What are Altcoins?
The term Altcoin is a combination of “alt” and “coin” where alt refers to the word alternative. Thus, these are the alternative cryptocurrencies launched after the huge acceptance of Bitcoin.
The success of Bitcoin as the first peer-to-peer digital currency paved the way for the introduction of alternative digital currency.
They are traded as a better alternative to Bitcoin and include all the cryptocurrencies other than Bitcoin. Over the years, the wide range and types of altcoins are witnessed in the crypto market.
Though, these coins are fundamentally based on the framework of Bitcoin yet are adhering to the shortcomings and are emerging as the best-suited alternative.
As per the recent study in February 2020 by Coin Market Cap, there were approximately 5000 altcoins in the trading accounting for about 34% of the total cryptocurrency market.
Additionally, in 2020 itself Ethereum and Ripple emerged as the largest altcoins based on their market capitalization.
Types of Altcoins
With the continuous evolution of various categories of cryptocurrency, there exist a few main categories which provide the best bifurcation for all the existing altcoins in the market.
There is a high probability for an altcoin to fall in at least one of the following categories:
- Mining–based: These coins have a mining-based process through which the new coins can be created. The generated coins are aimed to bridge the gap by unlocking the blocks.
- Most of the top altcoins today are based on mining with Ethereum being the best-known altcoin. The mining-based altcoins are believed to be the future of digital currencies.
- Stable coins: These coins aim to improve the performance of Bitcoin by reducing its volatility. This feature is actually brought into practice by attaching the value of coins to the existing currencies. The major preferences are the US dollar, Euro, and Gold. So far Facebook’s Libra is the most famous stable coin.
- Security Tokens: These are the coins that are generally launched in the event of Initial Coin Offering (ICO). Being linked to the business these tokens show resemblance to traditional stocks as they intend to provide some payout just like dividends or may be owned in the business.
- Utility Tokens: The utility tokens provide the claim on services and are suitable to be sold as a part of ICO. Filecoin emerged as the best utility token that was offered in an ICO.
- The token is designed with the intention to exchange against decentralized file storage space. The existing movement of altcoins directs towards the separation of most of the existing altcoins concepts from it. As a result, this ongoing trend might land up in the situation where the altcoins would be referred only to the mining-based cryptocurrencies that accept Bitcoin.
Prominent examples of Altcoins
The crypto market is flooded with altcoins today but the original graph of these can be drawn back to the year 2011.
This was the year when the first notable altcoin was introduced as Namecoin which was largely based on the Bitcoin code and used the POW algorithm too.
It was also limited to 21 million coins like Bitcoin yet it fundamentally diverged from Bitcoin ensuring less visibility of the domain.
It also facilitated users to undertake registration and mining using their own domains which increased the anonymity and resistance to censorship.
Consequently in October 2011, the introduction of Litecoin emerged as the “silver to Bitcoin’s gold”. Despite being based on Bitcoin’s fundamentals it differed in many ways.
One of the most prominent differences is that it provided for a total of 84 million coins created. With numerous altcoins in the crypto market following are the most significant ones to be given regard to:
- Ether: It is the cryptocurrency that is generated through the Ethereum platform (a ledger technology used by companies to build on) so it is often termed as Ethereum.
- It is the second-largest cryptocurrency by market capitalization after Bitcoin. The renowned Crypto kitties use the Ethereum platform for building on.
- Ripple (XRP): The tokens are referred to as XRP and are owned by a private company named Ripple. Apart from trading these are used by some banks to smoothen the cross-border payments too.
- Bitcoin Cash: It was introduced as the fork of Bitcoin but presently is a separate currency. The currency has inbuilt architectural changes that led to effective transactions backed by cost-efficiency.
- Litecoin: Initially this was also the Bitcoin fork but it used a different proof-of-work algorithm which made it more intensive in terms of memory. It envisages the block completion 4 times more than Bitcoin, thus speeding up the transaction confirmation. • Monero: It is a secure, private, and untraceable design which makes it more suitable for the online drug market places.
Why are Altcoins created?
- Bitcoin has certain inherent shortcomings owing to its design which broadens the gap. The high fees and a large amount of time and energy consumption is the highlighted limitation of Bitcoin which gets addressed by the creation of altcoins.
- Altcoins are designed to be less technical and more monetary which makes them easily accessible to get mined by the users. These can be sold off after it gets appreciated in value and the bunch of money can be earned.
- It ensures stability and security in the market by providing larger benefits in comparison to Bitcoin.
How to create your own Altcoins?
The launch of the new Altcoin can be done by adhering to the following major steps:
- Choice of type of platform: As we know Altcoins are built upon the Blockchain platform. Therefore, the first step is the choice of the platform for leveraging the plan. Following are the choices that are available to initiate the creation process:
– Using the existing Blockchain
– Building own blockchain
– In case of less technical knowledge, the third party platform can be chosen
– Creation of altcoin token
- Picking the desired ERC implementation standard: Since most of the Altcoins are based on ERC 20 standard so it is mandatory to choose the type of standard.
- In order to make the appropriate choice services like Metamask can be put to use as here, one can run Ethereum DApps instead of running complete Ethereum node. Coin Launch is one of the best service providers to connect to Metamask.
- Development of Altcoin with MVP: With the relevant set of features integrated into them, a huge base of investors can be attracted across the globe. The MVP is the perfect solution for the Altcoin website that completes the functionalities of the product backed by feedback collection. This way one can target the desired audience and ensure necessary changes.
- Check for Investors: In order to launch Altcoin a lot of investment is required. Thus, it is necessary to look for the best investors for the project if an individual budget is low. Additionally, these four processes are simpler for an Altcoin developer, else one needs to hire a solution provider for the creation of altcoins.
The cryptocurrency market is one big gambling platform. Consequently, the value of Altcoins is tied up with Bitcoin’s value as it appreciates the decrease in Bitcoin’s value and vice versa.
Therefore, it is advised to not assume altcoins purely as an alternative to Bitcoin as it would help in diversifying the portfolio.