What are Altcoins and Why You Should Invest in Them

Think you've missed the Bitcoin train? Altcoins to the rescue!

Altcoins

Source - iStock

The internet is filled with chatter about cryptocurrency. And in the noise, cryptocurrency has almost become synonymous with Bitcoin. But that’s just the tip of the iceberg.

There exists an entire marketplace of other cryptocurrencies launched after the success of Bitcoin. Sure, Bitcoin was the first peer-to-peer digital currency, but that doesn’t mean be all and end all of that space. Newer coins that are essentially trying to recreate the magic of Bitcoin, albeit in a better way, have been launched over the past few years. Ethereum, Ripple, Cardano, Dogecoin, Theta, and many more.

And all of these cryptocurrencies are called altcoins, as in… alternatives to Bitcoin? Get it?

So, altcoins are basically cryptocurrencies that are not Bitcoin, and here’s how they can broadly be classified.

Stablecoins

Cryptocurrency is known to fluctuate a lot. It is this sort of volatility that Stablecoins attempt to rectify. They do this by basing their values on goods like fiat currencies, precious metals, and other cryptocurrencies (mostly Bitcoin). True USD, USDC, and Binance USD are all examples of Stablecoins pegged on the US dollar.

Any alarming fluctuations in the values are corrected by the issuer. This is why Stablecoins are used less for investing and more for storing and transferring money. Certain protocols even offer interests on storing your wealth.

Mining Based Coins

These coins are mined into existence. Meaning, systems can generate new coins by solving equations to verify and therefore, create blocks. Most of the coins from the early 2020 fall under this class, popular examples being Litecoin and Zcash.

Security Tokens

These resemble traditional stocks. Security tokens are promising equity options for investors. They provide the equity in the form of ownership of the coins or by giving pay-outs to the shareholders. Polymath, Swarm and Securitize are among the best Security Token platforms in 2021.

Utility Tokens

Like the name suggests, Utility Tokens are used to provide services within a network. These services range from purchasing other services to redeeming rewards. Sirilabs tokens, Timicoin, and Funfair are among the most popular utility tokens.

Source - iStock

Why You Should Invest in Altcoins

Altcoins, though modelled after the revered Bitcoin, try to be better. They are in their infancy and therefore have a low user base compared to the mighty giant. But this is more to new investors’ advantage than you realize.

A lot of new investors hesitate to get started with Bitcoin because the space seems to be rather saturated, owing to its years of activity. This is where altcoins come in - to offer a fresh start. The first altcoins date almost a decade back (2011 was indeed 10 years ago) and are still developing. The new interests and activity in these spaces open more doors for making money.

Altcoins attempt to be meaningful alternatives to Bitcoin by:

• Employing better transaction systems to increase speeds and decrease costs.

• Have a narrow range of fluctuations in their values.

• Provide better privacy.

Litecoin is often referred to as “the silver to Bitcoin’s gold”.

This illustrates our point perfectly. Despite Bitcoin being the mammoth that it has become, altcoins will be important in the crypto landscape; much like silver is in comparison to gold.

Ethereum and some of its contemporaries can do things that Bitcoins could only dream of doing, like:

• Managing identities across a suite of different applications

• Data storage

• Creation of applications

• Serving as a platform for smart contracts and decentralized applications (like DeFis and NFTs)

• Significantly faster transaction speeds

The list keeps going.

The only 'flaw', if you can really call it that, that altcoins like Litecoin or Ether (that is, Ethereum’s native token) possess in comparison to Bitcoin is its popularity. Which is why, apps such as CoinSwitch Kuber decided to explore these avenues of investments, and make it easier for people to create wealth by trading in crypto, a lot of which happens using, yes, you’ve guessed it right - altcoins.

Like any investment, every altcoin has its share of risks and cons. And like any wise investor, you must take a look at the metrics before you decide to invest. That being said, the future looks bright for altcoins, and your choice of investment just might be the next big thing that takes over the biggest cryptocurrencies.