What Are Altcoins and How Do They Differ from Bitcoin?
Over the past decade, the world of cryptocurrency has been taking many huge strides and Bitcoin has been leading the race. But what many investors don’t know is that there is more to cryptocurrency than just Bitcoin. Altcoins, or alternative coins, are cryptocurrencies that were developed after Bitcoin, and they have their own unique features and benefits.
In this article, we’ll explore what altcoins are, the different types of altcoins, the benefits they offer, and how they differ from Bitcoin so that you can understand how they work and how they could fit into your investment strategy.
What Are Altcoins?
Altcoins are cryptocurrencies that were built using the same open-source code as Bitcoin, but with some modifications to make them different. Altcoins are designed to have their own set of features that set them apart from Bitcoin and other altcoins.
Altcoins can be used as a form of payment just like Bitcoin, and can also be traded on cryptocurrency exchanges.
Types of Altcoins
When it comes to altcoins, there are a few different types that exist. Here are the most common types of altcoins:
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Forked Coins – These altcoins are created when the code for existing cryptocurrencies is modified to produce something new. The most common type of forked coin is a Bitcoin fork, which is when the code used to create Bitcoin is changed to create a new version of the currency.
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Premined Coins – These altcoins are created when the code for existing cryptocurrencies is changed to create a new digital asset. They differ from forked coins in that they are pre-mine, meaning the creator has already distributed a certain amount of the coins before they become available to the public.
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Alternative Coins – These altcoins are not based on any existing cryptocurrency’s code and are created from scratch. This type of altcoin is often used to create an entirely new type of cryptocurrency that operates differently from any existing coins.
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Utility Tokens – These altcoins are generally used as a form of payment or to access certain services or products. They usually do not function as a form of currency and cannot be used to purchase goods or services in the traditional sense.
Benefits of Investing in Altcoins
Investing in altcoins can be a great way to diversify your portfolio, especially if you are already invested in Bitcoin. Here are some of the benefits of investing in altcoins:
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Lower Volatility – Altcoins tend to be less volatile than Bitcoin, meaning you may be able to make more consistent profits through investing in them.
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More Potential Gains – Since altcoins are not as widely traded as Bitcoin, they can provide the potential to earn much bigger profits if they are able to gain traction in the market.
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Innovative Features – Altcoins often offer features that Bitcoin and other cryptocurrencies do not, such as greater privacy, faster transaction speeds, and more.
How Do Altcoins Differ From Bitcoin?
Now that you know more about what altcoins are and the benefits they offer, it’s important to understand how they differ from Bitcoin. Here are the key differences between altcoins and Bitcoin:
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Volume – Bitcoin is the most widely traded cryptocurrency, meaning it has the highest volume of all cryptocurrencies. This means that any changes in its price will have a bigger effect on the market as a whole than any other cryptocurrency.
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Opportunity – As mentioned before, altcoins are not as widely traded as Bitcoin, which means there is far more potential gains to be had.
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Complexity – Bitcoin is still the most secure and mature cryptocurrency, so it is better suited for investors who are looking for a long-term investment that requires a lower degree of complexity. Altcoins are generally more complex and less secure than Bitcoin, and they may be better suited for more experienced investors.
Altcoins are an exciting and potentially lucrative investment, but they come with a range of risks and complexities as well. Once you understand how altcoins differ from Bitcoin, however, you can decide for yourself if investing in altcoins is the right move for your investing strategy.
