The internet is filled with chatter about cryptocurrency. And in the noise, cryptocurrency has almost become synonymous with Bitcoin. But that’s just the tip of the iceberg.
There exists an entire marketplace of other cryptocurrencies launched after the success of Bitcoin. Sure, Bitcoin was the first peer-to-peer digital currency, but that doesn’t mean be all and end all of that space. Newer coins that are essentially trying to recreate the magic of Bitcoin, albeit in a better way, have been launched over the past few years. Ethereum, Ripple, Cardano, Dogecoin, Theta, and many more.
And all of these cryptocurrencies are called altcoins, as in… alternatives to Bitcoin? Get it?
So, altcoins are basically cryptocurrencies that are not Bitcoin, and here’s how they can broadly be classified.
Stablecoins
Cryptocurrency is known to fluctuate a lot. It is this sort of volatility that Stablecoins attempt to rectify. They do this by basing their values on goods like fiat currencies, precious metals, and other cryptocurrencies (mostly Bitcoin). True USD, USDC, and Binance USD are all examples of Stablecoins pegged on the US dollar.
Any alarming fluctuations in the values are corrected by the issuer. This is why Stablecoins are used less for investing and more for storing and transferring money. Certain protocols even offer interests on storing your wealth.
Mining Based Coins
These coins are mined into existence. Meaning, systems can generate new coins by solving equations to verify and therefore, create blocks. Most of the coins from the early 2020 fall under this class, popular examples being Litecoin and Zcash.
Security Tokens
These resemble traditional stocks. Security tokens are promising equity options for investors. They provide the equity in the form of ownership of the coins or by giving pay-outs to the shareholders. Polymath, Swarm and Securitize are among the best Security Token platforms in 2021.
Utility Tokens
Like the name suggests, Utility Tokens are used to provide services within a network. These services range from purchasing other services to redeeming rewards. Sirilabs tokens, Timicoin, and Funfair are among the most popular utility tokens.