Five Major Altcoins Categories Every Investor Must Know
Before any other coins were mined on the blockchain, Bitcoin had already established itself as the leader in the cryptocurrency "wild west." The alternative coins were then required to wait in line.
The cryptocurrency market has now seen the addition of thousands of altcoins, or alternative coins. The term "Altcoin" is used to describe alternatives to Bitcoin. Because of its prominence in the altcoin market, Ethereum is often referred to by its entire name (Ethereum) when discussing the network as a whole, but by its currency ticker symbol (ETH) when discussing its value in isolation.
The Diverse Altcoins To Know
Altcoins can be classified in a few diverse ways. As a matter of fact, certain things fit into multiple classifications. Due to the relative novelty of cryptocurrency, many classifications are still developing.
Some of the existing broad categories that altcoins may be placed in are as follows:
Stablecoins
A stablecoin is indeed a cryptocurrency whose value is anchored to that of a different, more stable asset. Stablecoins can be pegged to fiat currency or physical commodities.
Stablecoins are cryptocurrencies that are pegged to something stable, such as government bonds or gold, to reduce their volatility and make them more comparable to the currencies people actually use.
Tokenized in USD, Tether was the first stablecoin. As an alternative to swapping U.S. dollars for every transaction, it has become a favorite altcoin among sophisticated cryptocurrency traders through reliable coin-selling joints like bitcoin era and others.
Memecoins
Memecoins, popular altcoins with a name inspired by internet humor, are highly valued due to widespread adoption.
Memecoins flood the crypto market and are quickly snapped up by followers of the latest trends and opinion leaders, in contrast to Bitcoin whose price is more directly related to fundamentals like rarity and total possible market cap.
Experts in the cryptocurrency industry claim that, like NFTs, memecoins provide value to the online community. Even if larger cryptocurrencies like Bitcoin and Ethereum have far longer histories, the value of memcoins tends to increase and decrease just like that of NFTs.
Utility Tokens
Many experts in diverse fields have noted the great potential of Blockchain technology, the foundation upon which cryptocurrencies are built. Many experts in the crypto industry and beyond have speculated that blockchain will become as pervasive as the internet itself; some have even begun to refer to it as "Web 3."
Users need a method of payment for transactions, such as publication fees for artwork, token minting costs, service fees, and access fees within a blockchain network, in order to make use of all the new features.
The solution is in the form of utility tokens, a subset of alternative cryptocurrencies designed for this very purpose.
Security Tokens
Security tokens are digital liquid contracts that represent ownership stakes in actual assets like businesses or real estate, similar to traditional financial securities.
Security tokens are indeed a method of recording one's ownership stake in an asset on the blockchain, which means that the record cannot be edited or erased.
Forks
When developers make a substantial change to the protocol that governs how a blockchain records, trades, and receives cryptocurrency transactions, this is known as a fork, and it gives rise to a new type of altcoin.
There are two types of forks: soft and hard. Currency forks can result in minor adjustments, a whole new currency, or a significant upgrade to the underlying blockchain technology that renders older transaction types obsolete.
Any blockchain is vulnerable to forks, which can necessitate upgrades on all participating computers (nodes).
The Final Thoughts
Comparing altcoins having their time in the spotlight with those that potentially have long-term worth is difficult. The current increase of the Omicron virtual currency, which increased in value by 1,000% after reports of the revolutionary coronavirus strain surfaced, is a somewhat somber example of crypto's ephemeral value.
If you're planning to invest in the market as a whole and/or passively, you don't need to worry about altcoins.
However, if you want to get involved with crypto and study DeFi, you might want to start familiarising yourself with the various altcoins and the purposes for which they are used.