Things You Should Consider Before Investing in Altcoins

Gold and silver crypto currencies laying on a laptop.

By definition, an Altcoin is any cryptocurrency that isn’t bitcoin, which means there are thousands in number. Altcoins account for more than half of the cryptocurrency market’s value. Like Bitcoin, Altcoins are based on the Blockchain as an incorruptible ledger. Some claim to be able to build on bitcoin’s triumphs, while others claim to be able to overcome its issues.

On the other hand, the Ethereum blockchain saw potential in bitcoin’s blockchain technology. It went beyond just recording financial transactions and began making records of agreements in the form of “smart contracts.” Other cryptocurrencies have emerged, claiming to be safer or faster. The result is a complex ecosystem of Altcoins that can hardly be categorized. However, the classification can be done as follows:

Native Cryptocurrencies

Native cryptocurrencies are coins explicitly designed for use on a particular network. Because Bitcoin is the currency utilized on the Bitcoin blockchain, it is considered a native coin. Another native coin is now the fourth-largest cryptocurrency by market capitalization, i.e., the Binance coin. And if you are a newbie and you’re not sure where to start, contact an expert who will provide you with enhanced encryption information to help you store, trade, send, and receive your virtual currency safely.

Stable Coins

Stablecoins were created to provide the benefits of cryptocurrencies without the volatility of their prices. They do it by matching the value of an existing currency one to one. Tether, the most valuable stablecoin by market capitalization, is pegged to the US dollar.

A token is a monetary unit that may be used for specified purposes and operates on an existing blockchain. Chainlink, for example, is based on the Ethereum platform and translates real-world data into a blockchain-compatible format. The adoption of Chainlink technology is directly proportional to the demand for its tokens.

There are a few things to think about before buying altcoins. Before you invest in any altcoin, find out what the company behind it is trying to accomplish. Think about the following issues:

  • Does the altcoin look like it could be a viable Bitcoin alternative?
  • If it’s a token, is it a real-world application?
  • If it’s a stablecoin, what will you do with it?
  • What made it happen if it’s a fork, and do you agree with the decision?

When a group votes to make any alteration to the rules that govern the chain, the process is referred to as a “fork.” A new chain appears, ready to begin recording transactions according to the new regulations. Bitcoin cash is a fork of the original Bitcoin blockchain, while Dogecoin is a branch of Luckycoin.

To Sum it Up

Keep in mind that this is a new market that will eventually settle. Some of these projects will fail—a lengthy list of cryptocurrencies has already died—while others will thrive. That’s why financial gurus define altcoins as “alternative assets,” something you might take part in if your portfolio is already well-diversified.

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Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.