What are altcoins?
Altcoins, the alternative digital currencies, already make up a pool of over 4,000 cryptocurrencies. But why so many? And is this good for the digital economy?
Bitcoin has ushered in a new era in the global economy, bringing a new technological paradigm that many entrepreneurs and developers have used and used to create new projects and business models involving the technology on which cryptocurrencies are based: the blockchain .
These projects are called altcoins, in reference to the fact that they are “alternative” currencies. Generally speaking, all non-bitcoin currencies are called altcoins .
To date, more than 5,000 altcoins have been launched, with the most varied objectives and applied technologies.
However, be careful: while many of these alternative digital currencies seek to be, in fact, solutions to real problems, others are merely objects of financial speculation or, worse, scams aimed at raising funds and disappearing.
What are altcoins?
To answer what altcoins are , it is necessary to understand that most of them are built on the basic structure provided by Bitcoin , but they project themselves (or try to) as a better option than it. And that’s mainly because of the popularity of this pioneering cryptocurrency in the digital economy .
They seek to work on some of Bitcoin’s technical limitations – scalability, transaction speed, among others -, creating more advanced technologies with greater competitive advantages.
And even with altcoins using several existing resources as a basis for the development of new functions and features , these alternative cryptocurrencies vary a lot from each other, whether due to the algorithms used, application improvements, greater digital security for users, in short, the possibilities are huge.
Are they good for the economy?
Like any other new technology, there are risks involved in using digital coins . However, we cannot overlook the positive points of these digital assets for the economy as a whole. The fact is, blockchains have enormous potential to disrupt the global financial system and other sectors.
And we are not talking about a threat to the current financial system, but about an optimization of it. Regarding the unification of transaction records of information and values, blockchains will speed up processes in a way never seen before.
But it would be naive to believe that digital currencies and blockchain technologies will solve all of the planet’s economic problems. They can exponentially reduce costs with international transactions, facilitating international economic integration, in addition to a host of other benefits – some of which we haven’t even imagined yet.
In addition, the democratization of investments in digital assets, which happens together with the birth of altcoins, allows new projects and innovations to be able to raise financial resources and be successful in a more practical and agile way.
So, with the birth of this altcoin market, many investors and speculators have been looking for this opportunity.
Are alternative digital currencies good investment options?
Before thinking about investing in alternative digital currencies or even Bitcoin, which already has a certain popularity, you need to be sure of two main points: that you understand what gives value to a cryptocurrency and that no investment is guaranteed, in especially, investment in digital currencies .
That said, some investors choose altcoins because they personally believe in the project’s business vision or use case for that particular digital currency . Others may only invest because of the hype (terms used to define a topic that is currently being discussed) that an altcoin is currently generating and the potential it has for appreciation.
The reasons may vary, but investing in digital assets serves the same purpose as traditional investments. And this new type of investment does bring financial returns for those betting on cryptocurrencies .
Even so, it is necessary to study a lot to try to predict at least some points more related to the economy, politics and society.
What are the main altcoins
To assess the importance and relevance of alternative digital currencies in today’s digital economy , a number of factors need to be considered.
The main one is the market cap, which is an estimate of the market value of each project, based on how much money (in US dollars) is allocated to the asset in question.
Currently, the market cap of bitcoin, which is the largest cryptocurrency in the world, is around US$ 220 billion. The second largest cryptocurrency in the world by this criteria is the ether (ETH), from the Ethereum project , whose market cap is around US$41 billion – it is the largest of all altcoins.
Also according to the market cap, the other most relevant altcoins in the world are Tether (USDT) – which is a stablecoin , or stable currency -, Ripple (XRP), Bitcoin Cash (BCH), Binance Coin (BNB), Chainlink ( LINK), Polkadot (DOT), Cardano (ADA) and Litecoin (LTC).
However, although very important, it is not only the market cap that defines the relevance of an altcoin . It is necessary to think of several other criteria, especially linked to the future perspectives of each project.
Some of the factors that can help you understand which altcoins are or could be relevant, you need to understand information such as the following:
- user community
- Technology used
- Project’s goal
- Qualification of the developer team
Objectively, figuring out whether an altcoin is “good” or “bad” is just as complex a task as figuring out the best and worst companies traded on a stock exchange – plus the fact that there are fewer people able to deciphering programming codes than reading company balance sheets and analysis.