What is Altcoin and how it works
Altcoin is a combination of the two words “alternative” and “coin.” All cryptocurrencies other than bitcoin are called altcoins. Some altcoins use different consensus mechanisms to validate transactions and add new blocks, or they differ from bitcoins by providing new and additional functionality.
Most altcoins are designed and released by programmers who have a different concept for their crypto or tokens. Altcoins belong to the blockchains for which they were designed. Many of them are forks of bitcoin and Ethereum, meaning they are a derivation of a blockchain that is not compatible with the original chain. In most cases, forks take place because one group of developers disagrees with the others and leaves to create their own coin.
Many altcoins are used within their respective blockchains to accomplish a task. For example, ether, is used in Ethereum to pay transaction fees. Some developers have created forks of Bitcoin and then re-emerged in an attempt to compete with Bitcoin as a payment method such as Bitcoin Cash.
What is the goal of altcoins?
Altcoins seek to improve the perceived limitations of the cryptocurrency and blockchain from which they originate or with which they compete. The first altcoin was Litecoin, created from Bitcoin’s blockchain in 2011. Litecoin adopts a different proof-of-work (PoW) consensus mechanism than Bitcoin, called Scrypt, which is less energy-intensive and faster than Bitcoin’s SHA-256 PoW consensus mechanism.
Ether is another altcoin. However, it has not separated itself from Bitcoin. It was designed by Vitalik Buterin, Dr. Gavin Wood, and a few others to support Ethereum, the world’s largest scalable blockchain-based virtual machine. Ether (ETH) is used to pay network participants for the transaction validation work done by their computers.
The types of altcoins
Altcoins come in various types and categories. Here is a brief summary of some of the types of altcoins and their uses.
As the name suggests, payment tokens are designed to be used as an exchange currency between parties. Bitcoin is a prime example of payment tokens.
Crypto trading has been characterized by volatility since its inception. Stablecoins aims to reduce this general volatility by pegging their value to a basket of assets, such as fiat currencies, precious metals, or other cryptocurrencies. The basket is intended to serve as a reserve to redeem holders if the cryptocurrency fails or has problems. Price fluctuations of stablecoins should not exceed a short-range.
Notable stablecoins include Tether’s USDT and USD Coin (USDC). In March 2021, payment processing giant Visa announced that it would begin settling some transactions on its network in USDC through the Ethereum blockchain.
Security tokens are tokenized assets offered on the stock markets. Tokenization involves the transfer of value from an asset to a token that is then made available to investors. Any asset can be tokenized, such as real estate or stocks. For the security token to work, the asset must be secured and held. Otherwise, the tokens would have no value. Security tokens are regulated by the Securities and Exchange Commission because they are designed to act as securities.
Utility tokens are used to provide services within a network. For example, they can be used to purchase services, pay network fees, or redeem rewards. Ether (ETH) is a utility token. It is designed to be used in the Ethereum blockchain and virtual platform to pay for transactions. Another example is Filecoin, which is used to purchase storage space on a network and protect information. Utility tokens can be purchased on the exchange but to be used in the blockchain network to function.
As the name suggests, meme coins are inspired by a joke or a silly version of other famous cryptos. They generally gain popularity in a short period of time, often promoted online by top influencers or investors looking to exploit short-term gains.
Governance tokens allow holders to have certain rights within a blockchain, such as voting for protocol changes or having a say in the decisions of a decentralized autonomous organization (DAO). Because they are generally native to a private blockchain and used for blockchain purposes, they are utility tokens, but they have been accepted as a separate type because of their purpose.
The best altcoins
In this section of our article, we at CryptoCasinoGuru will tell you more about the best cryptos. In particular, we will tell you the key information about what they are and why they were created.
Bitcoin Cash(BCH) is a fork of Bitcoin created in 2017. Its founders refer to it as the real bitcoin. Bitcoin Cash addresses the problems of slow transactions, high energy consumption, and bitcoin fees. However, it has failed to gain community recognition. Like bitcoin, it was created to be a virtual currency for payments.
Ether (ETH) is a second-generation, more advanced crypto. It runs on the Ethereum platform, which in turn is called “the world’s computer.” It is used to run smart-contract, decentralized applications (dapps) and is also the most popular digital currency for funding initial coin offerings (ICOs). Like other cryptocurrencies, it is also widely accepted as a payment method.
Litecoin (LTC) is a crypto whose sole purpose is to perform decentralized digital payments. This currency was created by a former Google engineer Charlie Lee in 2011 as a solution to bitcoin’s problems. It offers faster transactions, lower fees and greater coin availability. Its founder defines it this way, “BTC is digital gold. LTC is digital silver.”
Tether (USDT) is the most popular digital stablecoin of all. It is basically a stablecoin tied to the U.S. dollar with a 1:1 ratio, which means it will always be worth $1 and can be converted to euros or other fiat currency at any time. Long story short, its popularity is due to the benefits of blockchain technology and the stability of fiat currencies, thus reducing the volatility and instability of crypto trading.
Traders use it to protect their funds during uncertain times. It can also be used as a means of payment, when accepted, because of the fact that it can be sent anywhere in the world via blockchain technology. The big difference between Tether and other cryptos such as bitcoin and Ethereum is that its transactions can be blocked at any time by Tether Company Limited, which monitors the traffic.
TRON (TRX) is a semi-decentralized digital currency for digital entertainment. The TRON protocol enables scalability, high availability, and High-throughput Computing (HTC) support for creating decentralized applications in the TRON ecosystem. In addition, it is compatible with Ethereum smart contracts. The main goal of the network is to decentralize web distribution. The TRX coin is used to share content on the network and compensate content creators who contribute to the network. Thus, it can be classified as both a digital currency and a utility token.
Monero (XMR) is a decentralized, privacy-conscious crypto designed to make untraceable payments. It is one of the oldest cryptocurrencies on the market, as it was launched in 2014. Each individual user of XMR can control their own level of visibility and personal data. In addition, it is much faster and more scalable than Bitcoin. However, the coin’s privacy features are not always used for good, as evidenced by its growing popularity on the dark web and other unpleasant events.
Cardano (ADA) is the native token of the Cardano platform. It was created to be a third-generation cryptocurrency capable of powering smart contracts, dapps, side chains, metadata and multi-party distributed computing. Although still in the development phase, the project aims to be a new Bitcoin that is more efficient, faster, scalable and energy-efficient, with uncompromising security.
Ripple (XRP) is another virtual token for payments. It is also used by Ripple Labs as a source of liquidity for real-time international payments. For this reason, it is also often referred to as the “bankers’ currency.” The currency itself is designed to be the fastest and most scalable digital asset.
IOTA (MIOTA) is an innovative project for the future of the internet of things (IoT). It enables machine-to-machine transactions between IoT devices quickly and without fees. Although this feature is still a bit ahead of its time, IOTA can also be used as a crypto for regular payments, making it a legitimate virtual currency.
EOS is another second-generation blockchain and a semi-decentralized digital currency designed to power dapps and DAOs (decentralized organizations). It competes with Ethereum for the title of the world’s best smart contract platform. Essentially, EOS is faster and more scalable than Ethereum, but it sacrifices decentralization for this functionality. For this reason, EOS is governed by proof-of-stake delegated consensus (dPoS) and uses the EOS constitution to set the rules of the platform. Finally, EOS is much younger than Ethereum and is not yet widespread.