altcoins

At the same time as creating many diverse opportunities in the digital currency market, altcoins also create risks for users:

The price of altcoins is highly dependent on Bitcoin. Actually, the fluctuations of the price of Bitcoin directly affect the price of altcoins, and their market is not completely independent. In addition, due to their short life, sometimes there is a risk of falling in the value of the market capital.
The presence of various altcoins increases the risk of falling into fraud and scam traps. Unwitting users may be victims of these traps.

Different types of altcoins

Each altcoin has a different purpose and function depending on the purpose of its founder. For this reason, altcoins can be divided into at least three different categories.

Coins and digital tokens

Common cryptocurrencies, known as altcoins, fall into this category. Ethereum, Ripple and Tron are among the important altcoins of this category.

Stablecoins

Fixed value coins that aim to reduce the risk of market transactions are in this category. Tether and Libra are among the most famous stablecoins.

Gas coins

This category of altcoins is perhaps the least known of all. Gascoins are designed to simply pay the transaction fees of other altcoins on the network. Vethor currency is a good example of this type of altcoin.

Of course, there are other types of altcoins that have different uses. Like the Namecoin currency, which is designed for the new system of Internet addresses. But in general, altcoins can be divided into the above three categories.

The best altcoins on the market

In this part of the article, we will go to 5 of the best altcoins in the market and provide you with a short introduction of each one.

1. Ethereum

The first Bitcoin alternative on our list is Ethereum.

Ethereum is a decentralized blockchain that enables the creation of smart contracts and decentralized software. The native cryptocurrency of this blockchain is Ether or Ethereum with the symbol ETH.

In 2014, Ethereum took its first step into the cryptocurrency market.

In 2016, it was split into two different blockchains, Ethereum Classic and Ethereum, after a hacker attack. On February 20, 2020, the price of Ethereum reached $1,950 and the market value of this cryptocurrency reached $224 million.

2. Binance Coin

Binance Coin, abbreviated as BNB, was introduced to the cryptocurrency market in 2017 by Binance digital currency exchange.

The price of Binance Coin is currently 335 dollars and the market value of this cryptocurrency has reached 51 million dollars. Binance Coin with symbol BNB has its own blockchain, BEP2 and BE20.

There are a total of 200 million Binance Coins, of which 100 million have been distributed among users through the release of the first coin.

3. Tether

Tether is a stablecoin. The price of each Tether is equivalent to one US dollar.

Tether is recognized among users as a currency to preserve capital value during market tensions. Tether’s market value has reached 34 million dollars at the time of writing this article.

4. Polkadot

Polkadata is an open source multi-chain protocol where any kind of information or asset can be transferred.

Polkadat is not limited to one asset like cryptocurrency and can be used to implement a wide range of blockchain transactions.

The native cryptocurrency of this protocol is DOT. With features such as the possibility of cross-blockchain transactions and very high transaction processing speed.

Polkadat has quickly become popular among users. Currently, the price of each DOT currency, which is known by the symbol DOT, is 33 dollars in the market and its market value is 30 million dollars.

5. Cardano

Cardano is a blockchain platform with a proof-of-stake consensus algorithm that strives to allow users to make positive changes in the world around them in addition to providing financial services.

The goal of this project is to redistribute power from unaccountable organizations to users and individuals.

Cardano was founded in 2017. Cardano’s way of working with the ADA token is to make sure that those who are active on the Cardano blockchain and own the cryptocurrency, have the right to vote on any changes to the blockchain.

Today, the price of each Cardano token (ADA) reached $1.04, and the market value of this cryptocurrency is equal to $32 million.

6. Aave

Aave digital currency, which is offered in the digital currency market with the symbol AAVE, is a cryptocurrency based on DeFi.

Many analysts consider Aave to be the best new cryptocurrency to buy in the DeFi space, as the protocol allows users to easily lend cryptocurrencies.

Aave automatically determines interest rates and collateral ratios through the use of “liquidity pools” managed through smart contracts.

7. Stellar

If you are looking for which cryptocurrency to buy with great utility, Stellar is worth checking out.

Stellar is a distributed payment network powered by the Stellar cryptocurrency with the symbol XLM (Stellar Network Token).This network allows fast payments to be sent anywhere in the world with low fees, Regardless of currency.

Ultimately, it significantly improves the traditional banking system, making Stellar one of the best altcoins this year.

8. Dicenterland (Mana)

Decentraland is another one of the best new crypto projects of 2022, which has its own token called MANA.

Simply put, Dicentraland is a virtual world hosted on the blockchain where users can create their own characters and purchase in-game land.

All in-game items are structured as NFTs, meaning in-game exploits can be monetized through the marketplace. As the metaverse concept expands in 2022, altcoins like Mana will likely gain more publicity. That may lead to staggering price hikes.

Altcoin and the endless world of technology and capital

More than 5 thousand altcoins have been introduced to the cryptocurrency market so far.

The Trust Wallet claims to support 160,000 different tokens. Many tokens operate on the platform of other blockchains, such as the Tron and Ethereum blockchains, and do not have a dedicated host.

This possibility, that is, using the blockchain of other cryptocurrencies, allows any user around the world to introduce a digital token to the market without much technical knowledge.

The only condition for the success of any token is acceptance by other users.