Altcoins started emerging in the digital landscape based on a similar technical framework as Bitcoin. What is altcoin? The terminology is based on two words, ‘alt’ and ‘coin’, that translate to alternative coins. In this article, we focus on everything about the best altcoins and how they play a pivotal role in the world of cryptocurrencies. Furthermore, we provide you with the answer to one of the most popular questions in the world of digital currencies — what is altcoin? So, without any further delay, let’s dive in.
What Are Altcoins?
What is altcoin? Altcoins include all virtual currencies that are not Bitcoin. Investors consider Bitcoin the ‘original cryptocurrency’ and all the other additions as alternative (alt) coins.
Since Bitcoin’s inception in 2008, there has been a plethora of altcoins developed as enhanced copies of the original cryptocurrency. The modifications were made with the help of a technique known as Hard Fork.
How Altcoins Work?
After understanding what are altcoins, it is time to look at their work. The altcoins developed over the same blueprint as Bitcoin put forward a very similar mining process. What is altcoin mining? Mining is the process through which one can add and verify new transactions to the blockchain for a virtual currency that leverages the proof of work (POW) method. Mining helps crypto investors to reap healthy rewards in the form of crypto tokens.
Just like Bitcoin, the best altcoins have developed a market for themselves and gathered the attention of investors across the globe. Ether, an altcoin based on the Ethereum blockchain, had become one among many cryptocurrencies with the most transactions in 2021.
Types of Altcoins
Now that you know what are altcoins, it is time to develop an understanding of the various categories. Here is a quick look at some important altcoin categories that are available in the market:
- Stable coins: Market volatility has been synonymous with the digital currency market. Stable coins focus on reducing the risks for investors by securing the value with fiat currencies, precious metals, or some other digital currency. Some real-world examples of stable coins are USDC, USDT, and DAI.
- Security tokens: Similar to how securities work in the stock market, security tokens have a digital origin. These tokens assure equity to investors in the form of a dividend payout or ownership. Security tokens put forward healthy price appreciation prospects and are thus preferred by investors.
- Mining-based: These altcoins are among the best altcoins in the world. They come into existence through a process called mining. Mining-based altcoins leverage proof of work as a constructive way to generate new coins by overcoming complex mathematical problems to create blocks in the ledger system.
- Utility tokens: These altcoins are used to offer services within a specific network. Utility tokens can be used to redeem rewards, pay network fees, or purchase services. You cannot use these tokens to sell an ownership stake or pay out dividends. For example, you can use Filecoin to buy storage space on a network. It is an excellent example of a utility token.
- Meme coins: Just like the name, meme coins are funny iterations of renowned currencies or are inspired by a joke. The popular DogeCoin and Shiba Inu (SHIB) are excellent examples of meme coins. Meme coins gain traction over a short period of time as they usually get hype from influencers or retail investors. October 2021 saw a whopping 91% price surge in the popular meme coin Shiba Inu as Elon Musk posted a photo of his pet puppy Floki on Twitter. Moreover, Shiba Inu was the most popular cryptocurrency in 2021 on CoinMarketCap, outperforming Bitcoin and Dogecoin.
Key Takeaways
- An altcoin is the term that defines digital assets (coin or token) other than Bitcoin
- The best altcoins were launched after the worldwide success of Bitcoin as an effective peer-to-peer virtual currency
- Ethereum ETH and Tether USDT are among the largest altcoins based on market capitalization
- The framework for altcoins and Bitcoin is the same, with both expected to operate like peer-to-peer systems or a big computer processing huge amounts of data
Are Altcoins a Good Investment?
The question of which cryptocurrency is superior is a debatable one that depends on an investor’s financial situation, investment objectives, risk tolerance, and beliefs. Before you purchase any cryptocurrencies, you should discuss your investment options with a qualified financial advisor.
How to Buy Altcoin in India?
The best way to buy altcoins in India is through a cryptocurrency exchange. There are many different options available in India. Some of them include:
- WazirX
- CoinDCX
- CoinSwitch Kuber
- UnoCoin
- BitBns
- ZebPay
- BuyUCoin
What Are the Top 3 Altcoins to Invest in?
The top three altcoins by market capitalization are Tether, USD Coin, and Ethereum.
How Do Altcoins Differ from Bitcoins?
All cryptocurrencies besides Bitcoin are referred to collectively as altcoins (BTC). Since most cryptocurrencies are forks from one of Bitcoin or Ethereum (ETH), some people define altcoins as all cryptocurrencies other than those two. Some altcoins aim to differentiate themselves from Bitcoin and Ethereum by offering new or additional features or objectives, while others employ alternative consensus processes to validate transactions and open new blocks.
Pros and Cons of Altcoins
With the crypto market proliferating, the best altcoins have put forward lucrative investment opportunities; however, a volatile market and lack of regulation have baffled investors across the globe. From short-term profits to a lack of regulation, investing in altcoins comes with its own pros and cons. Here are a few to help you make an informed decision.
| Pros | Cons |
| Altcoins are focused on addressing the shortcomings of Bitcoin and are hence considered better investments | The size of the investment market is small for altcoins when compared to Bitcoin. |
| Some altcoins such as Ether and ADA have already gained traction in the cryptocurrency market and have high evaluations | Distinguishing between two altcoins can sometimes become an arduous task. This can pose a challenge to investors regarding the altcoin they should invest in. |
| With altcoins, investors get access to a plethora of options across different functions that they can invest in | Several dead altcoins have led to a significant loss of money for investors. |
| Stablecoins, just like Bitcoin, have the potential to become a medium for routine transactions | A lack of formal regulatory body means that there is thin liquidity and fewer investors. Therefore, altcoin prices are very volatile when compared to Bitcoin |
Conclusion
The best altcoins are one of the most productive ways for investors to enhance their investment portfolio. The masses have already acknowledged some coins like Ethereum, but there is still a big number that awaits recognition. Looking beyond the question of what is altcoin helps us comprehend its potential to alter the dynamics of finance in the modern world.
However, investors need to be attentive to even the slightest movements in the market and do ample research before making the decision to invest in any altcoin. The magnitude of risk associated with altcoins is equal and, in some instances, even more than Bitcoin.
FAQs
The price can range from a minimum of just a few cents to thousands of dollars. Ethereum is one of the best altcoins in the world, priced at $3229 in 2022.
Ethereum’s Ether is one of the best altcoins to invest in based on market capitalization. Ethereum, in itself, is the best blockchain platform in the world.
Bitcoin is the original cryptocurrency. All the other digital currencies are termed altcoins. While Bitcoin is the most popular cryptocurrency, some altcoins like Ethereum, Litecoin, XRP, and Monero are gaining traction in modern finance.
Some of the best altcoins in the world are Ethereum, Tether (USDT), Dogecoin, Polkadot, Shiba Inu, Binance Coin, and USD coin.
With altcoin valuations showing promise, the future looks bright. Investors must make investment decisions based on extensive research to avoid falling prey to the highly volatile market.
They are a great option for beginning a career as a cryptocurrency trader because most of them are significantly less expensive than Bitcoin and other well-known cryptocurrencies.
Altcoins can be held for a brief time—a few seconds, minutes, or even hours—before being sold for a profit. If you believe that the price will increase quickly in the near future, day trading may be successful.
Alternative digital money to bitcoin is called an altcoin.
Read more about What is Private Cryptocurrency.
