What Are "Altcoins," And What Are They Used For?

It may be difficult to keep track of all the many cryptocurrencies in circulation - what are these other coins, and how do you know which one to invest in?

The number of cryptocurrencies listed on various exchanges is now around 2000, and this number is expected to rise. There is no way to thoroughly investigate any of these endeavours. A terrific investment opportunity may present itself, though, at some point in the future.

You may not want to pass up the opportunity to profit from enormous crypto gains. Purchasing lesser-known cryptocurrencies, on the other hand, is more difficult and risky. The good news is that you've come to the correct spot since this tutorial explains how to buy altcoins securely in 2019.

What Are "Altcoins," and what are they used for?

In 2009, Bitcoin has launched the cryptocurrency world. Since the genesis block, the game has followed the following rules:

• There may only be a maximum of 21 million Bitcoins in circulation at any one time.

• Every 10 minutes, a new coin is minted.

• It takes a tremendous amount of computational power to maintain the integrity of Bitcoin.

• It is meant to be used as a kind of currency.

• It's easy to see that Bitcoin has a well-defined target market, characteristics, and use cases. However, as a technical breakthrough, Bitcoin's technology opens up a plethora of new possibilities. A broad ecosystem of different cryptocurrencies may be built on top of the first completely decentralized digital money, such as Bitcoin.

Entrepreneurs and technology pioneers see a wide range of applications for distributed ledger technology (DLT). That's where altcoins come into play.

"Altcoins" is defined as "alternative coins" by definition. To put it another way, this word refers to any cryptocurrency that is not Bitcoin. Ethereum, Litecoin, Ripple, Tron, Verge, and EOS are all examples of popular alternative cryptocurrencies.

With so many new crypto projects and businesses, it's easy to become lost in the sea of possibilities. To make things simpler, we'll categorize crypto assets into five categories:

There are a variety of digital currencies out there:

To support fast and secure peer-to-peer transactions, digital currencies are also known as cryptocurrencies, digital coins, or currency tokens. This includes Bitcoin and a variety of other cryptocurrencies. Bitcoin's core code was modified to allow for several of these other cryptocurrencies to emerge.

Litecoin, Bitcoin Cash, Dash, Zcash, and many more are examples of such currencies. There are no pre-written digital currencies. They are all aiming to do the same thing: to make it easier for people to transfer money anonymously.

Tokens of utility

Access to platform features, services, and privileges may be granted using these tokens. Also known as "app coins," they may be found in the app store. There are several ways in which utility tokens are created and distributed, including Initial Coin Offerings (ICOs). ICOs are a popular method of raising money for new projects.

There are two ways for investors to get tokens from the platform: Token holders may vote on governance issues or stake their tokens to earn extra benefits in certain projects. Basic Attention Token (BAT), Golem (GNT), Status (SNT), Vervain (R), and Augur are well-known examples of utility tokens (REP).

Authentication Codes

Tokens that represent a portion of the company's equity are known as security or equity tokens. Bitcoins and other cryptocurrencies are sometimes used as virtual shares in companies, which may or may not pay dividends. Regulators, on the other hand, forced the cancellation of a large number of security token sales. But they're getting more and more traction anyway.

While projects profit from the money invested by investors, security tokens are attractive to both parties. Also, keep in mind that security tokens and tokenized securities are two different things. For example, one is an asset that has been formally issued on the distributed ledger, while another is merely another form of that asset.

Security tokens are still a subject of much controversy, and there is no clear consensus on what they truly are. The Howey Test, for example, is used by the U.S. Securities and Exchange Commission (SEC). It is required that a security token fulfil these conditions:

It's a financial commitment (or other assets):

When someone else does the task, there is an expectation of profit. They are exchanged on specialized exchanges that only authorized investors may participate in. BCP (Blockchain Capital), Science Blockchain Fund, and Lottery.com are some of the best instances of tokenized equities. POLY, Harbor, Securitize and Swarm are among the projects that enable corporations to create STOs.

Tokenized Assets:

Coins backed by commodities like gold or oil are called asset tokens. As a digital representation of underlying assets, they generate value. Asset-backed tokens are thus more stable than other types of digital currency. As a new method to use blockchain, asset tokens are expected to see increased use.

Basically, they make it easy to buy goods without incurring additional shipping and logistics expenditures. Digix Gold Token (DGT) and Tether (USDT) are two popular examples of asset-backed tokens (DGX).

Tokens of Appreciation:

Status in an ecosystem may be expressed via reward tokens. Like utility tokens, they are utilized on certain platforms, but instead of purchasing them, users are given them as a reward for participating on such networks.

It is common for them to be used as a means of enticing people to do actions that support the ecosystem as a whole. They may still be traded for other currencies on the market. Examples of incentive tokens are Steem (STEEM) and BitDegree (LYM) (BDG).

Some coins and tokens are difficult to classify and may be found in more than one category. Adding insult to injury is the fact that certain cryptocurrencies seem to have no real function whatsoever. "Joke coins" are a common term for these types of ventures.

Despite the dangers, participating in an initial coin offering (ICO) is a terrific opportunity to support a new startup. Not to mention the potential financial gains. An ICO's average return on investment (ROI) was 1320 per cent in 2017. Obviously, this isn't always the case, but it may be worth the risk in certain cases. Additionally, ICO participation is not difficult. Bitcoin, Ethereum, and/or other cryptocurrencies are often used in initial coin offerings (ICOs). They'll likely have a well-detailed guide on how to become involved. A cryptocurrency or even an altcoin may be required to participate.

If you're serious about learning more about ICOs, check out our comprehensive ICO guidelines.

Written by: Anmolika Saxena