What is an Altcoin? Detailed Guide for Beginners

altcoin

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You might have heard of the term ‘Altcoin’ many times, but do you know what it really means? If not, well, we’ll assist you in understanding what it means in the cryptocurrency market.

Bitcoin has gained exceptional popularity since its launch in 2009. But there are other coins too that are equally valuable; these are Altcoins. In simple words, it is an alternative digital currency to bitcoin.

The term “Altcoin” is a combination of two English words, ‘Alternative’ and ‘Coin,’ which primarily refer to all cryptocurrencies other than Bitcoins.

Right now, there are over 10,000 altcoins available on the internet. The most popular of them are Ethereum, Ripple, Bitcoin Cash, Litecoin, Bitcoin SV, and Tether.

That’s not it! There’s a lot more about Altcoins. So, continue reading this article to know more about:

  • How does Altcoin Works?
  • Types of Altcoins
  • Pros and Cons 
  • Best Altcoins to Invest
  • Is Altcoin a Good Investment?
  • How to Buy Altcoin?

How does Altcoin Works?

Altcoins work on blockchain technology just like bitcoins. A blockchain is a distributed ledger that is managed by multiple computer networks worldwide.

Whenever a new transaction takes place, it automatically gets recorded and verified on the blockchain network as a block of transactions.

The best thing about blockchain technology is that it can’t be manipulated by anyone, meaning the transactions can’t be reversed once they are broadcasted.

People looking for the best altcoin to invest in can purchase them through a payment and exchange network, also known as exchange platforms.

Many Altcoins offer a unique set of features that distinguish them from bitcoins. For instance, Steller is a distributed payments network operated through the network’s native crypto, ‘Stellar Lumens.’

It works in the fastest, cheaper, and more efficient way in comparison to its rivals. These efficiencies of Steller have improved the traditional banking system significantly.

Likewise, Dogecoin, launched in 2013, got meme coin status but later increased in value with the support of Elon Musk.

Types of Altcoin?

There are different types of altcoins available on the internet today. Here are some of the major types:

Stablecoins:

Since its launch, the cryptocurrency market has involved a high level of volatility. Stablecoins reduce this overall market volatility as their value is pegged to a less volatile asset such as fiat currencies, metals, or other cryptocurrencies.

Most often, these coins are linked to fiat currencies such as the US Dollar. Tether is the first-ever stablecoin and has become one of the most popular among advanced traders.

Mining-based:

These altcoins use the PoW method in which the new coins are generated by solving difficult mathematical problems to create new coins. The most popular mining-based altcoins are Litcoin, ZCash, and Monero.

Security Tokens:

Security tokens are online contracts representing the snippet of real-value assets, just like traditional financial security.

As blockchain records can’t be erased or altered, these tokens offer a way to record ownership stake.

Memecoins:

Memecoins are the most popular type of altcoin, inspired by silly jokes and puns on other cryptocurrencies.

These coins have gained popularity in a very short period due to crypto influencers and retail investors.

Just like NFTs, Memecoins have value in the form of the online community. In simple words, memecoins and NFTs have a lot in common.

Utility Tokens:

Crypto experts have already pointed out the big potential of blockchain technology. As a result, it is likely to become a prominent part of the lifestyle.

These utility tokens offer services within the blockchain network. For instance, you can use utility tokens to buy services, redeem rewards or pay network fees. For instance, you can use Filecoin to buy storage space on a network.

Governance Tokens:

These tokens work exactly like utility tokens by which you can buy specific voting privileges to participate in blockchain-wide polls.

These tokens enable users to vote on decisions that may influence blockchain technology. Unfortunately, this type of altcoin is not as popular as others.

Pros and Cons:

There are several advantages of these alternative cryptocurrencies as they are based on the blockchain network. But before heading to the final decision, it is important to consider the drawbacks too.

So, to help you out in this case, here are a few Pros and Cons you should consider:

Pros:

  • Better Version of Bitcoins
  • High Potential Rewards
  • Wide range of coins to choose from
  • Great Stability
  • Accessible

Cons:

  • Lack of Market Value
  • Risky
  • Low market capitalization in comparison to bitcoins

Top 5 Altcoins to Invest in 2022:

As there are plenty of altcoins available today, finding the best one can be quite a challenging task. But all these efforts are undoubtedly worthwhile as these coins can make you a millionaire overnight.

Here’s a list of the top 5 altcoins you should consider investing in 2022:

Lucky Block (LBLOCK):

At number one on our list is Luck Block, as this crypto platform seeks to revive the traditional lottery industry.

Lucky Block uses blockchain technology to rejuvenate the old lottery industries by increasing winning chances and improving transparency.

Lucky Block uses LBLOCK tokens as the ecosystem’s foundation. Lucky Block’s compelling high return potential has made it a fantastic investment.

Ethereum:

Ethereum, one of the most popular altcoins, is often termed the most promising cryptocurrency.

This blockchain-based platform offers app developers a means to develop their projects and make use of smart contracts. Ether is the network’s native token.

Algorand (ALGO):

ALGO is another best choice of top altcoins. Algorand is a network built on the Pure Proof of Stake (PPOS) blockchain. In addition, it is considered the most scalable blockchain project.

It is also a good investment choice for newbies because of its features such as exceptional smart contract functionality and surety that it is backed by an experienced development team.

Decentraland (MANA):

Considered the best metaverse crypto, Decentraland is one of the best new crypto projects in cryptocurrency markets this year.

The platform offers a virtual world hosted on blockchain technology, where you can create their metaverse avatar and buy in-game land.

All the items in the game are structured as NFTs, meaning they can be bought and sold on the marketplace. As metaverse is the future, the value of altcoins such as Decentraland will surely skyrocket.

Ripple (XRP):

As we’re wrapping up this topic, the last but not the least on our list of top 5 altcoins to invest in 2022 is XRP Ripple.

RippleNet, a payment network that offers faster, safer, and cheaper money transfers in comparison to other blockchain networks, operates under Ripple. Using the XRP, users worldwide can exchange or transfer money.

In addition, it supports instant cross-border payments, which are quite faster than traditional systems.

As the demand for faster money transfers increases rapidly, XRP offers great investment opportunities in the future.

Is Altcoin a Good Investment?

The cryptocurrency market is unpredictable. So, predicting exactly what would be good or bad is quite impossible. But if we look at the current scenario, the future of altcoins is bright.

Nearly every week, a new crypto coin enters the cryptocurrency markets. As a result, there are thousands of altcoins, which have attracted a majority of retail investors.

However, the lack of regulation has contributed a lot to the volatility of its valuations. Overall, this type of investment is best for those who want higher returns while taking the risk of operating in an unregulated market, which is prone to high volatility.

How to Buy Altcoin?

The process for buying Altcoins may differ from platform to platform. However, the steps are generally the same and straightforward.

Here’s a step-by-step guide on how to buy altcoin:

Research and Find the Best:

When you’re looking to buy altcoins, there are several factors you should consider to get better returns. Researching is the most prominent among all these factors.

Before deciding on a particular coin, first do a lot of research on it, like its current market value, if it does have the potential for good returns.

Search for what other investors are saying about it and take investment advice from them to succeed in cryptocurrency markets. Ask them questions on different subjects such as Initial coin offering.

Choose a Good Brokerage Platform: 

Finding a good and reliable brokerage platform is a must in your hunt for the best cryptocurrency. You can buy or sell altcoins easily through these platforms without any hassle.

Always look for a regulated platform as it can lower your risk of falling into a crypto scam. One such good platform is InvestBy, ABInvesting.

The platform offers a range of cryptocurrencies to trade in. In addition, it is highly regulated by global financial regulators, which provides additional security to traders.

Convert Fiat Currency into Digital Currency: 

As some of the altcoins can’t be purchased with fiat currency such as USD, you’ll always need to convert them into digital currency such as Bitcoin or Ether.

You can use these cryptocurrencies to buy altcoins on an exchange. However, you can buy these coins with a debit/credit card.

Choose the Currency Pairs: 

Once you’re done with all opening account procedures, it’s time to do the main thing. As most altcoins can be bought with bitcoins only, remember they will trade in pairs. So, the primary currency of your pair is bitcoin; now, choose another currency you want to buy. Make sure to track the performance of the coin you’re trading in.

Move Them to Wallet: 

As you’re done buying altcoins, it’s time to keep them safe. If you’re buying them to hold them for a long period, moving them to your wallet is advisable.

Crypto wallets offer the safest place to store your cryptocurrencies. They are of two types: Hot wallets and cold wallets.

Bottom Line: 

Altcoins are an excellent option for cryptocurrency market investors looking to diversify their holdings.

Though some, like Ethereum’s ether and Cardano, are well-known, the vast majority of the more than 10,000 altcoins available are still new to the market.

These cryptocurrencies show a good example of how cryptocurrencies have the ability to disrupt current finance. However, investors should consider doing their own research before investing in them.

The risks of investing in altcoins are equivalent to, or even greater than, those of Bitcoin. So, it’s all up to the investor.

FAQs: 

Which are the Best Altcoins?

If you’re searching for the best altcoins, the list is quite lengthy. However, the most popular and profitable ones are Ethereum, Cardano, Ripple, Algorand, Lucky Block, and the list goes on.

How can I Buy Altcoin? 

The process of buying these cryptocurrencies is quite simple and similar to that of bitcoins. To know the full process, read this article.

Is it the Best Time to Buy Altcoins? 

Looking at the cryptocurrency market now, it is absolutely the best time to invest in them. However, some experts suggest that December is the best time of the year to buy cryptos.

What Makes Bitcoin Differ from Altcoins? 

As mentioned above, the word ‘Altcoin’ is an abbreviation of alternative coins, which simply means all cryptocurrencies other than bitcoin.

Which is the Better Investment Option between Bitcoin and Altcoin?

Looking at the current scenario, bitcoins are a considerable investment right now. On the other hand, people are gradually getting familiar with altcoins. So, both are good investment options.

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