Altcoin refers to any digital assets, such as a coin or token that is not Bitcoin. Because Bitcoin is the original cryptocurrency, it inspired many people to create their own digital assets as an alternative coin, hence the term ‘altcoins’
What is altcoin?
Altcoin is a combination of two words “alternative” and “coin” to form altcoin. After the success of bitcoin, many other peer-to-peer digital currencies paved the way. Altcoins are trying to target the perceived limitations of Bitcoin. Altcoins have to create competitive strategies to succeed against Bitcoin.
Types of Altcoins
Types of altcoins consist of mining-based cryptocurrencies, stablecoins, security tokens, and utility tokens. Some altcoins will change Bitcoin’s rules sufficiently to do something uniquely and may have a particular application. Examples of altcoins include Ethereum and stablecoins such as Tether and USDC.
These altcoins have a mining process which generates new coins by solving problems to unlock blocks. These coins are more similar to Bitcoin than other altcoins. Ethereum is the most popular mining-based altcoin.
Stablecoins are an improvement based on Bitcoin because they reduce volatility. The value of the coins exists in currencies. Popular backed altcoins include the US dollar, the euro, and gold. DAI is one example of a stablecoin.
These altcoins are often launched in an initial coin offering (ICO). Security tokens resemble traditional stocks, and they provide a type of dividend like payout or ownership in a business.
Utility tokens provide a claim on services and they are sold as part of an ICO. Filecoin is an example of a utility token offered in an ICO. Filecoins are created to be exchangeable for decentralized systems.