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    Altcoins Explained: Bitcoin’s Sidekicks or Rivals?

    Let’s assume the cryptocurrency universe expanded from a single point. That big bang would be Bitcoin, the first cryptocurrency ever created back in 2009. Every cryptocurrency that’s not Bitcoin is considered an alternative to it, hence an “alternative coin” or for short “altcoin”. But not everyone agrees with this. Some consider Bitcoin the big bang of De-Fi AND Ethereum the Sun of D-apps and NFTs. Where does this leave the definition and value of Altcoins? Let’s explain.

    What Is Altcoin?

    “Altcoin” is a combination of the two words “alternative” and “coin.” Every Altcoin belongs to its own blockchain, or the blockchain it forks from. SOL is an altcoin that belongs exclusively to the Solana blockchain. Where as , Binance Coin is an altcoin that forks from the Ethereum Blockhain to create the Binance Smart Chain (BSC). To know more about blockchain forks check out this guide.

    Altcoins are all cryptocurrencies other than Bitcoin (BTC). However, some consider Altcoins to be every cryptocurrency other than Bitcon (2009) and Ethereum (2015). Why?

    • It’s mainly because most cryptocurrencies are forked (and inspired) from either Bitcoin or Ethereum. 
    • Ethereum paved the way to an innovative use of the blockchain by introducing: 

    However since there is a 6 year gap between the two and Bitcoin was literally the first, Ethereum is still logically considered an Altcoin. 

    Why Are They Created? 

    Bitcoin’s history proved too big of a success and inspired an alternative chain of digital assets. Everyone wants to follow in the footsteps of Bitcoin, and create their own currency. Believe it or not there are more than 9,000 altcoins out there. Why are altcoins created if they can never come close to Bitcoin?

    For example:

    The first altcoin was Litecoin, as it forked from the Bitcoin blockchain in 2011. Litecoin uses a different proof-of-work (PoW) consensus mechanism than Bitcoin, called Scrypt , which is less energy-intensive and quicker than Bitcoin’s SHA-256 PoW consensus mechanism. This was then , but over the years there are other reasons people started creating altcoins, such as to:

    • Improve upon the perceived limitations of whichever cryptocurrency and blockchain they are forked from.
    • Compete with Bitcoin by offering higher transaction speeds or more privacy than other coins. For example , the Binance Coin.
    • Introduce a new paradigm and use-case for cryptocurrency. Which is the case of Ethereum. 
    • raise capital for a company’s goal through Initial Coin Offering or Initial Exchange Offerings.

    Type of Altcoins

    Alternative coins to Bitcoin, or altcoins , come to serve different purposes. Therefore, you can categorize them into 6 main types.

      • Payment Token : 

    Payment or exchange altcoins are designed to be used as currency—to exchange value between parties. Bitcoin is the prime example of a payment token.

      • Stablecoins:

    Stablecoins are cryptocurrencies that attempt to peg their market value to some external reference. This means that no matter what their price won’t fluctuate. 

      • Utility Tokens:

    Utility tokens are used to provide services within a network. Ethereum is the prime example of a utility token, as it facilitates Dapps and the purchase of NFTs.

      • Meme Coins:

    As their name suggests, meme coins are inspired by a joke or a silly take on other well-known cryptocurrencies. Check out this guide on Meme Coins.

      • Shitcoins :

    A shitcoin is a cryptocurrency with zero or close to zero value and no utility. It’s used as a pump and dump mone-making craze. Know all about it here.

      • Governance Tokens:

    Governance tokens allow holders certain rights within a blockchain, such as voting for  decisions of a decentralized autonomous organization (DAO).

    Difference Between Altcoins, Tokens, and Coins

    Altcoins are basically alternative coins to Bitcoin. Some altcoins such as the USD Coin have the word “coin” in them, when they are in fact tokens. The difference is slight. To avoid confusion, you should refer to the underlying blockchain.

    If the asset has its own blockchain → it is a coin → used as exchange currency only.

    If it operates on another blockchain → it is a token → has multiple use cases.

    So unlike coins, tokens have multiple uses. For example, Crypto startups often create tokens to raise funds through Initial Coin Offerings. While coins such as Ripple were simply created as an exchange cryptocurrency. Check out this article if you want a deeper dive into the whole Coin Vs. Token difference.

    Examples of Altcoins: The Top 10 of 2023

    The crypto market includes thousands of altcoins. In the following infographic is, according to Coingecko, the top performing altcoins in the market. Of course, with chainwitcher’s touch to make it all make sense.

    top altcoins 2023

    Why Do People Invest in Coins Other Than Bitcoin?

    If Bitcoin is the point source of every other cryptocurrency, why are people investing in altcoins? Fair question. As you see Bitcoin is THE currency. At the time of writing 1 BTC is equal to almost $30K. So, to make a noticeable profit one has to invest in small pieces of Bitcoin for the long run. That’s why alternative coins come as literally an alternative investment options. People invest in them for various reasons such as:

    1. to diversify their crypto portfolios, because why not?
    2. to make high profit returns. Some altcoins may give investors higher returns compared to more established cryptocurrencies like Bitcoin.
    3. to experiment with blockchain technology. Some investors believe they are backing the innovative and unique features offered by a certain altcoin and see their investment as a way of learning about blockchain technology.
    4.  FOMO (fear of missing out). Liquidity on such altcoins is often low which can result in sudden price spikes . Many missed out on becoming billionaires from Bitcoin. As you see there are years of traumatizing FOMO when it comes to cryptocurrency.

    Pros and Cons of Altcoins

    Pros

    • Improve upon another cryptocurrency’s weaknesses
    • Higher survivability
    • Thousands to choose from
    • offer different utilities

    Cons

    • Lower popularity and smaller market cap
    • Less liquid than Bitcoin
    • Don’t have Bitcoin’s first mover advantage or market share
    • Significant risk, as many altcoins are scams or end up failing

    Do Altcoins Have A Future?

    No Tarot cards can predict the future of the cryptocurrency market. Similarly, the future value of altcoins is impossible to predict. However, altcoins will continue to exist as long as the blockchain they are designed on continues to be used and developed. Considering that Ethereum is an altcoin, it definitely has a bright future.

    I know some investors still carry the trauma of missing out on Bitcoin’s generational wealth. You may have also heard about someone’s uncle’s friend who struck gold with an unknown altcoin. Keep in mind that such stories — even if they’re true — are ghost stories. They certainly do not hold up as justifiable ways to invest one’s hard-earned money. So Altcoins are neither Bitcoins sidekicks nor rivals, it depends on how you see it.

    Want to be haunted by ghosts? They are rivals.
    Want to benefit the cryptocurrency ecosystem? They are sidekicks.

    Point is that altcoins are VERY risky business. Their future survival does, however, depend on their use cases. For example if we speak about the Binance Coin , it sure as hell has a future. The Binance smart chain is operating as its own crypto bank. Also, look out for Stable coins such as USDT rank #3 in market capitalization right after Bitcoin and Ethereum. Lesson to learn here is to think and research well before investing into any type of cryptocurrency. Not all altcoins have a future but also not all of them will die.

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