Steemit Crypto Academy | Season 2: Altcoins – Part1 "Looking beyond the Bitcoin"
Altcoins are basically termed as other Cryptocurrencies besides Bitcoin. These were born following the success of Bitcoin. Altcoins are also referred to as ‘alternative coins’. ‘Alt’ means Alternative and coins are cryptocurrencies.
Namecoin was the very first Altcoin that was introduced in 2011, 2years after Bitcoin’s innovation in 2009. In my opinion, I regard Bitcoin as the mother of all “Altcoins.” Thanks to the pseudonym ‘Satoshi Nakamoto’ who championed the innovation of Bitcoin because today we now have over 5000 Altcoins including Litecoin, Ethereum, Tether, Cardano, BNB, Chainlink, Steem, etc; As portrayed by the rankings and statistics of the various Altcoins on the Coinmarketcap
Altcoins were born to address the limitations of Bitcoin. For example, With Bitcoin, there will only be a creation and mining of up to 21 million Bitcoin whereas with an Altcoin like Litecoin there will be a creation of up to 84 million Litecoins. Besides that, every bitcoin takes 10 minutes to be mined whereas Mining of Litecoin only takes 2.5 minutes. Bitcoin mining is costly due to the costly hardware that is employed in the process of mining whereas, with Litecoin, mining is cheaper reason being that it is done by simply using a computer.
Types and Examples of Altcoins
Altcoins go beyond being coins as they are innovated uniquely with a certain working product powered by any of these Altcoins. For instance, Steem as an Altcoin has a great product called “Steemit” a social media blogging site and online community powered by the “steem blockchain”. In the process, Investors are attracted to such a coin. I will elaborate more on the determinants of a successful coin and you will get to learn which ones are worth your investment? Just stay tuned for that part in the next topic “Altcoins – part2”
There are various types and examples of Altcoins
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Previously, during the season 1 Crypto Academy, I delivered a lecture on this type of Cryptocurrencies. You may want to check out that article for more details about Stable coins. Otherwise Stable coins are simply a type of Cryptocurrencies whose value is tied up to an underlying asset that could be fiat-backed with fiat currencies like USD, EURO, or Crypto-backed with cryptocurrencies such as Bitcoin, Ethereum, or commodity-backed with real-world assets like Gold. Examples of Stable coins include Tether, Dai, Paxos standard, USDC, DGX and so on.
Bitcoin is highly volatile, for example during last year in March the Bitcoin price dropped from about $13000 to as low as $6000. Therefore, Stable coins as a type of Altcoins were innovated to offer a great solution to the challenge of high volatility in the Crypto market. These are doing well by always providing a safe haven for the funds of crypto traders and Investors courtesy of their fixed value that does not waver in the times of crypto dumps.
These are basically an investment contract that represents legal ownership of an asset be it a real physical asset such as real estate or a digital asset. They are linked to a business or an organisation that guarantees certain benefits to its customers like profit sharing, equity in the Company, direct decision making of a company which can be in form of voting rights. In other words, the more security tokens you hold the more voting rights, profit margin/ shares you have in the company.
However, there are stricter guidelines put in place by the company which ought to be carefully observed while transferring the company’s security tokens. These are also subject to federal security regulations.
Examples of security tokens include; Bcap tokens, 22x fund, etc
These are a type of Altcoins that avail a user with access to a service. You can also call these “gateway tokens.” For example, a user needs Filecoins in order to gain access to the file storage service in the Filecoin decentralized peer to peer file storage service. Another example is the Basic Attention token BAT, which is used in the interaction with the Brave browser, where a user is incentivized for viewing ads. Companies that need to advertise on Brave browser need to buy and spend BAT on the brave browser. Other typical examples of Utility tokens are Siacoin and Civic token.
The Pros of Altcoins
Offer unique functions
Altcoins are more than just coins; these offer some unique functions such as incentivizing user behaviour for example in social media platforms like Steemit where steem is rewarded to Content creators for creating quality content.
Provide a healthy Competition
These provide healthy competition in the crypto market. Many Altcoins have been innovated uniquely with a great solution to the problems/challenges in other existing Cryptocurrencies such as Bitcoin. These are providing faster and cheaper transactions plus better and low-cost mining algorithms for the tokens.
Altcoins are less Volatile for example Stable coins like tether, Dai, PAX, USDC are much more stable crypto assets that are a great solution to the challenge of high volatility in the Crypto market.
Cons of Altcoins
Low marketcap value
Due to their low marketcap, they yield a lesser return of investments as compared to that of Bitcoin. Hence this is something that keeps back some potential investors from investing in them.
High potential of Fraud and Scam
There are high chances of being scammed through the various mushrooming Altcoins that is through their scam ICOs. In Uganda, I have witnessed plenty of scam coins such as Onecoin. It has no working product. It has collected plenty of billions of people’s money during its ICO. This crypto project has for a long time kept on promising its investors that, it will soon go public, get an exchange and then enable withdraws/cashing out of the onecoins.
Lack of Acceptance and exposure
Many Altcoins lack acceptance and Exposure hence keeping investors from investing in them. Many people (investors) are rather attracted to Bitcoin because of its popularity and exposure hence the neglect and low interest in Altcoins.
In conclusion, Altcoins are built on the success of Bitcoin but with a different set of rules of operations. They are uniquely designed and each of them seeks to address the drawbacks of Bitcoin.
Homework task: Write about any one of the following Altcoins
- Litecoin (LTC)
- Ripple (XRP)
- Binance coin (BNB)
Rules and guidelines for the homework task
- Post your homework article in the steemit Crypto Academy
- Only steemexclusive articles will be curated
- Your article should range between 300 – 1000words.
- Use an exclusive tag #yohan2on-s2week1 and also tag me @yohan2on so that I can easily find your article.
- Clearly reference your work in case you have directly borrowed any content from other sources. Otherwise, be original and as creative as possible.
- Plagiarism and spinning of other users’ articles will not be tolerated in the homework task. Otherwise repeat offenders will be blacklisted and banned from the Crypto Academy.
- Use only copy-right free images and showcase their source.
- This homework task runs till 18th/04/2021, Time: 11:59 pm Ugandan local time.