An altcoin is any cryptocurrency that’s NOT Bitcoin.
Altcoins operate according to their own set of rules. And most are either trying to improve upon Bitcoin or to satisfy an entirely different use case — that’s the headline answer, at least.
If you want more detail, read on.
Do Altcoins Work Differently To Bitcoin?
For all intents and purposes, not really.
There isn’t much difference between how Bitcoin and altcoins work. At least, not on the surface.
Both Bitcoin and altcoins require a:
- Private key: to access, manage, and send funds from a digital wallet
- Public key: to receive funds from another digital wallet
Altcoins also record transactions on a distributed ledger with blocks of transactions stored across multiple devices. This ensures altcoins can maintain an immutable, public record of all activity on their corresponding blockchain.
Most altcoins also use cryptography and mathematical proofs to confirm and validate transactions on their network.
Do Altcoins Use The Same Rules As Bitcoin?
Here’s where the main difference lies.
Bitcoin and altcoins follow different governance structures, which is why so many altcoins exist, and different variants of Bitcoin exist (Bitcoin Cash, Bitcoin SV, etc.).
Let’s look at Bitcoin versus an altcoin called Litecoin as a concrete example.
Bitcoin will only ever have 21 million in circulation with new Bitcoin mined roughly every ten minutes. Litecoin, on the other hand, will one day have over 84 million in circulation — with new Litecoin mined every 2.5 minutes.
In theory, Litecoin’s set-up makes it a quicker solution than Bitcoin, meaning faster payments processing and making it more applicable to everyday use cases.
Litecoin is just one such example with these traits; other famous altcoins include:
…aaaannnnddd — you guessed it, EUM.
Why Do Altcoins Like EUM Exist?
Typically, altcoins like EUM exist to serve a different audience to Bitcoin.
Many see Bitcoin as an ideal store of value. However, it’s not so useful for day-to-day spending. Altcoins fill this void. How so? Thanks to three core features.
- Quicker: altcoins are typically faster than Bitcoin, which means transactions process quicker, and they’re more appropriate for daily use
- Cheaper: altcoins often have lower transaction fees than Bitcoin, meaning you don’t lose money whenever you buy something in crypto (the Elitium Card guarantees 0% fees on all spending, for example)
- More dynamic: altcoins like EUM can enable custom smart contracts, opening up an ecosystem of use cases above and beyond just spend, spend, spend
Those are the benefits.
However — while altcoins are exciting, their sheer volume creates drawbacks. On the one hand, they can be very volatile: most are relatively new, meaning prices can surge and fall overnight.
Plus, it can be hard to carry out due diligence on alternative cryptocurrencies if they offer little insight into their operations.
Two Primary Types Of Altcoin
Despite there being more than 5,000 altcoins, two types warrant most of your attention.
Stablecoins are cryptocurrencies pegged to the value of an underlying asset (Tether mirrors the value of the US Dollar, for example). They do this to combat the inherent volatility of cryptocurrencies and offer a price-stable crypto-solution.
Digital tokens are cryptocurrencies that serve a specific ecosystem. For example, EUM serves as the currency of the Elitium Digital Economy — and it enables features that span holding, spending, investing, and trading.
Key Takeaways On Altcoins
Altcoins are a different species to Bitcoin. And you need to exercise caution if buying, using, or investing in them.
That said, if you trust the team behind the coin and see value in the use cases, they can be both a very appealing investment proposition and a complementary addition to anyone’s lifestyle.
Do your research, and you may just find the altcoin of your dreams.
Discover Value. Discover Elitium.