Learn about altcoins

Nowadays, most people have some knowledge of what bitcoin is, even if on a surface level. However, the users that actually dive into the world of cryptocurrency might quickly find out that there are over a thousand more cryptocurrencies other than bitcoin, known as altcoins. Altcoins rarely provide interesting innovations to the world of cryptocurrency, so they’re definitely not for everyone. However, they’re still worth learning about. This article will give you an overview of what altcoins are to help you decide whether or not to invest in one of them.

What are they and why are they so important?

The term “altcoin” is nothing more than abbreviation for “alternative coin” or “bitcoin alternative” used to describe every cryptocurrency that came after bitcoin. The reason they’re referred to as bitcoin alternative is because altcoins usually have as a goal to improve or replace a preexisting component of bitcoin.

BitCoin mining machine

As of December of 2017, coinmarketcap lists over 1300 altcoins in the cryptocurrency market and more keep popping up on a daily basis. For the most part, altcoins tend to be nothing more than bitcoin clones that change certain characteristics of it, meaning that they don’t do enough to distinguish from each other, much less to distinguish from bitcoin in a relevant manner.

However, it’s worth noting that not every altcoin is a mere clone of bitcoin, some actually try to innovate through the implementation of some features that bitcoin does not offer. Some altcoins worth looking out for are Dash (previously named darkcoin), Monero, Zcash and Ethereum. Litecoin deserves a mention too, even if it doesn’t offer features that are particularly unique.

A certain percentage of bitcoin users tend to say that altcoins aren’t necessary and are useless for the most part because they lack innovation or something to make them distinct enough from bitcoin. In reality, altcoins have an important role in the world of cryptocurrency. Decentralization is the main goal of bitcoin, and altcoins contribute by further decentralizing the cryptocurrency community. In addition to this, altcoins allows developers to experiment and try out new, unique features and also gives bitcoin some competition. This keeps the cryptocurrency market from becoming stale because of a constant look for new features or innovations to bring forth.

When did the first altcoin show up?

Way back in April of 2011 the first altcoin was created, its name was Namecoin and still exists to this day. However, the primary purpose of Namecoin was the decentralization of domain-name registration, making internet censorship more difficult. While it’s not as relevant nowadays, it had a pretty good run during its early years, making it one of the most successful altcoins ever.

Is investing in them a good idea?

Before investing it’s important to understand that there’s a lot of risk involved with putting your money into a market that is as volatile as this one. Even bitcoin which is considered the most stable cryptocurrency suffers from quite violent price fluctuations regularly.

Because of this, it won’t come off as a surprise that altcoins are even more volatile. Their relatively low market caps make them the perfect targets of “whales”, who can manipulate the price of the currency through the injection of large amounts of capital into cheap altcoins to build hype and cause an off the charts price increase. After this happens the whales sell the coins they bought to earn massive profit, making many gullible investors lose money in the process. This method is known as a “pump and dump” and some exchanges have started working on regulating this to keep stability on the prices of cryptocurrencies.

If you want to avoid losing money in a pump and dump you should focus on doing long term investments in coins you actually believe have some potential. More importantly, look for coins that are actually healthy, meaning they have a strong community, high liquidity, and active developers. For reference, use CoinGecko to see coins ranked in accord to these three important factors.

BitCoin mining machine

Much like any other investment, if you do decide to invest in altcoins, make sure to follow certain guidelines. Avoid hype propagated by communities. Don’t take investors words at face value and only invest in a coin that you have thoroughly researched, because it’s a really bad idea to invest in something you don’t understand. Blindly making and investment is a good way to lose your money, so make sure to take your time to do some research on the coin you’re looking to invest in. In addition to this, some research on day trading before doing high volume short-term transactions will prove useful if that’s something of interest. But the most important thing is, never invest more than you can afford to lose.

Where can I earn altcoins?

Much like bitcoin, you can obtain altcoins through different ways. Accepting them as a payment for a goods or services is a good way to start. If this interests you, look around for job postings at Jobs4Crypto or a similar site.

Trading them is also possible through cryptocurrency exchanges. Exchanges typically use bitcoin as an intermediary so you’ll probably have to buy some satoshi first before you can trade for some altcoins. Check Bittrex out for a good exchange that supports several altcoins.

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