When people learn something about cryptocurrencies and start getting involved in that market, they soon realize that there are hundreds of types of cryptocurrencies, known as altcoins. Altcoins may be an intriguing facet of the cryptocurrency world, but they simply aren’t made for everyone. The word “Altcoin” comes from “Bitcoin alternative”, and it represents every single cryptocurrency except Bitcoin. Altcoins are also referred to as Bitcoin alternatives because most altcoins hope to either replace or improve upon one Bitcoin component at some point.
Bitcoin vs altcoins
Even if there are hundreds of the altcoins, more of them appear every day. Most of altcoins are a sort of Bitcoin clones, changing only minor characteristics, such as transaction speed, distribution method or hashing algorithm. Most of these new coins don’t live too long. One exception was Litecoin, which was one of the very first altcoins. In addition to using the different algorithm than Bitcoin, Litecoin has a higher number of currency units. Except Litecoin, there are many more popular crytpocurrencies on the market, such as Peercoin, Primecoin, Novacoin, etc.
Many Bitcoin users argue that altcoins are completely unnecessary and will not have a success on the market because of the powerful characteristics that Bitcoin possesses. However, altcoins still serve an important role in this market. As the decentralization is one of Bitcoin’s most prominent goals, altcoins intend to further decentralize the cryptocurrency community. It is also important to know that altcoins allow developers to experiment with unique features. While Bitcoin can copy these features if the community wishes to do it, fully-functioning altcoins are much better “cryptocurrency laboratories” than Bitcoin’s testnet.
Altcoins give Bitcoin healthy competition as well. Altcoins offer cryptocurrency users some alternative options which force Bitcoin’s developers to remain active and continue innovating. If at some point, users do not feel that Bitcoin satisfies their desires, they always have the option of adopting an altcoin. If enough users left Bitcoin for particular altcoin, the Bitcoin developers would need to adopt the features the community desired.
The first altcoin
Namecoin was the first altcoin, created in April 2011. Although it worked as a digital currency, Namecoin’s main purpose was to decentralize domain-name registration, making internet censorship much more difficult. For some period of time, Namecoin held the place among top 10 cryptocurrency market caps throughout its short lifespan.
Investing in altcoins
Regarding the speed of the development of new cryptocurrencies, all digital currency investments are still considered to be quite risky. Even Bitcoin, as the most stable currency, exhibits price volatility on regular basis. But by comparison, altcoins are significantly more volatile. The main reason is their low market cap. Altcoin markets are highly prone to price manipulation.
Some wealthier traders, also known as “whales”, often inject a large amount of capital into low-priced coins in order to build hype and cause the price to skyrocket. Once the price has significantly risen, the whales sell their coins on exchanges, obtaining a massive profit and hurting vulnerable investors in the process. This method is also known as “pump and dump”.
How to get altcoins?
Just like with Bitcoin, there is a variety of ways to buy altcoins. The most common way to obtain them is to accept them as payment for goods or services. Those who are interested in doing so should place an ad showcasing their skill-set on a crytpocurrency job board.
One of the best ways is definitely to trade for altcoins on various cryptocurrency exchanges. Most exchanges use Bitcoin as an intermediary, so if users don’t already own Bitcoins, they need to buy some before trading for altcoins. Some of the most-trafficked exchanges include Bitstamp, BTC Markets, BTC-e, Cex.io, Coinbase, etc.
Best cryptocurrencies on the market
As we already said, Bitcoin is the most powerful cryptocurrency overall. If we take a look at other cryptocurrencies that have a successful rally and represent a healthy competition to Bitcoin, there are some names worth of mention. In the following list, you’ll see the most popular cryptocurrencies after Bitcoin.
Ether is the cryptocurrency for Ethereum, which is a decentralized platform that can execute peer-to-peer “smart contracts”. Since late 2016, as a result of an attack to the DAO, Ehtereum was split into two: Ethereum (ETH) and Ethereum classic (ETC). It has a market cap of around $1.1 billion. Peer-to-peer smart contracts are what Ethereum is known for, aside from the mentioned cryptocurrency. It enables users to code and enact contracts without any third party. Ehter is known for being the first alternative to Bitcoin and smart contracts.
Litecoin was launched in late 2011 by a former Google employee Charles Lee, as an alternative to Bitcoin. In general, Litecoin is very similar to Bitcoin, as it can be mined, used as currency and transacted for goods and services. It has a market cap of around $180 million. Its highest peak was $1.2 billion in 2013. It is known for being most similar to Bitcoin and an alternative to BTC.
As Bitcoin was often wrongly labeled as “anonymous” currency, Monero, on the other hand, is a cryptocurrency that focuses mainly on privacy, using the ring signature technology in order to be “secure, private and untraceable”. Monero has a market cap of $138 million and it’s used mostly by individuals who wish to remain incognito on network. It’s known for being a privacy-centric cryptocurrency.
Ripple is actually a real-time gross settlement system, currency exchange, and remittance network. This currency was released is 2012 and with a market cap of around $243 million, the Ripple system has been even integrated into few banks and payment networks to reduce costs. It’s known for a strong focus on banking market and real-time settlement.
Dogecoin was first created as a “joke currency”, but later developed into a significant cryptocurrency. As it was modeled after a dog in famous “doge” memes, this cryptocurrency, which was created in late 2013, is now frequently used to tip users in various forums. It is also frequently sent as a donation in fundraising efforts. Dogecoin is valued at about $25 million and it is known mostly for its “joke currency” debut, tips, and donations.
Dash, which is short for “digital cash”, is a currency with a strong focus on privacy, using anonymization technology and speed of transaction. It was rebranded from Darkcoin in order to avoid being associated with a dark web all the time. It has a market cap of around $77 million. Dash can be spent at various merchants who accept it. It is known for being anonymous and quite fast.