Bitcoin is revolutionary, but it’s not perfect. Although BTC is the most recognized and long-standing digital asset, there are numerous cryptocurrencies, in particular alternative cryptocurrencies (altcoins) that seek to overcome the dominance of Bitcoin. But first, what are altcoins?
Altcoins are alternative cryptocurrencies that were develop to exist outside of the Bitcoin monopoly and, mainly, to respond to the problems of scalability, decentralization and security, which Bitcoin has a hard time solving. It is true that Bitcoins peer-to-peer payment network has pave the way for it. Without a doubt, itcan be decentralize, like Bitcoin, but they are distinguish by a greater degree of privacy and efficiency in their transactions, which are faster.
Among the thousands of altcoins available, the first was Namecoin, created by Andrew Chow in 2011. But it took off and grew exponentially, giving rise to Dash, Ethereum, EOS, Litecoin, Monero, Ripple, and others. On its own, ETH accounts for approximately 30% of the market capitalization of the crypto market, which comprises more than 5,000 currencies? Although altcoins are achieving recognition, it is worth asking how they work and what forecasts they have.
How do you trade altcoins?
At one time, enthusiasm for altcoins faded due to interest in Bitcoins uptrend; but today, altcoins are still growing and arguably even undergoing a revival.
They are typically bought and sold on various cryptocurrency exchanges, which fall into two main categories: centralized and decentralized. But each exchange offers a different set of altcoins. However, most exchanges advise against buying altcoins with fiat currencies. This implies that traders must exchange BTC, ETH or USDT for others.
While centralized exchanges (CEXs) typically have a more extensive screening process. Decentralized exchanges (DEXs) like Uniswap allow traders to buy altcoins listed for sale by the general public. Despite their drawbacks, CEXs are often the safest option for large-scale operators.
However, the difficulty of trading it lies in the need to store them in a wallet. While it is possible to store bitcoins and altcoins in some CEXs. It all depends on the characteristics of each cryptocurrency. Some altcoins are supported by public CEX wallets, while others can only be stored in wallets created by the developers themselves. Most crypto exchanges offer refunds, but better safe than sorry. In general, those who trade altcoins keep them in “cold storage” wallets, disconnected from the Internet, to protect them from prying eyes.
How do altcoins grow exponentially?
There are altcoins of all kinds and, although they all share certain characteristics. Most of them are designed for a specific use. Despite the fame of Bitcoin, it was actually Ethereum that kick-started the growth of the altcoins market.
Ethereum inaugurated this project, not only because it allowed users to implement applications and create associated tokens on the network, but because thanks to Ethereum, anyone can create a cryptocurrency. What’s more, the recent rise of decentralized finance (DeFi) and DApps, a concept that was born on the Ethereum blockchain, is also contributing to the rise of more altcoins.
Among the thousands of cryptocurrencies that exist, only a few have any real utility. The world’s first alternative cryptocurrency, Namecoin, is not even in the top 300 most active list. However, as people create better and more inventive solutions to the world’s financial problems. Altcoins are not see as an inevitable by-product, but as a necessary component of the process.
Should you invest in altcoins?
Cryptocurrencies are a long way from mass adoption. And that is unlikely to change until useful applications are developed for users. Geared towards the general public. Consequently, there is no doubt that investing in altcoins is a better option to mitigate risks in the volatile world of cryptocurrencies.
Little by little, they are reflecting the latest market movements. However, it present an opportunity to be part of that movement, which. Beyond betting on the right horse, aims to improve the sport in general.
Some recent investments by institutional benchmarks have been a huge boost for it. In June 2020, the international tech conglomerate Google announced the integration of its BigQuery platform with the Chainlink blockchain, a decentralized oracle network for data mining.
On the other hand, Grayscale Investments, one of the largest digital currency management companies in the world, has holdings of cryptocurrencies totaling almost 10 billion dollars, of which almost 2 billion correspond to altcoins. It would be easy to argue that if the great leaders do it, you should too. The reality is that every investment is risky and it is crucial to do your research before spending any money. We advise you to guide yourself by the following rule: if something seems too good to be true, it probably is.
