What is Altcoin and why does it attract investors to invest more than Bitcoin?

Understanding Altcoin Clearly

Altcoin (Alternative Coin) refers to all digital coins that are not Bitcoin. This term comes from combining “Alternative” (alternative) and “Coin” (coin). Currently, the crypto industry has over 20,000 Altcoins, all built using blockchain technology similar to Bitcoin but with different objectives and features.

Altcoins emerged because Bitcoin, as the first digital currency, has limitations. This led to efforts to create new coins that are better, faster, or have different features. As a result, Altcoins have developed to become significant players in the market, with some holding value and importance comparable to Bitcoin.

How do Bitcoin and Altcoin differ?

Bitcoin primarily functions as a decentralized medium of exchange, widely accepted, with the highest market value, often called the “big brother” of the crypto market.

Altcoins are developed from newer blockchain technologies, addressing issues found in Bitcoin, allowing for new approaches. Some are faster, more energy-efficient, or more private. Due to these features, Altcoins have shown remarkable growth, but they are also more volatile than Bitcoin.

How many types of Altcoin are there?

Four main types

1. Proof-of-Work (PoW) Altcoins

Use the same mechanism as Bitcoin, requiring mining (Mining) to obtain coins. Miners (Miners) are rewarded with coins. Examples: Monero (XMR), Bitcoin Cash (BCH), ZCash (ZEC), Litecoin (LTC)

2. Proof-of-Stake (PoS) Altcoins

No mining needed; instead, you stake your coins as collateral to have the right to verify transactions. This saves energy and is faster. Examples: Tezos (XTZ), Tron (TRX), Zilliqa (ZIL), Cosmos (ATOM), Cardano (ADA)

3. DeFi Altcoins

Decentralized finance systems that do not rely on banks, allowing borrowing, lending, creating assets, collateralizing, and conducting transactions like traditional banks. Examples: Compound (COMP), Uniswap (UNI), PancakeSwap (CAKE), Aave (LEND), Synthetix (SNX)

4. Stablecoins

Pegged to other currencies or assets, such as dollars, gold, or other assets. Examples: Tether (USDT), USDC, PAX Gold (PAXG), Gemini USD (GUSD)

( Subcategories: 6 types

1. Stablecoin Altcoins - Linked to other assets like fiat, commodities, or cryptocurrencies.

2. Payment Tokens - Used for payments and goods/services instead of cash.

3. Security Tokens - Asset tokens representing investments.

4. Utility Tokens - Used to access services or rights within a project.

5. Meme Tokens - Created from online jokes; example: Dogecoin )DOGE###, featuring the Shiba Inu dog segment.

6. Governance Tokens - Grant holders voting rights and decision-making power over project development.

Is it true that Altcoins can profit faster than Bitcoin?

( Advantages of Altcoins that investors love

1. High returns

Altcoins are much more volatile than Bitcoin, often surging during strong market movements. Sometimes, they can yield 100% or more profits in a short period, while Bitcoin’s gains are usually more modest.

2. Many options

With over 20,000 Altcoins, investors have many projects to choose from, each with its own use case and goals.

3. Innovation

Altcoins introduce new methods not available in Bitcoin, such as Ethereum’s programmable functions or Litecoin’s speed.

4. Low fees

Most Altcoins have much lower transaction fees than Bitcoin, making them suitable for quick transfers.

) Disadvantages of Altcoins to watch out for

1. High risk

While Altcoins are genuinely volatile, they can also drop sharply. Many have fallen to half or a few percent of their original value.

2. Small market cap

Most Altcoins have much smaller market caps than Bitcoin, increasing the risk of pump-and-dump schemes.

3. Less security

Some Altcoins have lower security levels than Bitcoin, which has been tested and proven over time.

Notable Altcoins in 2024

Ethereum ###ETH### - Blockchain platform supporting smart contracts and DApps, created by Vitalik Buterin. Always ranked second by market cap.

Litecoin (LTC) - One of the oldest coins, faster than Bitcoin, with a new LTC20 Token Standard launched in 2023, similar to Ethereum’s ERC-20.

Bitcoin Cash (BCH) - Forked from Bitcoin in 2017, with larger block sizes and lower fees.

Dogecoin (DOGE) - The first meme token, very popular, with a strong supporter base.

Ripple (XRP) - Blockchain platform for international money transfers, designed to be fast, secure, and low-cost.

Cardano (ADA) - Energy-efficient Proof-of-Stake system supporting smart contracts and DApps.

Polygon (MATIC) - Layer 2 solution for Ethereum, enabling faster transactions and lower fees.

The uncertain future of Altcoin

Experts have differing opinions. Some believe Altcoins will continue to grow because humans are increasingly interested in blockchain technology, and Altcoins have features Bitcoin lacks, such as speed, privacy, or efficiency.

Others believe Bitcoin will dominate the market, and Altcoins may depreciate or merge into other projects.

Notably, Altcoins like Ethereum, Cardano, and Polygon have already achieved high market caps and widespread use, indicating that the future of Altcoins depends on whether each project can solve real problems and offer valuable use cases.

Summary for easy understanding

Altcoin refers to all digital coins except Bitcoin, created using blockchain technology with various objectives. Although Altcoins emerged after Bitcoin, they have become an essential part of the crypto market, in terms of technology, innovation, and practical application.

Altcoins offer high returns and diversity but also come with high volatility and risks. Investors interested in Altcoins should study each project carefully, assess risks and rewards, and make informed investment decisions.

Common questions

Why do Altcoins rise faster than Bitcoin?

Altcoins are more volatile, allowing their prices to surge rapidly during good market conditions. Investors like this because they can make quick profits.

What is Alt Season?

A period when most Altcoins outperform Bitcoin in profits, often caused by old coins rallying, new coins launching, or positive news about Altcoins.

How many Altcoins are there now?

More than 5,000. Previously, there were over 20,000, but some have disappeared.