Alt coins are becoming a big talking point for new investors so are you keen to understand more about them here is an explainer on what exactly are altcoins
bitcoin's appearance as the first peer-to-peer digital currency has paved the way for many others to follow all coins are essentially all the other cryptocurrencies that were launched after bitcoin's success literally the word is a combination of two words alt and coin.
Altcoins are basically enhanced versions of bitcoin as they aim to overcome the cryptocurrencies shortcomings and extend its capabilities such as transaction speeds or energy efficiency altcoins are based on the same principles bitcoin they use the blockchain as an immutable decentralized public database that authorizes and records transactions only if there is a consensus that they are valid all coins were often pitched as better replacements for bitcoin and aim to achieve alternative aims or solve perceived shortcomings.
All coins currently amount for nearly 60 percent of the total cryptocurrency market the first world coins were launched in 2011 and by now there are thousands of them but they all vary from each other in many ways they also have a wide price range ranging from a couple of cents to thousands of dollars while some are a passing trend others have a more long-term horizon while there are different types of altcoins each one offers its own competitive advantage and unique value proposition many altcoins use other consensus mechanisms to validate transactions and build blocks.
Since all coins are such a big part of the market every crypto investor must understand how they work broadly speaking there are various types of altcoins like stable coins mining based coins security tokens utility tokens stable coins pack their value to a basket of goods like feared currencies precious metals or other cryptocurrencies so they combine the
advantages of cryptocurrencies and tokens without the volatility of their prices it is also possible to earn interest on stable coins by lending them out or through certain savings protocols tether is the most valuable stable coin by market capitalization and is pegged to the us dollar this type of cryptocurrency uses a process called mining to verify transactions and add more coins to the supply miners use devices to solve mathematical equations.
Typically the first miner to solve the equation gets to verify a block of transactions in return miners who verify blocks receive crypto awards one disadvantage of mining is that it requires significant energy security tokens are digital in origin but more like traditional stocks and often promise equity in the form of ownership or a payout to holders the prospect of prize appreciation for such tokens is a major draw for investors security tokens are generally offered to investors through icos or initial coin offerings utility tokens are used to provide services within a network for example they might be used to purchase services pay network fees or redeem awards a utility token is much better than a coin in terms of versatility investors can purchase these tokens that can help facilitate transaction on the issuing company's platform unlike security tokens utility tokens do not pay out dividends or part with an ownership stake file coin is a good example of utility token forks and the creation of new blockchains.
Cluster of transaction records the public ledger are structured into blocks on a cryptocurrency blockchain each block is then linked to the next using complicated encryptions all pass transaction in all preceding blocks must be confirmed before a new block can be added to the existing chain there must also be consensus that everything is in order a new blockchain is formed with new regulations voted upon by those who validated the fork and are ready to lock transactions.
Meanwhile the forks other prong continues to function normally altcoins are attracting investors and are great for portfolio diversification and wealth creation backed with proper research altcoins could be a worthwhile investment you can buy your preferred altcoins from various trusted crypto exchanges like fuzzy rex.