What Is Altcoin? What Is the Difference Between Altcoin and Bitcoin?

What Is Altcoin? What Is The Difference Between Altcoin And Bitcoin?

Altcoin refers to cryptocurrencies produced as an alternative to Bitcoin. Cryptocurrencies other than Bitcoin are known as "altcoins". Altcoin is a term created by combining the words "alternative" and "coin".

Göknil Bağatarhan

Altcoin is a term used to refer to cryptocurrencies other than Bitcoin, the first cryptocurrency. The term altcoin is also used by cryptocurrency users to refer to cryptocurrencies with low market capitalization.

An altcoin is known as an alternative asset. The concept of altcoin is derived from the words "alternative" and "coin". Altcoin is used to refer to cryptocurrencies other than Bitcoin. The first altcoin issued after Bitcoin was Namecoin (NMC). Bitcoin had a high degree of market dominance for a long time, but its market dominance has declined as the number of altcoins has increased.

At the time of writing, Bitcoin dominance stands at 42.22%. Many altcoins were launched led by Bitcoin, and therefore the price movement of altcoins generally follows Bitcoin. Assets such as cryptocurrencies like Ethereum (ETH), Litecoin (LTC) and Ripple (XRP) are called altcoins. Altcoins claim to show unique functionality. For instance, LTC has the ability to confirm transactions faster than Bitcoin. Dash or Monero are altcoins that focus on anonymity, making transactions virtually untraceable.

Ethereum (ETH) is the largest altcoin by market capitalization.

What Is the Reason for the Emergence of Altcoin?

Altcoins were created as an alternative to Bitcoin, the first cryptocurrency, to expand the cryptocurrency world and to enable easier mining and faster transfers.

What Are the Types of Altcoin?

Altcoins are categorized into four types based on their functionality and consensus mechanisms:

Mining-based cryptocurrencies
Stablecoins
Security token
Utility token

Mining-Based Cryptocurrencies

Mining-based cryptocurrencies use consensus mechanisms that generate cryptocurrencies by solving complex mathematical problems to create blocks. Litecoin (LTC) and Ethereum (ETH) or Metatime Coin (MTC) are examples of mining-based altcoins.

Stablecoins

Stablecoins peg their value to fiat money or other cryptocurrencies.

Cryptocurrencies have fluctuated constantly since they were created. Stablecoins aim to reduce the overall volatility. Tether (USDT) or Meta is a dollar-backed asset and an example of a stablecoin.

Security Token

Security tokens are similar to securities and traditional stocks that exist in the digital world and are traded on platforms. Security tokens are usually offered to investors through ICOs. Security promises dividend payments (dividends in proportion to the shareholding) to its holders.

Utility Token

Utility tokens are created and used to provide services within any network. Unlike security tokens, utility tokens do not promise dividend payments. Filecoin is an example of a utility token.

What Is the Difference Between Altcoin and Bitcoin?

Bitcoin is the first cryptocurrency. Proof-of-Work, the consensus mechanism used by Bitcoin, has disadvantages in terms of energy and time. Bitcoin is also limited in terms of smart contracts. Altcoins were created as an alternative to Bitcoin's limitations and shortcomings.
Although Bitcoin is volatile, it is the market leader and is valuable. Altcoins, on the other hand, have more room to grow, but they have the potential to fail.
Because they were created after Bitcoin and through technology that has evolved over time, altcoins have the opportunity to have more modern technology than Bitcoin.
Most altcoins are superior to Bitcoin in terms of transaction speeds and cost.

What Are the Advantages and Disadvantages of Altcoins?

Here are the advantages of altcoins:

Altcoins are often easier to mine.
Altcoins provide their users with more investment opportunities and privacy in terms of transactions.
Altcoins are considered advantageous because they have high liquidity.
Altcoins provide more investment opportunities.
Altcoins can experience strong fluctuations. These fluctuations can lead to a significant increase in earnings.

The disadvantages of altcoins are as follows:

Altcoins may be more vulnerable to price fluctuations as they have lower market volumes.
A systemic error in an altcoin that has not yet reached popularity can cause it to lose its value significantly.
Strong fluctuations in altcoins can also lead to losses.

How Are Altcoin Prices Determined?

Generally, altcoin prices are determined depending on the interest of investors. Altcoin prices are volatile depending on the period. Depending on fluctuations, their prices may increase or decrease.

Altcoins can be purchased on cryptocurrency platforms.

Altcoin purchases can be realized by creating membership transactions on a cryptocurrency platform.

What Are the Most Traded Altcoins?

Cryptocurrencies such as Ethereum, Litecoin, Cardano, Tether, Dash are the most traded altcoins. However, the ranking of the most traded altcoins is constantly changing.

What Is Altcoin Season?

Altcoin season is the period when Bitcoin tends to lose some of its dominance on cryptocurrency platforms to altcoins. During altcoin season, Bitcoin's market capitalization decreases relative to the overall market capitalization of altcoins. A market cap is determined by multiplying the price of an asset by the circulating supply. Altcoin season can be recognized by the fact that altcoins are in the news a lot.