Back in 2009, it was hard to predict the future of cryptocurrency. Founded by Satoshi Nakamoto (a pseudonym for whoever penned the original whitepaper), Bitcoin was the digital currency pioneer, introducing the world to a new way of trading. As with any revolutionary development, the acception came later. There were plenty of experts claiming Bitcoin would not last a few years, let alone become a feasible alternative to traditional fiat currency. But in this guide to altcoins we will reveal all the myths and give you the detail description.
Those critics were eventually proven wrong. Today, Bitcoin is not only worth thousands more than when it was just a conception. But it is also now one of several coins that have all contributed to a worldwide metaverse takeover.
While these experts underestimated the coin as a concept, a great deal underestimated the technology to formulate it. Blockchain, in many ways, is more game-changing than Bitcoin itself. It has become the springboard for these alternative tokens to challenge Bitcoin as a leader in the crypto market and develop into digital entities that will undoubtedly play a prominent role in the new world of Web3.
What Exactly Are Altcoins?
At one stage, it was only possible to trade Bitcoin on the crypto market. During this domination of the digital currency field, any other rival that came along was always defined as the original, which is why they were an “alternative”.
Today, however, there are an estimated 19,000 individual cryptocurrencies (far more than created a few hundred during those first few years), and their unique utilization of blockchain technology makes them more than just an alternative to Bitcoin.
Although Bitcoin is still ahead of the market in terms of price, many of these coins are scaling in ways that set them apart. In fact, according to experts, the second largest player, Ethereum, could overtake Bitcoin as the world’s largest coin by the 2030s.
How Do You Invest In Altcoins?
With a number of these coins setting up a stall in the run-up to Web3, for prospective investors looking for a place to put their cash, it is crucial to understand altcoins in the context of 2022.
In other words, just as experts could not predict the trajectory of cryptocurrency back in 2009, nor can they predict exactly how each altcoin will perform ten years from now. Therefore, although it is easy to look at these altcoins as stepping stones toward the looming metaverse, investors must block out the path ahead and look at the stability right now.
There are plenty of cryptocurrencies currently in existence. Narrowing them down is useful to look at how exactly each altcoin works. With this in mind, here’s a quick rundown of each alternative trading type.
The most popular Altcoin types
Perhaps the most popular type of coin, mining-based tokens are run by several technologically proficient computer networks. Inside blocks stores the information of every transaction and computers solving complex mathematical problem validate them. Once the problem appears, the block is confirmed, and a new block appears.
There are many reasons to admire this method. After all, Bitcoin itself is a mining-based coin. But having said that, there has been scrutiny about energy usage, especially concerning the amount of computer power needed to validate a block. With the world becoming more in tune with environmental issues, the mining process has been put under the spotlight and could affect how certain coins perform in the future.
When people think about cryptocurrency, they often try to rationalize it by comparing the sector to the traditional stock market. Security tokens are digital contracts that define partial ownership of an asset (much like owning stocks). They are undoubtedly stable avenues for investors looking to go from the stock market into digital trading.
Several altcoins have pegged to another asset value (typically the US dollar). People know them as stablecoins, and they track the underlying asset to keep the coin’s price equivalent to the tethered currency. For investors looking for assurance and transparency, stablecoins could be a good choice, but there was a de-pegging debacle.
Despite their moniker, both Terra and Tether de-pegged from the US dollar back in May 2022, causing it to collapse to just a few pennies. It is due to the automatic stabilizers failing to keep up with orders from certain traders selling their positions. It points to an ironically unstable future when it comes to their concept, but having said that the de-pegging debacle was just one issue in an otherwise solid conceptual journey.
Looking at the more quirky side of the cryptocurrency market, meme-coins are a form of cryptocurrency that has grown their notoriety through social media and meme communities such as Twitter and 9GAG. These have a typical lottery nature, increasing in price rapidly (along with certain social media and meme community trends) before falling away at the knots rate. Dogecoin, for instance, is a good example of a meme-coin that soared in popularity after an endorsement from billionaire Elon Musk. Since then, there was a dip arguably caused by the attention increase to the rival coin Shiba Inu.
Utility coins are perfect for a specific purpose. While a user could trade a stablecoin or mining-based coin for essentially anything, a utility coin – for dApps or blockchain gaming platforms. In recent years, people associated them with ICOs (initial coin offerings), which are a way for dApp developers to raise money for their blockchain projects, offering utility tokens for sale before the project launch. In this way, when the project is underway, users already have the coins they need to utilize them.
What Are The Most Popular Altcoins?
Some altcoins are making waves in the market today. Here is a list that narrows them down to the most widespread, as of late 2022:
Anyone looking to trade Ethereum would be dealing with the second most valuable coin in the market. Ethereum is a revolutionary altcoin that may overtake Bitcoin in around ten years. It is a form of digital payment, but, as mentioned previously, the world it has created goes far beyond currency. The Ethereum network is a place to build, create, publish, monetize, and innovate. With many dApps constantly in development, as smart contracts that give creators free rein over the blockchain, it is steadily turning into a solid foundation of Web3.
That was the first stablecoin, and, before the de-pegging scenario, it was one of the most stable, transparent, and cost-efficient cryptocurrencies. When it lost its peg, every other cryptocurrency plummeted, proving its importance and prominence within the wider system.
Looking again at another stablecoin, the USD is backed by $1 in reserve and regularly audited by a major accounting corporation. Running it on the Ethereum blockchain, and, in March 2021, we heard the report that Visa would facilitate its use in its payment network, which was a big step in the conjoining worlds of digital and traditional finances.
Created as a utility coin, Binance was originally built upon Ethereum’s blockchain but has since moved out to Binance’s blockchain network. After the move, Binance developed several real-world uses and application opportunities, including traditional payments, travel bookings, and online services. Every quarter, Binance buys back its coins and burns them to drive demand. The idea here is to increase the value of the remaining coins. The more Binance coins become scarce, the higher the circulating price.
XRP is a coin created on the Ripple Ledger Network. Unlike many other cryptocurrencies, this is a coin without mining opportunities. Instead, there is a limited number of coins (approximately 100 billion XRP), that already exist, and each transaction is verified through polls conducted amongst participating nodes. You can utilize each of them to buy more XRP, exchange for other cryptocurrencies, or finance transactions on the Ripple network.
As previously stated, there are a large number of altcoins available. Some other popular coins right now include:
What To Consider Before Investing
Once investors decide where to put their money, the rest of the process is relatively simple. But there are still some factors to consider. Back in 2009, people were unsure about Bitcoin because of the implicit market volatility. In many ways, it has not changed.
Cryptocurrency is market-driven entirely by sentiment, which means the users and investors themselves determine what the price of certain coins will be at any given time. If several investors suddenly get cold feet about a popular altcoin, for instance. Then their movements could swing the pendulum in a direction that would have been unforeseeable. If you were to trade Bitcoin, Ethereum, or any other coin, then each price could rise and fall in an essentially unpredictable way. That makes it an incredibly difficult market to pin down. It is, however, perfectly achievable. It is simply necessary to be aware and vigilant before you step into it.
As well as this, prospective investors must focus on an altcoin’s technical capacity. Coins such as Solana have done increasingly well. It is because they provide high functionality at a relatively low cost, making them highly attractive for investors looking to make the most out of their portfolio without incurring a loss.
As well as this, several crypto whales are keen to invest in coins that have value both in the monetary and innovative sense. In this way, the higher the technical capacity of a coin, the more attractive it becomes as a trading vehicle. It means its price could steadily rise as more users begin to take advantage of its capabilities.
Conclusion: What Is The Best Altcoin To Invest In?
Several altcoins are performing positively in the market right now, which makes an investment decision rather difficult, especially for first-time investors. It is hard to argue against Ethereum’s prominence in the market, especially when it comes to the incoming world of Web3.
When people were underestimating Bitcoin in 2009, so too were they underestimating blockchain and how it might be utilized. Out of all cryptocurrencies, Ethereum is making the most out of this technology. It is a mine-based coin, but there is an incoming merge that will allow it to run on POS (proof of stake).
While Bitcoin and other altcoins run their mine-based system through POW (which determines a new block through competition and a vast amount of computer energy), POS will pick a validator at random. Effectively canceling out the power-eating rival and allowing all validators to get a fair chance of earning more ETH. This is due to make it a far more environmentally stable and efficient network, further widening its scope when it comes to thriving within the metaverse. With ETH also set to overtake Bitcoin in the next decade, deciding to buy and trade Ethereum is certainly a legitimate alternative.
But hold on, we hear you say, what about the stepping stone analogy? Didn’t you advise that an investor should look at the coins right now and not the path they might be heading down in the future? Well, yes, but Ethereum is not just a stone. It is a temple, constantly rebuilding itself and forming a spire that points toward a clear trajectory. In this way, it is hard not to take the future into account when investing in ETH today, especially when Ethereum is already reaching so high into the ether.