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What are altcoins?
Altcoins, are alternative cryptocurrencies to Bitcoin. They were created following the huge success of Bitcoin. Bitcoin’s success as a peer-to-peer digital currency was what led other crypto creators to work on their coins. Altcoins are designed to eliminate Bitcoin’s limitations.
There are over 5000 cryptocurrencies in the world since Satoshi Nakamoto launched the first one over a decade ago. Despite that, Bitcoin still occupies over 60% market share of the total global crypto market.
Altcoins include sub-categories like stablecoins, security tokens, mining-based cryptocurrencies, and utility tokens. The largest altcoin by market capitalization is Ethereum.
What are the different types of altcoins?
As altcoins emerged, new categories started appearing along with them. Some examples include:
- Stablecoins: Created to combat Bitcoin’s volatility. This is accomplished by securing the stablecoin’s value to fiat currencies like the U.S. dollar, the Euro, and gold.
- Security Tokens: Normally linked to organizations and businesses, these altcoins are launched as an initial coin offering (ICO). They resemble traditional securities and usually offer a dividend-like repayment.
- Utility Tokens: These tokens offer a claim on services and are occasionally sold as a portion of an ICO.
- Mining-based: Altcoins that are obtained via mining, just like Bitcoin.
Examples of altcoins
The Ethereum platform was created in 2015 by child prodigy Vitalik Buterin. Buterin is a Russian-Canadian programmer who created the platform to offer developers the opportunity to create decentralized apps, programs, and tokens. According to Ethereum’s founders, Ethereum is an open-source, public, blockchain-based platform that can be used to “codify, decentralize, secure, and trade just about anything.”
To use the platform, users much obtain Ethereum’s cryptocurrency called Ether. Ether is the second-largest digital currency by market capitalization. Investors tend to buy and hold the currency for a certain period to speculate its growth. Ether is currently worth $1,283 at the time of writing.
Litecoin was created by an ex-Google employee, Charlie Lee. Lee wanted to combat Bitcoin’s volatility and create a lighter, more stable cryptocurrency. Due to Litecoin being a stablecoin, it is a much more convenient medium of exchange. Litecoin is often referred to as silver , while Bitcoin is gold.
One of the fundamental differences between Litecoin and Bitcoin is how Litecoin is mined. Litecoin’s algorithm uses Scrypt. Scrypt’s limiting factor is memory, not processing power. This allows ordinary people to mine Litecoin without the need of purchasing excessive, expensive hardware. Litecoin is currently worth $126.65.
Ripple has created a team of American developers in 2012 who believed the world needed more secure payment options. Their core mission was to develop a system that consisted of international banks and financial institutions. Just like Ethereum, Ripple has both a platform (RippleNet) and a cryptocurrency.
RippleNet consists of institutional payment-providers, like banks, and allows you to quickly and instantly execute global payments. Payments are done via blockchain technology and are low-cost. XRP, on the other hand, is often referred to as the “digital asset built for global payments.” Its core purpose is to act as a medium of exchange on RippleNet.
XRP is often looked down on by crypto enthusiasts as it is not a fully decentralized cryptocurrency. XRP has a closed blockchain that is controlled by a single mother entity – Ripple itself. XRP’s value increases when more banks join and use the platform. Some of the current banks that support the currency include UBS, Axis Bank, Santander, Westpac, and more. At the time of writing, XRP’s price is $0.2538.