What is an Altcoin?
There are numerous altcoins to invest in, but you may find yourself asking – what is an altcoin? Altcoin stands for alternative coin. It is basically any cryptocurrency that is not Bitcoin.
Why do Altcoins Exist?
The reason developers create altcoins is to provide new or additional features that Bitcoin does not have. Some also use very different protocols in order to verify transactions. Many developers have a different vision that they need their own coin to turn their imagination into a reality.
More Information on Altcoins
Altcoins belong to specific blockchains. When a new such platform is created, it will have its own coin or token that is associated with it. Coins are created independently of other cryptocurrencies while tokens use established platforms as their base.
Developers often create forks of existing blockchains to accomplish unique goals. Sometimes the purpose is raise money to help fund a specific project.
What are the types of altcoins?
There are many types of altcoins. Some belong to more than one category. Broadly the types include:
- Payment Tokens: These are used as currency
- Stablecoins: These attempt to reduce volatility by being pegged to things like fait currencies, precious metals, or even other cryptocurrencies.
- Security Tokens: These are tokenized assets made available via stock markets. These are regulated by the SEC.
- Utility Tokens: These can be used for purposes such as paying network fees or buying services.
- Meme Coins: These are often considered joke coins.
- Governance Tokens: These give holders rights such as being allowed to vote on a particular decentralized platform.
Altcoin Pros and Cons
While altcoins are important to cryptocurrency networks because they provide increased functionality and often fill in niches that create value for users, at the same time, they are much more volatile and less liquid than Bitcoin. Some are scams and others, while once popular, has lost the interest of the community.
For these reasons, while investors can make great profits by investing in altcoins, they also increase their risk.
What altcoins should you invest in?
Before you invest in any altcoins, you need to do your own research. Because they are so volatile, you should not expose yourself to too high a percentage on these risky assets. Here is a list of altcoins that have many adherents:
- USD Coin
The reason these particular coins are popular is that they utilize unique features that add value to the market. However, just because they are popular in the market does not mean they are not subject to the same fluctuations as other altcoins. Again, invest carefully and do your due diligence!
For those wanting help figuring out what altcoins to invest in, SoFi offers a robo advisor that automates the process. SoFi provides an all-in-one app that allows you to invest in crypto as well as stocks and ETFs. You will get a portfolio that is designed specifically for you and there won’t be any management fees. Your automated advisor provides a unique feature that makes your life easier. SoFi is cutting edge all the way.
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