Interest in the cryptocurrency niche is growing, and for a long time has not focused only on the first one – bitcoin. A huge number of others are also worthy of attention. But even now, even among those who have long been interested in cryptothematics and interact with it, there are those who work exclusively with “bitcoin”. The reasons are different, but mostly it’s the fear of not knowing. What is it? What are the differences? What are the possibilities? The number is growing every week, so in this article, we will analyze in detail the features of “alts” and why they are worth to understand.
WHAT TAKOE ALTCOIN AND HOW IS IT DIFFERENT FROM BITCOIN?
What is “altcoin”? Bce is easier than it may seem. Absolutely all cryptocurrencies other than Bitcoin are called altcoins (alternative coin). But this does not mean that they are worse. It’s just that by the time the first token with similar functionality appeared, almost two years had passed. Bitcoin has established itself as a revolutionary digital currency based on blockchain technology. By the mass emergence of others with similar functionality, they were classed as altcoins because most used the open source code of the original. Many tried to copy the idea completely with minor changes and try to create a more popular independent digital currency.
Nowadays there is a lot of difference between the two. Most startups that are based on blockchain have their own cryptocurrency. The number is growing every day and all of them are created to solve different problems. There are projects that develop cloud storage, with distributed data storage inside blockchain, other teams create them for use in a specific niche, for example, as a substitute for likes on social networks.
The more the technology develops, the more applications it finds. But even among cryptocurrencies, where the main goal is to replace fiat, there are differences. For example, the speed of transaction. In bitcoin, it can take several hours. This was one of the first and main tasks that the developers of altcoins tried to solve. Another part of the teams focused on creating an anonymous altcoin, where it will not be possible to connect the owner of the wallet with a real person. Depending on how useful was the functionality, communities began to appear around a particular crypto. Some of them also appeared and disappeared because of the lack of interest in them.
HOW TO USE ALTCOINS?
The first and most obvious option is trading. Many professionals came here from the classic market, because during peak periods, they often manage to lock in more profits in a short period of time. The main reason is in the high volatility. Some coins fluctuate greatly in the price even within a trading day. Due to this, understanding how a particular crypto should behave, it is possible to earn much more, a couple of percent of the deposit. Another popular way is mining. At first, mining was only by PoW technology. In short, participants connected computers to the blockchain network and provided computing power for the blockchain to function.
As the complexity of calculations increased, devices called asic were created for the purpose of crypto mining. They were many times more powerful than conventional desktop PCs. In such projects, the issuance of tokens was gradual, and new tokens were given as rewards to miners. Later, there were projects where all tokens were issued at once. Here, in order to mine cryptocurrency, you had to store it in a personal electronic wallet. Holders acted as “validators” in the network, and confirmed the authenticity of transactions automatically. It is important to note that PoS mining was always less profitable. PoW mining paid for itself faster, even though it required an investment in computing hardware. Although it largely depended on the price of a particular altcoin. To fix the maximum profit, you need to monitor which altcoin is more profitable “digging”, and when you get it into your wallet, do not hesitate to transfer to the more promising that can increase in value faster.
The largest mining farms until 2021 were in China. Now, due to changes in government policy in the Celestial Empire, miners moved to other countries, mainly to America.
The third way to make money is buying for the long term. This approach should be classified as a high-risk investment. The reason is that the crypto market is still young, developing, forming and very unstable. Sometimes you don’t know which altcoins will grow. For example, Dogcoin suddenly made a significant jump in price this year. on a short period, you can accurately enough predict the growth of the altcoin, but on a long period it is more difficult. The problem lies in the following nuances:
- they are highly dependent on bitcoin and when it falls,
- the price can react sharply to global news, if it concerns crypto,
- a similar product may appear in the market or the missing functionality is implemented in an existing, but more popular one.
In such cases, the token can literally depreciate in 24 hours. An example is ZClassic. At the best of times reached a mark of $200 per unit, but now it is not worth even a dollar. In general, investments in crypto are similar to investments in startups. It is very important to be very sure that the token is launched in order to solve a problem and not to raise money on a blockchain hype wave.
The most reliable way to store cryptocurrency is cold wallets. Exchanges are constantly hacked, dishonest ones are closed, even just keeping it on your personal electronic wallet is still a risk. When the information is stored on a flash drive, or even represented as a QR code phrase on a simple sheet, it is not accessible online, and this means the risk of theft is minimal. Of course, if not to lose the carrier.
HOW TO BUY AND SELL ALTCOINS?
One of the fastest ways is through exchangers. Almost any promising altcoins are easy to exchange in 2021. And the withdrawal is possible not only to card, but also directly to cash. This way is used by those who do not want to show their extra money in official accounts. Using exchangers you can cash your crypto in a few clicks. Not everyone likes this method because of the high commissions.
Popular sites such as localbitcoins, where users exchange assets with each other. Excluding the intermediary, costs are reduced solely to transaction fees for the network. They differ for each altcoin, so if you are interested in cashback, you choose the cheapest one by this criterion. Platforms with peer to peer exchange are usually used for withdrawal of funds or to buy crypto for a long term. Another option – cryptocurrency exchanges. Depending on the site, different pairs are available for exchange. This way is good if you want to buy rare coin, which is absent in peer-to-peer exchanges. In other cases, just for the purchase, this method is unprofitable because of the large number of commissions at each step.