Altcoins – What to Know about It

altcoinIn the cryptocurrency world today, you may have heard about Altcoin. What is it? A new type of cryptocurrency? A new governance token? A type of utility token? Or what? You should remember that not everyone is familiar with cryptocurrency or the concept about blockchain platform. This is relatively a new technology – existing within the past decade. Many, who have understood the potential, realize that these platforms (along with their cryptocurrencies) have promising future and profitable investment outcome. Such an outcome can be fruitful for long-term scope – if you know how to make use of it right.

Altcoin Understanding

The word Altcoin comes from two words: alt and coin. Alt is from alternative while coin refers to cryptocurrency. When combined together, it refers to crypto category which acts as an alternative to the popular Bitcoin cryptocurrency.

After Bitcoin’s success and its ability to transform digital (and virtual) economy by the storm, many platforms with peer-to-peer methods have been created. Along the way, digital currencies are also created to imitate the success. The concept being used is to use decentralized system where users can interact with one another directly. The centralized we know today is complicated because it uses intermediary. The financial and banking service – as well as most institutions we know today – are using centralized system. Well, Bitcoin and its decentralized system really create a difference.

Basically, Altcoin isn’t referring to a particular type of cryptocurrency. Any cryptocurrency, which is Bitcoin’s alternative, would be included as an altcoin. Each altcoin has its own regulations and rules – and each operates based on their platform’s mechanism and structure.

Further Details about the Altcoints

Many of these (crypto) coins are constructed based on Bitcoin’s basic structure. That’s why most of them have peer-to-peer mechanism. In most cases, those platforms are using a novel technology, the blockchain, that usually eliminates the needs of third party or intermediary for the success of a transaction. Moreover, most crypto platforms require mining process where the users (it’s like the members of the platform) solve issues within the platform as well as providing inexpensive and safe ways in the operation. Altcoins have tons of overlapping features – and yet they are different from one another.

Altcoins and Their Way of Work

In a sense, Altcoins are basically similar to Bitcoin. You have the so-called digital wallet where you can send or receive money from other users. You have a private key to operate the wallet. This digital wallet is needed to use the cryptocurrency. It is usually operated with a blockchain (or the recording ledge)

where transactions are recorded automatically, permanently, and publicly. In this mechanism, the transactions or exchanges can’t be denied or changed.

Altcoin and Bitcoin – the Differences

Although Altcoins are generally running with similar concept as the Bitcoin, they don’t follow the same regulations or rules. Different platforms will have their own different cryptocurrency guides. For instance, Bitcoin will mine (produce) once in every 10 minutes. Other cryptocurrencies may not have the same concept. Litecoin, for instance, will mine once in every 2.5 minutes. Because of this, Litecoin should be able to process transactions faster. Moreover, Litecoin has its own mining rules and requirements – which are completely different from the Bitcoin.

Litecoin is only one example of the many types of altcoins out there. In fact, there are thousands of them in the market. Some Altcoins are pretty popular although they may not be as popular as Bitcoin. Some examples of them are Monero, Litecoin, Ripple, Ethereum, or Dash.

The Pros of Altcoins

One of the greatest pros of the Altcoin is the fact that it resolves Bitcoin’s issues and downsides. Sure, Bitcoin delivers blockchain technology and decentralized system, but scalability is the major issue that is difficult to tackle. Scalability is related to slow processing time and also the expensive cost. With Altcoin, you can expect faster processing time, which also affects the fees. The faster the performance is, the cheaper it becomes.

Altcoin also provides competition. People who want to build on BItcoin’s structure, but not really into the Bitcoin, can always look elsewhere. As you can find tons of alternative platforms (and cryptocurrencies) out there, investing your money is easier and it becomes more flexible from day to day. Competitions create low processing (and transaction) fees, which is good for the users and customers.

Not to mention that different platforms and cryptocurrencies also provide different environments and ecosystems for those who are interested in various things. There are platforms for the gaming enthusiasts. There are platforms for traders. There are platforms for apps development and building. There are platforms for everyone.

The Cons of Altcoins

Of course, the Altcoin isn’t 100% perfect without flaws. Although there are many benefits you can get from it, there are still several downsides you need to consider about. First of all, Altcoin value is volatile. There is nothing fixed or stable about it. It’s because Altcoins are relatively new – which affects their standing in value. This is also the reason why their value often changes drastically.

Moreover, despite the claimed safe environment, Altcoins are prone to fraud and scams. It is pretty common to encounter fraudulent schemes and scam issues with Altcoin. In some cases, there have been several platforms with unclear intentions and concepts. Some platforms even stop in the middle – and there is no official website or such thing alike.

Altcoin Types

There are several different types of Altcoins:

  • Stablecoins. They are created to deal with cryptocurrency’s volatility. The idea is to tie the value to a certain underlying security, commodity, or index. For instance, Facebook has its own stablecoin, named Libra. Tether is another example of a stablecoin.
  • Digital tokens. These are Altcoins supported by underlying (blockchain) platforms. For instance, Tether is a digital token as well because it is built on Ethereum.

There is also solarcoin, designed as an exchange unit for (solar) power production. There is also namecoin, which is designed for domain name’s new system.

It is common for investors to exchange Altcoins for profits. Most of them prefer doing exchanges because investment is considered riskier. However, it doesn’t mean that you can’t invest with cryptocurrency. Feel free if you want to invest in Altcoin.

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