What is cryptocurrency?
Cryptocurrency is a type of currency that can be traded or exchanged for products and services online. Many businesses have developed their own currencies, known as tokens, which can be exchanged for the goods or services that the business sells. Consider them to be arcade tokens or casino chips. To gain entry to the product or service, you must first swap real fiat money for cryptocurrencies.
Cryptocurrency Blockchain
Cryptocurrencies operate on blockchain technology. Blockchain is a decentralised technology that handles and tracks transactions through multiple computers. The protection of this technology is part of its allure.
What are the benefit of cryptocurrencies?
Cryptocurrencies have a wide range of supporters for a number of causes. Here are a few of the most well-known:
- Cryptocurrencies such as Bitcoin are seen as the money of the future, and followers are rushing to purchase them now, probably before they become more expensive.
- Any backers appreciate the fact that bitcoin prevents central banks from controlling the money supply because these banks prefer to devalue money over time through inflation.
- Others favour the blockchain platform that underpins cryptocurrency because it is a transparent processing and storage mechanism that can be safer than conventional payment structures.
- Some investors like cryptocurrencies because their valuation is rising, but they are uninterested in the currencies’ long-term adoption as a means of exchanging funds.
Should you invest in cryptocurrency?
Cryptocurrency is a highly speculative and unpredictable investment. Investing in cryptocurrencies such as Bitcoin is less risky as compared to investing in established corporations’ stocks.
Are Cryptocurrencies Legal?
There is no doubt that they are legal in the UK, while China has effectively forbidden their use, and whether they are legal depends entirely on each individual country. Also, know how to shield yourself against fraudsters who see cryptocurrency as a way to defraud investors. As a buyer always beware, as always.
How many types of Cryptocurrencies are there?
The three main types of cryptocurrency are Bitcoin, altcoins, and tokens.
The blockchain identifies these three major forms of cryptocurrency. The very first blockchain is Bitcoin. Many other blockchains were developed after Bitcoin, and these are known as altcoins. Altcoins such as NEO, Litecoin, and Cardano are great examples of altcoins.
Finally, there are tokens/dApps, the third major form of cryptocurrency. Civic (CVC), BitDegree (BDG), and WePower are a few examples (WPR).
In this thread, we’ll mainly discuss altcoins, let’s explore them more:
What are Altcoins?
Altcoins are cryptocurrency alternatives to Bitcoin. They are cryptocurrencies that use blockchain technologies to allow encrypted peer-to-peer transfers. Altcoins leverage Bitcoin’s popularity by slightly altering the rules to cater to a wider range of users.
How do Altcoins work?
In specific, altcoins function similarly to the original Bitcoin. You can transfer money from your digital wallet to the wallet of another person by using a secret key. There seems to be a blockchain, or recording database, in a cryptocurrency such as this, where transactions are indefinitely and officially registered, meaning transfers cannot be changed or rejected after the fact. Mathematical proofs that validate transactions in blocks protect the blockchain.
Bitcoin vs. Altcoin
The rules for altcoins are not the same as those for Bitcoin. For eg, while Bitcoin only mines or produces bitcoins every 10 minutes, an altcoin known as Litecoin produces coins every 2.5 minutes. This allows Litecoin to process transfers more quickly. Litecoin would also generate 84 million litecoins, while Bitcoin would create only 21 million bitcoins.
Litecoin’s mining laws are also distinct from those of bitcoin. Unlike bitcoins, which require advanced hardware to mine, litecoins can be mined using normal desktop computers.
Litecoin is just one of the hundreds of alternate coins available on the market. Few altcoins stand out as common alternatives to Bitcoin, despite not having the same market cap as Bitcoin. Some examples of Altcoins are:
- Dash
- Litecoin
- NEM
- Ethereum
- Ripple
- Monero
Pros of Altcoins
- Improve Bitcoin’s imperfections: Altcoins are generally developed to fix a potential shortcoming with the Bitcoin framework, whether it is pace, mining expense, or some other aspect.
- Provide competition: Altcoin developers make room for potential entrants to the Bitcoin scheme by changing the rules under which Bitcoin works.
- Transaction fees are low: Aside from the anonymity of blockchain technologies, another of the advantages of using altcoins as a payment mechanism is the comparatively low transaction fees charged with each transaction.
Altcoins Cons
- Value is highly volatile: Altcoins are a relatively new investment, and their value can fluctuate drastically.
- Frauds and scams: Altcoins, including Bitcoin, are often the target of scams and other fake schemes.
Types of Altcoins
Altcoins are often passion projects, at other times the foundation for entirely new companies. They can also be more than just tokens, emerging into whole new systems for anything from chat apps to online marketplaces.
An altcoin can frequently modify Bitcoin’s rules enough to do something new and could have a special use.
Check the following types of altcoins.
- Stablecoins
Stablecoins are altcoins that are intended to counteract cryptocurrency volatility by binding their value to an underlying asset, product, or security. Tether is one form of a stablecoin; Libra is a stablecoin that Facebook is developing.
- Digital Tokens
An emerging blockchain platform supports altcoins that act as digital tokens. Tether, for example, is a digital token and it is based on Ethereum as well as other blockchains.
Some investors want to gain returns by trading altcoins with one another, but this is a risky investment. Virtual currency float on unregulated markets may lead you to market manipulation, bribery, and other issues.
To know more about cryptocurrency, bitcoins, altcoins and tokens check the rest of our posts!