What Are the types of Altcoins?

Cryptocurrency is a form of digital money or soft money. The account of cryptocurrency is maintained by a decentralized system known as cryptography. Whenever we talk about cryptocurrency, the first name that comes to our mind is Bitcoin. And that’s obvious too. Bitcoin is a leading name in crypto currency. 

The spikes in online investing keep on increasing and decreasing, this further affects the money value of digital currencies. Currently, when we are writing this blog, the value of Bitcoin is around INR 32 lakhs and 66 thousand. 

But it might change when you are going to read it. This is how online investments and crypto currencies work. If we keep bitcoin aside, there are several other currencies available, like Litecoin, Ripple, Ethereum, Bitcoin Cash, Zdash, etc. Some of you might have been invested in these. Right? 

These currencies are known as alternative coins. But now, the question is which altcoins are more stable? Advantages or disadvantages of altcoins on bitcoin. Best altcoins to invest in 2021-22. Don’t worry. We are here to solve your queries related to financials. In this article we will learn what altcoins are in cryptocurrency. 

What are Altcoins?

The word Altcoin is a blend of two words, ALTernative COIN, this is how the word got its meaning. Altcoins are basically alternative coins of Bitcoin. All other digital currencies except bitcoin come under alternative coins. 

Some strong examples of altcoins are Litecoin, Ethereum, Ripple, Bitcoin Cash, NEO, etc. These altcoins are like bitcoin with few other characteristics. For example, like bitcoin, altcoins also validate and secure transactions, but the mechanism can be different than blockchain mining. 

Like bitcoin their price is volatile too, but altcoins are more affordable when compared to bitcoin. Altcoins are basically built on the success of Bitcoin. Though, as mentioned earlier, there is a slight modification in the intermediate process. According to investment records of March 2021, altcoins occupy almost 40% of total crypto currency web.

Types of Altcoins

Altcoins are classified under various categories. These categories are described based on their functionalities and mechanisms. Few altcoins fall into more than one category. Here is the list of major types of altcoins.

ON THE BASIS OF MECHANISMS

1. Mining-Based

Based on mining, altcoins are classified into two categories:

1. Proof-of-work altcoins

1. Pre-mined altcoins

Proof-of-Work altcoins are those coins which are generated by solving difficult mathematical queries. 

For example, Litecoin, Zcash, etc.

Pre-mined coins are those coins which aren't generated by the means of an algorithm query.

For example, Ripple, XRP, etc.

1. Stablecoins

Stablecoins as the name shows are stable in nature. That doesn't mean, they don't go up and down the trend of the market. But stablecoins aim to reduce the volatility of value. Fluctuations do happen, but it never exceeds a narrow zone.

Few examples of stable altcoins are USDC, MakerDAO, etc.

ON THE BASIS OF FUNCTIONALITIES

On the basis of functionalities, altcoins are divided into two tokens. 

1. Security Tokens

Security tokens are usually issued to investors, they deliver a dividend payout to holders. This form of ownership attracts investors to invest money.

1. Utility Tokens

Utility tokens are used to purchase services or gain rewards. Like security tokens they don't provide any ownership in any kind. 

For example, Filecoin, it is used to buy a network storage space.

Are altcoins trusted?

Altcoin’s market is quite unstable. The trends change several times a year. The status of different altcoins is unstable and fluctuates. Different altcoins have different values, their mechanisms and algorithms are different, though they often mimic Bitcoin. 

In the last decade, plenty of altcoins have registered in the market. This introduction has attracted many investors and betting. The altcoin market lacks liquidity due to insufficient capital. 

Case study: In January 2018, ETHER price reached its zenith, by December of the same year, its price was reduced to almost half. And, after two years, it was increased to four times.

This is the trade inconsistency in altcoins. Fluctuation is always there. But this fluctuation is responsible for profits and wealth for traders.  

Examples of Altcoins

There are a variety of Altcoins available in the market. Different altcoins have different values. For example, the current cost of Ethereum is around 2.25 lakhs INR, on the other hand, ripple is just 80 INR. Here is the list of some top 10 Altcoins which can be invested in : 

1. Ethereum

1. Zcash

1. Cardano (ADA)

1. NEO

1. Bitcoin Cash

1. Ripple

1. Solana

1. USD Coin

1. Litecoin (LTC)

1. Dash