Confused about what an altcoin is? Let us explain.
What is altcoin?
You know how Bitcoin is sometimes used as a synonym for all cryptocurrencies by people who aren’t 100% clued in? That’s because for many, it may as well be. Bitcoin is pretty much the original crypto. It’s certainly the biggest. Whenever something good happens to Bitcoin, the overall cryptocurrency market goes up. Whenever Bitcoin does badly, the market goes down. Bitcoin’s size, cultural significance and influence means you could split crypto coins into two categories like so:
While this is a bit unfair to all the crypto coins that aren’t Bitcoin, it does mean that we can give them a classification, a way of saying “here’s a crypto coin which isn’t Bitcoin” quickly. That word is Altcoin, a portmanteau of “alternative” and “coin”. So the meaning of altcoin is “alternative coin”.
There is another reason why Bitcoin’s successes and failures are repeated across the entire crypto market, though. That’s because around 40% of all cryptocurrencies are altcoins. That means, with around 5,000 active cryptocurrencies, there are about 2,000 altcoins out there. And many, if not all, altcoins are ultimately based on Bitcoin, using parts of its code and so on. So things that happen to Bitcoin will also happen to altcoins.
But there are some differences.
Why do altcoins exist? In many cases, it’s to do things that Bitcoin can’t do. For instance, some altcoins use the Proof-of-Stake (POS) method to cut down on energy consumption and to speed up creating blocks and validating new transactions.
Ether, the biggest altcoin, is used to fulfill smart contracts on the Ethereum network, while stablecoins like Tether are linked to a fiat currency, meaning they lack the volatility of Bitcoin and make them a good method of transaction. There are also utility tokens, like ICP, which provide services in a network, and security tokens, which can give holders equity or a dividend payout.
As you can see, there are lots of altcoins. If you want to invest in them, you can do so via currency.com. But make sure to do your research, remember the value of an altcoin can go down as well as up, and never invest more than you can afford to lose.