The Beginner’s Guide to Altcoins
When asked about cryptocurrencies, the word on everyone’s lips is Bitcoin. The crypto industry has spawned a vast array of alternative coins – altcoins – which, inspired by Bitcoin’s example, are now carving out their own space in the market.
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- What are Altcoins?
- How do they work?
- Altcoins vs Bitcoin
- Sage FX & Altcoins
What are Altcoins?
When asked about cryptocurrencies, the word on everyone’s lips is Bitcoin. Crypto newbies and experts alike wish they’d been among the savvy few who invested in Bitcoin back in the early 2010s. As the first digital currency on the scene, it is no surprise Bitcoin has grown to dominate the crypto landscape.
That’s not to say that it holds a monopoly. The crypto industry has spawned a vast array of alternative coins – altcoins – which, inspired by Bitcoin’s example, are now carving out their own space in the market.
Over 6,000 altcoins are now listed on CoinMarketCap, and a possible market cap growth of 27000% in 2021. You may well be wondering how long Bitcoin’s supremacy can possibly last. But before you rush off to buy “the next Bitcoin”, it is important to understand how altcoins work, how they relate to Bitcoin in the market, and which ones are worth your attention.
How do they work?
Altcoins, like Bitcoins, represent the digital alternative to fiat money. Traditionally, if you wanted to send a payment, you would rely upon banks, clearinghouses, and other intermediaries to process and record the transaction. The time taken to finalizing your transfer would vary, and you’d most likely incur fees along the way.
Blockchain technology allows you to cut out these intermediary bodies that are exposed to governmental and institutional pressures. Instead, your payment is recorded by powerful mathematical computers into a “block”. This block will be stacked into the “chain”, resulting in faster and cheaper transactions. This blockchain ledger is decentralized, immutable, and distributed, or in other words, impartial, unchangeable, and globally transparent.
Bitcoin may have been the pioneer in this technology but altcoins are actively utilizing and expanding it. Some, such as DASH, build directly off of the Bitcoin blockchain in “forks” to tailor the network to their needs. Others, such as Ether, are supported by entirely independent blockchain networks with new and improved capabilities.
Altcoins vs Bitcoin
Bitcoin is no longer the new kid on the block (pun not intended) and its shortcomings have become apparent, so there is considerable incentive for developers to market better and more efficient alternatives. For example, Bitcoin transaction fees are relatively high, and speeds slow: where Bitcoin processes 7 transactions per second, Ethereum handles 30, whilst Tron can manage an impressive 2,000. Some competitors, such as Litecoin, are switching to simpler hardware infrastructure in order to make their energy demands less taxing on the environment.
Others have enhanced blockchain in order to solve new problems. The integration of smart contracts and “decentralized applications” (Dapps) in some altcoins allows them to extend crypto usage in everyday life, incorporating everything from games and entertainment to trading networks and lotteries. Altcoins are proof that cryptocurrencies are growing in real-world credibility and have an exciting and dynamic future.
Investing in Altcoins
So if you missed the memo on Bitcoin back in 2009, you might leap at the opportunity to invest in an up-and-coming altcoin. Altcoin price trajectories have so far tended to shadow Bitcoin, but if more investors diversify away from Bitcoin, liquidity could increase across the crypto market and strengthen the independent prospects of altcoins. Prices are still volatile, which means great opportunity, but also great risk.
Indeed, it’s worth bearing in mind that no altcoin has yet managed to knock Bitcoin off the top spot. Bitcoin’s fame and liquidity still makes it the first port-of-call for institutions exploring crypto integration; altcoins must wait their turn to be picked up by more platforms and vendors.
And not all altcoins are born winners. Unfortunately there is a higher risk of fraud or loss with the less established coins, and with such a vast array to choose from, the pressure of making a sound investment decision might seem overwhelming.
This is where Sage FX can help!
Sage FX & Altcoins
Sage FX has curated a collection of the best altcoin exchange pairs available so you know you’re investing smartly. Selected for to their high liquidity and security, you’ll find some of the biggest market cap holders behind Bitcoin, such as:
- Ethereum (ETH)
- Ripple (XRP)
- Litecoin (LTC)
- Doge (DOGE)
Check out our full list of crypto pairs – you have 19 to choose from!
Remember, you don’t have to choose between altcoins or Bitcoin! Investing in both is a great way of diversifying your portfolio, and Sage FX allows you to manage all your investments in one place.
Stay on track with your altcoin adventure – visit our News section for all the latest crypto developments.