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Study alternative Cryptocurrencies to Understand How They Work and how They Differ From Bitcoin

By Michael Rasya

Cryptocurrency_ If you've been a part of the cryptocurrency community for a while, OctoMate, you might already be familiar with the phrase "altcoin." Because how it appears to be a superior version of Bitcoin, this kind of cryptocurrency is also very popular right now. In other words, cryptocurrencies promise some advantages over bitcoin's drawbacks.

Study alternative Cryptocurrencies to Understand How They Work and how They Differ From Bitcoin


So what distinguishes bitcoin from other cryptocurrencies? How does it function, too? Yes, carefully read the following explanation.


What do altcoins mean?

The term "altcoin" is a combination of the phrases "alternative" and "coin" in English. In other terms, an altcoin is a cryptocurrency that is used as an alternative to bitcoin. As a result, all cryptocurrencies—aside from bitcoin—are referred to as altcoins.


This cryptocurrency was initially introduced in 2011, following the popularity of bitcoin as a well-liked tool in the world of investments. Since altcoins were developed to address some of bitcoin's shortcomings, they ought to have an advantage. They work to enhance elements of bitcoin including transaction processing time and energy efficiency.


Namecoin is the original altcoin. There are at least 900 alternative coins available right now. Even in November 2021, there will be 14,000 different cryptocurrencies.


Typically, the crypto market is where you may purchase this digital currency. Depending on the kind of altcoin offered by the cryptocurrency market, altcoins are traded in centralized and decentralized systems.


Fiat money purchases of altcoins are largely discouraged by the majority of crypto exchanges. As a result, you can trade it for other altcoins or buy it regarding ETH, USDT, or BTC.


Bitcoin's and alternative currencies' differences

In essence, altcoins are digital currencies that primarily use the bitcoin architecture. However, there are several key distinctions between the two, such as the following.


1. From the meaning

From the definition alone, it can be seen that bitcoin and altcoin are two different things. Bitcoin is a digital currency as a potential payment instrument to become an investment instrument. It was launched in 2009 and was originally intended for online transactions without intermediaries such as banks.


While altcoins are an alternative to bitcoin that offer advantages over bitcoin so they are considered more efficient. However, there are still many altcoins made with the framework contained in bitcoin.


2. From the investment period

In terms of the investment period, altcoins are cryptocurrencies that are more suitable to be used as short-term investment instruments, especially the Tron ​​type. This is because Tron ​​does not have good fundamentals and is not popular enough, so there are still few people who use it.


While bitcoin is suitable as a long-term investment because the level of profit is quite promising. In addition, the transaction process is more practical and the cost of using it tends to be cheaper than conventional currencies.


3. From the price

The next difference between bitcoin and altcoin is in terms of price. Bitcoin prices are more expensive than altcoins. So that when the price of bitcoin rises, altcoins are the alternative chosen by investors.


How altcoins work

The way altcoins work is similar to bitcoin, that is, they operate on blockchain technology. This technology is a digital database that is managed by many computers around the world. Every new valid transaction will be recorded on the blockchain as a transaction block.


Almost all altcoins are created on a different offering basis. Some are cheaper, and some are more expensive. Altcoins enhance aspects of bitcoin to build a competitive advantage.


One way is to apply the proof of stake method which minimizes energy and time consumption for creating blocks and validating new transactions. Altcoins established a glaring advantage over bitcoin, so they managed to create their market.


All kinds of altcoins

There are various altcoins on the market. Here's the explanation.


1. Stablecoins

The first type of altcoin is the stablecoin. Stablecoins were created to reduce the volatility of other cryptocurrencies by tying the coin's value to the prevailing currency, such as the US dollar, euro, and gold. An example of a stablecoin is Facebook's Libra.


2. Mining-based

To get new coins, you need to do mining or mining. The trick is to solve a problem to disassemble the block. This type of altcoin is almost similar to bitcoin, for example, Ethereum.


3. Security tokens

Another type of altcoin is the security token. This is a type of altcoin that is similar to conventional stocks, which promises dividends to investors, such as business ownership or profit payments. Because it is related to business, the security token launch is carried out through an ICO or Initial Coin Offering.


4. Utility tokens

Utility token-type altcoins are focused on trying to claim certain services. In addition, sometimes this type is also sold with the status as part of an ICO. An example of a utility token is filecoin which is designed to be exchanged for a decentralized archive storage service.


Examples of altcoins for crypto investments

After understanding the various types of altcoins on the market, below is a list of altcoins that OctoMate can invest in.

  • Ethereum
  • Lite Coin
  • NEO
  • Cardano (ADA)
  • EOS
  • DASH


That's a complete explanation of what an altcoin is, how it works, how it differs from bitcoin, what types of altcoins are, and examples. Well, now OctoMate understands, right? The bottom line is that altcoins are potential cryptocurrencies to try because they are cheaper and offer advantages over bitcoin.