Even if you aren’t fully aware of what they are, you have likely heard of bitcoin. However, what about altcoins? When it comes to cryptocurrency, one of the first things you should realize is that there are more than a few types out there, fittingly titled “altcoins”. They were launched after bitcoin was released in 2009.
Put simply, altcoins are considered bitcoin alternatives because they help to solve and improve the bitcoin protocol limitations and the features. These alternative currencies are considered better substitutes for bitcoin. The success that bitcoin had as the initial peer-to-peer digital currency resulted in the creation and introduction of other types of digital currencies.
What are Altcoins?
Now comes the important question of, “what are altcoins?” The altcoin is a mash-up of two different words, which are “alt” and then “coin.” In this word, alt (which is a well-known shorthand) is an abbreviation for alternative and coin relates to currency. When they are put together, the word itself implies a new or alternative type of cryptocurrency to the bitcoin.
Quite a few of the altcoins are created on the same framework that bitcoin uses and the majority of them are peer-to-peer and they involve a mining process that provides users a more efficient and affordable way to handle transactions. Even with a number of the same features, altcoins have features that are distinct and that vary greatly from one another.
The goal of many altcoins is to target the perceived limitations of bitcoins. As a result, the competition among these is intense and has led to the creation of a wide array of altcoins being produced.
With the success of bitcoin, there have been a number of other peer-to-peer digital currencies that have emerged in an effort to mimic the success that has been seen.
Why Altcoins Began to Emerge
The primary reason that altcoins started to emerge was in an effort to improve the flaws in bitcoin and, in an effort, attempt to compete with the already successful cryptocurrency by developing and innovating new features that would surpass the bitcoin limitations.
Another crucial factor was the actual transaction time. There are some altcoins, such as Fastcoin (FST) and Litecoin (LTC) that have blockchain update times that are a minute, or more, faster than bitcoin. As a result, these bitcoin alternatives can help to increase the speed of commerce by providing much faster transaction confirmations.
When it comes to altcoin appeal, one of the biggest factors is that you don’t even know which one is going to be a winner. There isn’t any finish line for the race, only the competition that is designed to continue meeting the needs of users. Litecoin is a third-generation currency that has emerged after Namecoin. And it has become extremely popular. To date, this is seen as bitcoins closest competition.
Should You Invest in Altcoins?
Because of how recently cryptocurrency was invented and how quickly the landscape is changing, all the investments of cryptocurrency will carry quite a bit of risk. Even the well-known bitcoin, which is the most stable cryptocurrency in existence experiences quite a bit of volatility regularly.
However, when compared to altcoins, these are much more volatile. This is because they have extremely low market caps, which is the value of all of the coins combined. Also, the altcoin markets are susceptible to price manipulation.
The wealthy traders, who are called “whales,” will often insert quite a bit of capital into coins that are priced lower, which results in the build-up of hype, resulting in skyrocketing prices. After the price has gone up, the whales sell the coins on the exchange for a large profit, which hurts the gullible investors along the way. This is a method that is referred to as “pump and dump.” When this occurs, it hurts the greedy traders who don’t take the time to do research, but it can also lead to the death of many altcoins.
If you are interested in investing in altcoins and don’t want to lose your money in a pump and dump situation, then you need to be focused on the long-term investments in the coins you believe offer quite a bit of potential and that have good overall health. In most cases, altcoins that are healthy have strong communities, they have high levels of liquidity and have developers who are working to improve the source code of the coins.
Tips for Investing in Altcoins
If you make the decision to invest in altcoins, you need to remember some basic tips for these investments. Try not to buy into the hype that the coin communities create. The fact is, investors have an agenda, which means you can’t take their word at face value. Only make investments in coins that are well-researched. You should not ever invest in something you don’t fully understand. If you make an investment without having all the information, then this is just the first step to losing your money. Take time to do research and get to know the coins you are interested in before considering any long-term investment. Also, research day-trading before you start high volume trades.
Being informed is the key to having success with any cryptocurrency. You need to use reliable sources of information to ensure you make smart decisions related to your cryptocurrency. Keep this in mind to ensure you get the results you want and need.