What is an Altcoin?

Litecoin is the thickest Altcoin

Even if they do not accurately understand how it works, most people are at least somewhat familiar with Bitcoin. However, once they start to get involved with cryptocurrency, they may be astonished to learn that there are actually hundreds of types of cryptocurrencies known spil altcoins. Altcoins are an intriguing opzicht of the cryptocurrency landscape, but they are not for everyone. Altcoin newcomers often have many questions, and this guide will provide a epistel overview of altcoins to help beginners determine whether or not to invest ter them spil part of their cryptocurrency portfolio.

What Are Altcoins and Why Do They Matter?

The word “altcoin” is an abbreviation of “Bitcoin alternative,” and thus describes every single cryptocurrency except for Bitcoin. Altcoins are referred to spil Bitcoin alternatives because, at least to some extent, most altcoins hope to either substitute or improve upon at least one Bitcoin component.

There are hundreds of altcoins (CoinMarketCap listed 478 at the time this guide wasgoed written), and more emerge each day. Most altcoins are little more than Bitcoin clones, switching only minor characteristics such spil its transactions speed, distribution method, or hashing algorithm. Most of thesis coins do not get through for very long. One exception is Litecoin, which wasgoed one of the very first altcoins. Te addition to using a different hashing algorithm than Bitcoin, Litecoin has a much higher number of currency units. For this reason, Litecoin has branded itself spil “silver to Bitcoin’s gold.”

The top Five altcoins according to CoinMarketCap

However, some altcoins innovate by experimenting with useful features Bitcoin does not suggest. For example, Darkcoin hopes to provide a toneel for downright anonymous transactions, BitShares describes itself spil “a fair version of Wall Street,” and Ripple serves spil a protocol users can employ to make inter-currency payments with ease. Some altcoin ecosystems, such spil CounterParty and Mastercoin, even utilize the Bitcoin blockchain to secure their toneel.

Many Bitcoin enthusiasts argue that altcoins are downright unnecessary and will not succeed because they cannot rival the infrastructure Bitcoin boasts. However, altcoins serve an significant role. Decentralization is one of Bitcoin’s most vooraanstaand goals, and altcoins further decentralize the cryptocurrency community. Moreover, altcoins permit developers to proef with unique features. While it is true that Bitcoin can copy thesis features if the developers or community desires, fully-functioning altcoins are much better “cryptocurrency laboratories” than Bitcoin’s testnet. Eventually, Altcoins give Bitcoin healthy competition. Altcoins give cryptocurrency users alternative options and coerces Bitcoin’s developers to remain active and proceed innovating. If users do not feel that Bitcoin sates their digital desires, they can adopt an altcoin. If enough users left Bitcoin for a particular altcoin, the Bitcoin developers would have to adopt the features the community desired or risk losing its place spil the preeminent cryptocurrency.

Namecoin wasgoed the very first altcoin. It seeks to decentralize the world of online identities.

What Wasgoed the Very first Altcoin?

Created te April 2011, Namecoin wasgoed the very first altcoin. Albeit it also functions spil a currency, Namecoin’s primary purpose is to decentralize domain-name registration, which makes internet censorship much more difficult. Spil its place among the top ten cryptocurrency market caps suggests, Namecoin has remained one of the most successful altcoins across its brief lifespan.

Should I Invest te Altcoins?

Due to how latest cryptocurrency wasgoed invented and how rapidly the landscape switches, all cryptocurrency investments carry a good overeenkomst of risk. Even Bitcoin-by far the most stable cryptocurrency-exhibits price volatility on a regular voet.

By comparison, however, altcoins are exponentially more volatile. Because they have such low market caps (the total value of all coins combined), altcoin markets are very prone to price manipulation. Wealthy traders-colloquially called “whales”-often inject large amounts of capital into low-priced coins to build hype and cause the price to skyrocket. Once the price has risen considerably, the whales sell their coins on exchanges at a massive profit, hurting many gullible investors ter the process. This method is known spil a “pump and dump.” Not only does this hurt greedy traders who did not take the time to do their homework, but it often proves to be the breath of an altcoin’s geschreven lifespan.

To avoid losing all your money ter a pump and dump, concentrate on long-term investments te coins you believe have immense potential and exhibit overall health. Generally, healthy altcoins wield strong communities, exhibit high liquidity, and have developers who proactively improve the coin’s source code (tho’ not necessary, many users also choose developers who expose their true identities). CoinGecko’s comprehensive coin metric analysis algorithm statistically analyzes thesis three significant factors and ranks coins according to overall strength.

CoinGecko’s coin ranking chart ranks coins according to overall health.

If you do choose to invest ter altcoins, it is significant to recall some basic tenets of investing. Avoid the hype that coin communities propagate. Investors have an notulen, so you should not take their word at face value. Only invest te coins you have researched. It is unwise to invest te something you do not understand. Making an ill-informed investment is the very first step to losing your hard-earned money. Take the time to research the coins you are considering for long-term investments, and research day-trading before you attempt to become a high-volume, short-term trader. Most importantly, never invest more than you can afford to lose. Far too many people have lost their life savings by centralizing them te volatile investments.

Where Can I Obtain Altcoins?

Spil with Bitcoin, there are a multitude of ways to obtain altcoins. The most basic way to obtain altcoins is to accept them spil payment for goods or services. If you are interested te doing this, place an ad showcasing your skill-set on a cryptocurrency job houtvezelplaat.

You can also trade for altcoins on cryptocurrency exchanges. Most exchange use Bitcoin spil an intermediary (albeit a few include fiat pairs), so if you do not already own bitcoins you will need to buy some before you can trade for altcoins. Some of the most-trafficked exchanges include BTER, Bittrex, MintPal, Cryptsy, and BTC38 (Chinese-only).

Many altcoin communities also sponsor giveaways to increase exposure of their coin and entice fresh users to join their communities. This is a fine way to acquire coins if you are low on funds or do not have marketable abilities.

Featured photos from Shutterstock.

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