Introduction to Altcoins
Alternative Coins (aka altcoins) are now becoming more common on the cryptocurrency scene. If you’re new to altcoins, then giving this your full attention will clarify more than a few things for your future trading.
What are altcoins?
Altcoins are essentially ‘alternatives’ to the well known cryptocurrency coin – Bitcoin, the first blockchain-based digital currency. Most altcoins were created to improve on Bitcoin, or to focus on a specific use case.
There are hundreds of altcoins. Some have a clear purpose (we’ll get into that later) and some are more novel, like Dogecoin, Potatocoin and Coinye (an altcoin dedicated to Kanye West).
Don’t confuse altcoins with tokens, like EOS and TRON, who have a parent coin (Ethereum). View a full list of cryptocurrency coins and tokens on CoinMarketCap.
The difference between Bitcoin, Ethereum, Ripple and Litecoin
There are three main altcoins that closely follow Bitcoin in the cryptocurrency hierarchy – Ethereum (ETH), Ripple (XRP) and Litecoin (LTC).
All three of these coins are all built upon the basic foundations of the decentralised network Bitcoin was also founded upon. Each coin is designed to improve upon and provide features that Bitcoin does not and therefore each coin has unique properties of its own. These coins encourage further innovation and decentralisation.
Before you trade altcoins, it’s critical that you understand what you’re dealing with. In the table below, we’ve compiled key facts, figures and risks on Bitcoin, Ethereum, Ripple and Litecoin.
|Bitcoin (BTC)||- First ever cryptocurrency - Decentralised with no government, institution or authority that controls it – creators are anonymous - Mined by computers connected to the internet - Limit of 21 million bitcoin||- Transparency of transactions from public ledger - Most well known and supported cryptocurrency||- Slow transaction time: 5.5 transactions per second - High transaction fees|
|Ethereum (ETH)||- An open software platform for developers to build decentralised applications that are intended to run as planned without any downtime, fraud or third party interference - Known for its ability to support smart contracts - No limit on ethereum||- Fast growing community - Provides ability to issue transparent governance for communities - Secure communications - Long term potential||- High inflation - Larger network complexity - Value of Ethereum is tied to its success - Contracts sometimes break at the expense of its users|
|Ripple (XRP)||- Connects banks, payment providers, digital asset exchanges and corporates to provide frictionless, real-time global payments - Used as a decentralised ledger for banks for the use as liquidity in cross border transactions - XRP currency exchange operated by Ripple||- Large corporate backing with large support team - Network is secure and anonymous - Value isn’t tied to its success as much as Bitcoin or Ethereum||- 60% of all XRP is controlled by Ripple (the company) - Ripple is centralised in current form - Has been accused of not being a real cryptocurrency as it is backed by banks|
|Litecoin (LTC)||- Open source peer to peer digital currency - Has a larger blockchain and faster transaction confirmation speed - Limit of 84 million tokens||- Lower transaction fees - Easier mining - Secure||- Blockchain will be larger with more orphaned blocks - Little innovation on top of Bitcoin|