Not many people have the accurate understanding of how cryptocurrencies work, but most of the people are somewhat familiar with Bitcoin. However, the surprising fact is that there are multiple other cryptocurrencies available in crypto space, known as altcoins, which are undoubtedly an intriguing facet of the cryptocurrency landscape. But numerous investors are not well versed with these coins and have any questions regarding investing their money in these altcoins, as these are not a part of cryptocurrency portfolio.
What are Altcoins?
Altcoins, also known as Bitcoin alternative, can replace or improve at least one Bitcoin component to some extent. There are already hundreds of altcoins available in the market and each day, more are being added. Some people believe that altcoins are just Bitcoin clones, but as a point of fact, most altcoins are more than just Bitcoin clones and possess minor changes in their characteristics like hashing algorithm, transaction speed, and even distribution method. Few are even better or different than bitcoin for example. Litecoin or Monero. Few of them have survived for very long. Litecoin was one of the first altcoins in the market that used a different hash algorithm than Bitcoin. It has a much higher number of currency units and is, therefore, referred to as silver to Bitcoin’s gold.
First Altcoin – Namecoin
Created in 2011, Namecoin was the first altcoin developed for decentralizing domain name registration, which was otherwise making internet censorship a difficult task. It also functioned as a currency during its short lifespan and remained as the most successful altcoins throughout.
Let’s look at some of the alt coins:
SiaCoin – SC: Founded by Nebulous Inc, a Boston based start-up, SiaCoin is among the top 40 coins available in the market that are circulating nearly 33 billion in number.
Cardano: Cardano is home to the Ada cryptocurrency, which can be used to send and receive digital funds. This digital cash represents the future of money, making possible fast, direct transfers that are guaranteed to be secure through the use of cryptography.
EOS: The Most Powerful Infrastructure for Decentralized Applications. Founded by Brendan Blumer & Dan Larimer. Currently the market supply of EOS is 800 Million tokens.
Ethereum: Created by Vitalik buterin in 2015. Ethereum is a currency as well as blockchain platform, which is powered by Ether. Ethereum is currently the top blockchain being used for raising funds for the project via smart contracts.
Dash: Formed from two words, Digital and Cash, transactions in Dash are rapid and instant. Dash is among the top 15 digital currency currently.
Investing in Altcoins. How to Choose best altcoins.
As compared to other cryptocurrencies, Altcoins are very volatile and highly prone to price manipulation, as they have quite low market caps. Usually, wealthy traders, often called whales, invest a significant amount of capital in small priced coins to build hype around it. This ultimately results in the price to skyrocket. As soon as the price plunges, the wealthy traders sell their coins and make huge profits out of it, but this immensely impacts the gullible investors. This process is usually referred to as pump and dump.
So, if you are planning to invest your money in altcoins and do not wish to lose it in pump and dump, you should look forward to making long term investments. You can always research about the coins that have immense potential and exhibit overall good health. So, if you come across altcoins that have active communities, have developers who keep improving the source code of the coin, or if the coins exhibit high liquidity, then you can consider investing your hard earned money in that altcoin.
While putting your money in altcoins, you should ensure that you do proper research. Always check the team, technology, and scalability of the project. If you come across a hype propagated by coin communities, then you must avert yourself from making an ill-informed investment. You should never invest in anything that you are unable to understand. And you must research about day-trading even before you think about stepping forward to high volume-short term trading.
Note: This is just a informative article and is not a investment advice. Investors are solely responsible for the investments.