Altcoins refer to any cryptocurrency that is not bitcoin. Naturally, there are loads of such altcoins in the market – over 10,000! Since bitcoin presently holds around forty percent of the total market cap, over half of the market value floats in altcoins.
All altcoins are not the same. Some of them cost pennies and others cost hundreds of dollars. A few have long-term applications, while others are hardly going to stay around. Keeping all that in mind, here are the four types of altcoins.
Native cryptocurrency
These are the coins originally made to run on specific blockchain networks. For instance, bitcoin is a native coin because it’s the currency used in the bitcoin blockchain. Moreover, the second-largest crypto by market cap, Ether, happens to be Ethereum network’s native coin. You will have to pay Ether transaction fee to run the applications, such as smart contacts on the Ethereum network.
Tokens
Tokens are the basic units of value that runs on a present blockchain and are useful for particular purposes in that environment. The idea of usage is simple – exchange the American dollars for tokens.
For instance, Chainlink is made over the Ethereum blockchain. Developers tend to use it for converting real-world information into blockchain-based formats that they can read through smart contracts. Chainlink services are paid for by Link (the token).
Thus, investors can purchase Link when they feel the demands for contract-based services will increase. The use of Chainlink tech and the Link demand rises in tandem, which further increases the value of the latter.
Stablecoins
A stablecoin was made to provide the crypto and token benefits minus the price volatility. One way for them to achieve this is by tying the value to a present currency. For instance, Tether – the biggest stablecoin in terms of market capitalization – stays connected to the American dollar.
Price appreciation of stablecoins will not help you earn profits. However, there are loads of applications for coins whose value stays stable. For many people, stablecoins are a reliable way of holding funds in the cryptocurrency exchange and converting them into other cryptocurrencies, instead of getting the converted to U.S. dollars. Others use stablecoins for easier global transactions.
Forks
In case of a crypto blockchain, several groups of recorded transactions get organized in blocks. Every block remains linked to the next through complicated cryptography. For newer blocks to be added to the present chain, the earlier transactions in the earlier blocks also need to be verified. There has to be a consensus regarding whether everything is right in the chain.
Forks tend to happen time and again, making new protocols and cryptos all the time. Bitcoin cash is the fork of the actual bitcoin blockchain, while the Ethereum system has a fork known as Ethereum Classic.
The final note
It is important to understand the viability and market conditions of an altcoin before going for it. To know more about different altcoins and their market cap, you can talk to the experts at Yuan Pay Group.
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