What Are Altcoins?Sep 30, 2022
Everybody heard about Bitcoin and its incredible rally from back in the day when one unlucky guy actually spent 10,000 Bitcoins for two pizzas to $69.5K per one Bitcoin in the November 2021 bull market.
This rally encourages people to look for cryptocurrencies that would make a similar rally to that of Bitcoin. That is the secret which we shall talk about in this article. As these cryptocurrencies are known as “altcoins” or alternative coins.
So, what is an altcoin?
Bitcoin is a cryptocurrency that has its own blockchain, which is the Bitcoin blockchain. By introducing blockchain technology to the world, Bitcoin opened a lot of room for innovation and creativity. Web3 was born out of this.
Many developers and crypto evangelists built on the decentralized philosophy of Bitcoin and used its open source code to develop their own cryptocurrencies and blockchains.
This means that an altcoin is simply any cryptocurrency that isn’t Bitcoin. This includes Ethereum, BNB, XRP and ADA, the top cryptocurrencies after Bitcoin according to market cap.
Why do Altcoins exist?
When Bitcoin was created, the aim was to replace the current financial system with a trustless peer-to-peer system. However, Bitcoin started facing problems such as
- Scalability because of high fees and low transaction speed.
- Interoperability because everything must be done on the Bitcoin blockchain only
These problems sparked the creation of other blockchains that sought to address such issues.
Here are some altcoins examples and their use cases
Ethereum is a blockchain that was created in 2013. Ether is its native currency. It’s the most famous altcoin and is used for
- Processing transactions.
- Validating smart contracts.
Ethereum created an ecosystem that revolutionized the tech world through smart contracts. Think of it as a new platform like app-store and google-store but on the blockchain. Developers can build new decentralized applications on it or dapps.
The value of Ether increases as more developers build applications on it that attract more users.
Although Ethereum is a bit faster than Bitcoin, it’s still expensive to process transactions, which is why a project called Polygon was built on the Ethereum blockchain.
Polygon - MATIC
MATIC is Polygon’s token. This project aims to create an Ethereum blockchain ecosystem where users and developers can use the blockchain and benefit from its merits without paying the high fees required for validating transactions or “gas fees.”
The project also aims at creating bridges that enhance interoperability. This means that tokens and coins on other blockchains can transfer to the Ethereum blockchain and vice versa. Think of it as a currency exchange platform.
Sol is Solana’s token. Solana is a blockchain that provides a fast network where up to 75000 transactions can be processed per second while using the security and privacy of blockchain technology.
It wants to integrate low gas fees into its business model to further encourage users to use the blockchain for peer-to-peer transactions. Further, it seeks to build an ecosystem for smart contracts developers to use to build dapps.
These are just a few examples of some altcoins and their use cases. Many other altcoins provide various use cases and solve real issues that Bitcoin isn’t capable of addressing because of its business model.
This is why many of these altcoins are gaining value and increasing.
But why invest in altcoins?
- Altcoins have smaller market caps compared to bitcoin.
- This means less money is invested in altcoins.
- That translates into more room for growth.
- More room for growth means massive gains.
If you invest $100 in BTC now, it might increase by 5 to 10 times over the years.
If you invest $100 into a low-cap altcoin, it might increase up to 100 times or even 1000 times over the years.
Think of it this way
If you decide to invest in Apple, it will be considered a “relatively safe investment” because
- Apple has successfully passed the startup phase.
- Apple is now a big company that is well established in tech.
- Apple is a tycoon in the cell phone industry.
- The market cap of Apple is estimated at $2.5 Trillion!
This means that your investments with Apple may not increase significantly because Apple has already seen most of its growth over the last three decades.
This is precisely the case with Bitcoin. Bitcoin has seen most of its growth over the last decade.
You can think of altcoins as startups. This means it might be riskier to invest in them, but with that high risk will come high reward. However, altcoins are yet to see their growth in the space.
If you have an adventurous nature and a higher-than-average risk tolerance, investing in altcoins might be a better option for you!
- Crypto is a risky asset, making it volatile and dangerous to invest in.
- Bitcoin is the top cryptocurrency in the market cap, making it the safest option in the crypto world.
- Ethereum is the safest altcoin to invest in as it is second to Bitcoin in market cap.
- The smaller the market cap of the altcoin, the higher the risk and the more room there is for growth.
- Only invest in smaller market cap alts after you do your own research on the project and validate
- Its team.
- Its use case.
- Its community.
- Its whitepaper.
- Its website.
- Its tokenomics.
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