What are Altcoins? Getting to Know Alternative Tokens Apart from Bitcoin

what are altcoins

What are Altcoins? Literally, altcoins come from two words, namely alternative and coin. Thus, you could say altcoins are all tokens or cryptocurrencies other than bitcoin. Since bitcoin was created in 2009, there have been more than 5,000 altcoins on the market.

Altcoins are here arguably to overcome the shortcomings possessed by bitcoin. Altcoins do not have the various features and advantages that bitcoin has. However, altcoins also have advantages that bitcoin may not have.

In fact, in April 2020, the trading volume of altcoins reached 35 percent of the market capitalization. History has recorded that in 2018, one type of altcoin, namely Ether, could reach 30 percent of the crypto market capitalization value.

Affordable prices and a better security base compared to bitcoin are the main reasons traders choose altcoins over bitcoin. In fact, nowadays, the price of bitcoin is very high, so novice traders will usually choose altcoins.

So, what are the types of altcoins circulating in the cryptocurrency market? Here’s a little explanation of the different types of altcoins and examples.

1. Mining Based Altcoins

This type of altcoin has a lot in common with bitcoin. To get this type of altcoin, you have to do the mining process first. You can get this type of altcoin through cryptocurrency mining services.

One of the most well-known mining-based altcoins and has the largest market cap value in the cryptocurrency market is Ethereum.

2. Stablecoin Types

Stablecoin type altcoins are altcoins that aim to reduce the volatility that exists in bitcoin. Thus, the value of uncertainty in bitcoin that has been worried by many people can be overcome with stablecoins.

Typically, a stablecoin will tie the value of the token to an existing fiat currency, such as the United States dollar, Euro, or in the form of gold. To date, the most famous stablecoin is Facebook’s Libra.

3. Security Token

Securities tokens can be said to have a system like traditional shares in companies. These securities tokens are launched at an initial coin offering (ICO).

These securities tokens are used to raise funds as capital to develop certain blockchain technologies. Securities token owners will get benefits in the form of dividends.

4. Utility Token

Utility tokens are usually also offered at the ICO of securities tokens by certain token issuers. One of the well-known utility tokens in the cryptocurrency world is filecoin.

Filecoin is usually offered to investors in exchange for the new decentralized file storage space.

In addition to the types of altcoins in the outline above, there are several names of altcoins that are well-known in the cryptocurrency market to date. Some of the well-known altcoins in the cryptocurrency market today, such as ethereum, ripple, litecoin, and bitcoin cash.

1. Ethereum

Ethereum is arguably the most popular altcoin, when compared to other altcoins. In fact, Ethereum’s market cap value is the second most popular after bitcoin in the cryptocurrency market.

Ethereum was created by Vitalik Buterin in 2015. Buterin himself is a former member of the Russian bitcoin development team. The Ethereum that was created is expected to be used to codify, decentralize, secure, and trade anything.

Ethereum is run on a platform-specific cryptographic token that fuels a token called Ether. Smart Contracts on Ethereum can also be a guarantor of security in transactions using Ethereum. Apart from that, Ethereum has something in common with bitcoin in terms of mining.

2. Ripple

Ripple is a platform with its token called XRP. Ripple was created not for personal use, like bitcoin. However, Ripple was created more for a digital payment network in financial transactions.

Ripple was founded by Chris Larsen and Jed McCaleb in 2012. Thus, Ripple users are usually dominated by certain companies engaged in financial transactions.

3. Litecoin

Litecoin is an altcoin built on bitcoin. Litecoin was created by a former engineer at Google named Charles Lee. This altcoin is designed with the aim of being the latest version of bitcoin for traders.

One of the advantages that litecoin has over bitcoin is that new blocks on litecoin are created much faster than bitcoin. On bitcoin, a new block is created within 10 minutes.

However, the block size of litecoin is larger than bitcoin. So, blocks that are not selected on Litecoin will appear more easily. Litecoin is arguably a duplication of bitcoin because it only has a limited amount like bitcoin.

4. Bitcoin Cash

Bitcoin cash is arguably an extract from the bitcoin token itself. Bitcoin cash is generated by being hard-forked from the bitcoin main chain. Hard fork itself is the process of changing the validation of the old rules on the resulting blocks with the validation of the new rules.

Bitcoin cash was first launched in August 2017. Bitcoin cash or commonly called BCH is considered to have faster and more flexible transactions than bitcoin.

However, the cheapness of the price of bitcoin cash can be a trigger for the weak security of this altcoin. Nevertheless, bitcoin cash still has a lot of interest and support from the cryptocurrency market with a decent trading volume.

In fact, there are still thousands of altcoins in the cryptocurrency market. However, some of the most famous altcoins after bitcoin are the four altcoins above. You can choose according to the ability and financial analysis you have done.


Muhammad Zaki Fajrul Haq
Author: Muhammad Zaki Fajrul Haq

Follow me at @mzfajrulhaq (Instagram) or @ZakiFajrul (Twitter).

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