My First Coin #6 - Understanding Altcoins
This is the second series of Bitcoin in 5 Minutes available every tuesday 8AM.
Welcome! This is the second series of Bitcoin in 5 minutes.
In this second instalment, you are going to learn about Altcoins and how they work.
For your reference, below is a link to the previous post on this series.
After you complete the first series, you should have a good understanding of what Bitcoin is and how Bitcoin transactions work plus an intro of Bitcoin alternatives.
Bitcoin alternative is simply a cryptocurrency that is not Bitcoin. To understand altcoins, it helps to first understand what Bitcoin is (just in case you miss the previous post, you can read it up here).
What are Altcoins?
Simply put, any cryptocurrency you have heard or will hear that is not Bitcoin is generally termed Altcoin.
The term “Altcoin” is a combination of two words “Alternative” and “Coin”. Because Bitcoin is the first digital coin and also the standard, any other coin out there is an alternative.
There was a time Bitcoin makes up nearly 90% of the crypto market. However, today, Bitcoin currently makes up about 40% of the crypto market, and more than half of the crypto market is now floating around Altcoins.
Both Bitcoin and Altcoins share the same basic characteristics and function: They all leverage blockchain technology, a distributed public ledger, which allows and records a transaction only if there is consensus that the transaction is legitimate.
How are altcoins different from Bitcoin?
As powerful as Bitcoin is, there are some issues with it: It is expensive and takes a lot of power to perform a bitcoin transaction.
For instance, to send N10 million worth of bitcoin to someone today will cost you about N20,000 in fees. To send N21,000 worth of bitcoin will still cost you the same N20,000. LoL. So irrespective of the amount of bitcoin you are sending via the Bitcoin network, the fee is the same (about 0.0005 BTC).
Many of the altcoins we have today are basically improvements of Bitcoin.
Litecoin for example is basically a copycat of Bitcoin but with faster transaction time. Ethereum saw an opportunity in Bitcoin beyond financial records by recording transactions in form of “smart contracts” — computer programs that automatically executes an agreement if certain conditions are met.
Most of these altcoins marketed themselves as "Bitcoin killer” or “the new Bitcoin” all claiming to solve problems like transactions cost, speed, security, volatility, or just a mockery of Bitcoin and other existing altcoins.
Different types of Altcoins
Over 16,000 altcoins, is hard to categorize, but for investing purposes, it can be roughly broken down into these three buckets:
Native cryptocurrencies
Stablecoins
Meme Coins or Tokens
Explaining each of these is a single post on its own. But it is very appropriate to just give a glimpse.
Here we go.
Native cryptocurrencies are coins or tokens that were originally created to operate on their own blockchain or connected platform. Examples of native cryptocurrencies are Bitcoin, Ethereum, and Solana.
Stablecoins are basically cryptocurrencies that represent a stable currency or asset hence the term "stablecoins”. Usually, it is pegged with traditional currencies like the dollar or naira. A popular example of a stablecoin is USDT which is a cryptocurrency that represents the US Dollar. So 1 USDT will always be the same as 1 US dollar.
Meme Coins are basically cryptocurrencies without a use case or function. They are created for fun, entertainment, or meme-inspired purposes. They are highly risky. Their price value is driven by the community or social media rants. An example of a meme token is the popular Dogecoin which was hyped by Elon Musk. Also, Shiba Inu and Wakanda Inu are also examples.
Recap
In this issue, we covered the following:
What are Altcoins?
How are altcoins different from bitcoin?
Different types of Altcoins
In the next issue of Bitcoin in 5 minutes, you are going to specifically learn more about different types of cryptocurrencies plus the difference between a coin and a token.
Subsequent content for only "Bitcoin in 5 minutes" will be available every Tuesday at 8 AM.
There will be an email tomorrow Wednesday 8 AM, Wednesday content will be short tips we feel you need to know in crypto.
Have a great day!
WAGMI