We all know what bitcoins are, they are a type of digital currency in which record transactions are maintained and new units of currency are generated by the computational solution of mathematical problems that operates independently of a central bank. It has become a hot commodity among speculators. They can be used for online transactions between individuals.  

This article will help us in knowing what altcoins are and how do they differ from bitcoins, are they genuinely good or are they just some cheap replicas of the original bitcoins? Read this to find out more.  

First of all, the main question arises: 

What are Altcoins? 

The term Altcoin refers to all cryptocurrencies other than bitcoins. “Altcoin” is a combination of the two words “alt” and “coin” and includes all alternatives to bitcoin. They are created by deviating from bitcoin consensus rules and concepts (the fundamental rules of the cryptocurrency’s network) or by developing a new cryptocurrency from scratch. 

An altcoin must have a competitive advantage to succeed against bitcoin. People usually use this term to describe coins with lower market capitalizations. They can differ from bitcoin in different ways. Some of them have a contrasting economic model or a diverse coin-distribution method. 

Others may employ separate proof-of-work mining and different algorithms, perhaps to repel specialized skills of mining hardware — or maybe they don’t even rely on proof of work at all.  

Various altcoins offer a more adaptive language for programming to build applications, while others offer more privacy in comparison to bitcoin. Many serve very specifically, non-monetary use cases, like domain name registry or data storage pointers. 

Types of Altcoins 

An altcoin can fall into more than one category. Some of the altcoin categories include: 

Mining-Based 

These coins have a mining process by which new coins are generated by solving challenging problems and obstacles to unlock blocks. They are more synonymous with bitcoin than other altcoins. Ethereum is the best-known mining-based altcoin. 

Stablecoins 

They seek to improve on bitcoin by reducing volatility. In the actual practice scenario, this is achieved by tying the value of the coins to existing currencies. Popular choices for backing altcoins include the U.S. dollar, the euro, and gold. Libra is by far the most famous stablecoin, even though it had not launched yet. 

Security Tokens 

These sets of coins are linked to a business, and they often launch in an initial coin offering (ICO). Security tokens resemble traditional stocks, and they often promise some type of dividend like payout or ownership in a business. 

Utility Tokens 

The tokens provide a claim on services, and they are sometimes sold as part of an ICO. Filecoin is an excellent example of a utility token offered in an ICO. They are designed to be exchangeable for decentralized file storage space. 

Now the question we’ve all been anticipation for so long.  

How do they differ from Bitcoin? 

With time, however, other digital currencies also came into the market as the blockchain technology continued to evolve. All these new digital coins are called “altcoins” and although the technology of decentralization remains at the heart of each cryptocurrency, altcoins come with the added convenience of enhanced functionality owing to a greater number of used case scenarios. 

Take, for instance, the second-largest cryptocurrency by market capitalization, Ethereum which although operates on the same principle decentralization and peer-to-peer networking but comes with the added functionality of smart contracts. 

This feature of smart contract allows Ethereum to execute the contract between two parties automatically using the open ledger technology. Just like this, we have several different applications and use cases for different altcoins, which help them to find their unique positioning against bitcoin although fundamentally all digital coins work on the same principle. 

These newer coins use different mechanisms to reduce both the cost and complexity of mining and can process many more transactions per second than bitcoin’s paltry seven. Besides, some of these new cryptocurrencies use technology such as smart contracts, which let them build innovative apps directly on the blockchain.  

If we do deeper research, there aren’t a lot of differences when it comes to trading in altcoins as compared to trading in bitcoin. It must be noted that the crypto markets are marked by a lot of volatility, hence investors should do thorough research before investing in any of the coins.

So, now we know that altcoins are a revised version of bitcoins with almost the same cryptocurrency features. Just the fact they were created to dominate the crypto market after the success of bitcoin. So that people invest in altcoins too.

Whether you invest in them or not is a question of your interest in the computational market. They have gradually made their recognition in the crypto market currently, let’s see what the future holds for these coins. 

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