What’s an Altcoin?

he simple definition of an altcoin is any cryptocurrency coin that is not Bitcoin. (A Bitcoin alternative)

The more complicated definition of an altcoin is any decentralized digital currency that launched after the success of Bitcoin. Although Bitcoin was technically not the first of what is now thousands of peer-to-peer digital currencies built on blockchain technology, it was the most successful and started a wave of new coins, that followed the basic framework provided by the open-source code of Bitcoin, built on their own personal blockchain networks.

How are Altcoins different from Bitcoin?

There are many differences between Bitcoin and its successors, even though all are based on the same basic principles and technologies. One of the main differences you will find amongst altcoins is their functionality and use. Each coin, in essence, has its own economy and ecosystem in which it can be used. Additionally each altcoin comes with its own set of rules that sets it apart from Bitcoin. For example, some coins such as Litecoin, were designed to reduce or stop people from “mining.” Some come with increased security or anonymity, faster transaction speeds or more diversified uses. Each one is slightly different from the next.

In truth, it can sometimes be hard to tell all the altcoins apart and anyone who is thinking of investing should always do their own due diligence to ensure the coin they are investing in is safe or has the features they are looking for.

Types of Coins:

• Transactional Coins: Transactional coins offer fast and fee-less transactions.
• Store of Value: Bitcoin would fall under this category of coin, which is known for having high values and are often kept as assets and used in a way more akin to stocks than cash.
• Privacy Coins: These coins have upgraded privacy features and take extra steps to mask user addresses. They are ideal for people who do not want organizations to track how their money is spent.

What is a Major Alt?

Although Bitcoin still holds the title of being the most successful and valuable cryptocurrency to date, it may not hold the title forever as new altcoins aim to improve in areas that Bitcoin lacks.

Take Ethereum for example, Ethereum is not just an altcoin but also its own platform, which introduced smart contacts, making transactions more credible by making them trackable and irreversible. Litecoin made transactions faster, Ripple made transactions possible between any unit of value and is not limited to just coins or currency.

Every day new coins are being developed in the hope of improving the system Bitcoin created. This is the beauty of peer-to-peer digital currency or cryptocurrency because they are not controlled by third parties with singular interests, they are adaptable, shareable and transactional in ways traditional currency never could be.

How are Tokens different from Altcoins?

The major difference between a “coin” and “token” is how they are built. Coins are built on their own designated blockchain. However, creating a blockchain from scratch is complicated and hard to do.

Tokens are built from the base of an existing blockchain platform, such as Ethereum or Waves through the use of smart contacts. This way a token can be created without the need to facilitate its own blockchain. Within these two categories lay many sub-categories of coins and tokens. Again, it is up to the purchaser to decide which is the right investment based on their needs and potential.

Types of Tokens:

• Usage Tokens: A usage token a token that is created to give the user access to a specific service or good and cannot be used outside of a designated platform.
• Work Tokens: Work tokens are similar to Usage Tokens as they are only of use within one token economy and are required to participate in a specific platform.
• Hybrid Tokens: Hybrid Tokens have both the requirements and use of Work and Usage tokens. They are required to participate and can be used for goods and services within a platform.
• Network Tokens: Network Tokens aid in the growth of a specific network and gain value as a network grows.
• Equity Tokens: These tokens act very similar to owning stock in a company. Token holders are considered shareholders and can use their tokens in the same ways a shareholder would use their stock.

The advantage of a Token, besides being easier to create, is that they are also easier to invest in. Sometimes the barrier to entry for someone who wants to invest in a cryptocurrency coin can be very high. Tokens allow public investors to buy in when new tokens are created, typically via an ICO (initial coin offering). The investors can then sit back and watch their assets grow along with the company, provided they choose a token with the right potential!

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