What Is An Altcoin? The Beginners Guide To Cryptocurrency 

There are thousands of cryptocurrencies available on the market, and all of them are competing for a piece of the pie. Even if you’re new to the space, you probably know that there is more than one cryptocurrency that exists. A handful of these digital tokens have even managed to achieve some measure of success and recognition — something most new crypto projects struggle to attain. However, there is also a lot more than meets the eye when it comes to altcoins. So what exactly are these coins? Do they serve any purpose? Keep reading to find out everything you need to know about altcoins and whether or not you should invest in them.

What is an Altcoin?

Altcoins are simply another name for cryptocurrencies that are not Bitcoin. The term ‘altcoin’ was originally used because most people thought that Bitcoin was going to be the only successful cryptocurrency in existence. However, the crypto space is now home to thousands of tokens that each have their own unique features and functionality. It’s important to note that altcoins are not necessary a bad thing, either. In fact, it is really only a bad thing if you’re referring to a scam coin that is trying to capitalize on the popularity of the cryptocurrency space without actually having anything to offer the space. Otherwise, the existence of altcoins is actually a good thing. It means that there is something other than Bitcoin that users can turn to in order to transact and store their money.

Why Do We Have Altcoins?

Altcoins have their origins in the very first days of Bitcoin. When Bitcoin was first released in 2009, it was (and still is) an extremely innovative project in the digital asset and blockchain space. Bitcoin was the first decentralized digital asset that was available to the general public. It was also the first blockchain network. It was this second fact that caused many people to wonder why only one blockchain was needed. If one blockchain was decentralized, secure, and robust enough to hold the first digital asset, then why not use it to hold other assets? This is the question that spawned the creation of altcoins. Many people saw the potential for a blockchain network to hold more than just one type of token — and within a few years, several altcoins were released.

Types of Altcoins

There are many types of altcoins, but the biggest and most popular groups are privacy coins, smart contract tokens, and utility tokens.
– Privacy coins are tokens that are designed to maintain the privacy of the network members, as well as the transactions that take place. In the early days of altcoins, there were a few privacy-focused blockchain networks that released coins that were meant to be used to facilitate illegal activities.
– Smart contract tokens are blockchain-based tokens that are programmed with the functionality to execute work and/or store data. Think of smart contract tokens like Ethereum, which is the most widely used example of this type of blockchain network.
– Utility tokens are tokens that are used to pay for goods or services on a blockchain network. This is the token type that people often get confused with the privacy coins. Utility tokens don’t have special features that allow them to remain private; instead, they function as a regular cryptocurrency.

Pros and cons of investing in altcoins

Pros
– There is surely no shortage of potential benefits to investing in altcoins. First and foremost, altcoins could very well be the future of cryptocurrencies. If one token is capable of doing what multiple tokens can do all at once, chances are good that the one token will be the go-to choice for most people.
– You also don’t have to choose a winner when investing in altcoins. You simply have to choose which altcoin you want to invest in and watch it grow. If one token does become the standard, you’ll have made a great investment. If not, you’ll still have some exposure to the digital asset space.
– Another potential benefit of investing in altcoins is that you can diversify your digital asset portfolio. If you choose to invest in several altcoins, your investment can be less risky than putting all your money into Bitcoin.
Cons
– The biggest con of all when investing in altcoins is that they are not proven to be worthwhile investments. Most of these altcoins are still in their early stages and have not proven themselves to be valuable enough to survive. If you do choose to invest in altcoins, you’ll want to be careful about which ones you choose.
– You might also have to deal with some messy tax situations if you decide to sell your altcoins. Depending on which country you live in, you could be required to pay taxes on the gains from your altcoin investments.
– You also might not be able to cash out easily. Many exchanges that support altcoins also support Bitcoin, Ethereum, and other major digital assets. If you want to cash out in fiat currency, you’ll likely have to sell your altcoins for Bitcoin or Ethereum. This may limit your ability to get cash out of your altcoin investments quickly.

How to buy altcoins?

If you want to buy altcoins, you’ll need to find an exchange that offers altcoins as a trading pair. You’ll first have to make a fiat currency deposit into the exchange. Then, you’ll select the altcoins that you want to purchase. After that, you’ll place your order and wait for it to be filled. At this point, you’ll have altcoins in your trading account. However, if you want to sell the altcoins and receive cash, you’ll likely have to sell them for Bitcoin or Ethereum. Then, you can withdraw the Bitcoin or Ethereum and sell it for cash.

Final words: Is investing in Altcoins worth it?

Altcoins are a hotly debated topic in the digital asset and blockchain space. Some people believe that altcoins are unnecessary and that one blockchain network should be able to hold multiple tokens. Others believe that altcoins have a valuable place in the ecosystem, especially if one blockchain network isn’t robust enough to hold all the tokens that people want. While there is no telling whether or not altcoins will ever be as successful as Bitcoin, they do have the potential to be a successful investment. You just need to make sure that you’re picking the right altcoin and that you have a good strategy for when and how you plan to sell it.