What is a Stablecoin or an AltCoin?
The cryptocurrency jargon can be confusing, and there are no set rules for navigating its products like those on a site like Amazon or Joker123. The crypto sphere is a maze of strange terms, with more developing every day. It is a process that leaves the uninitiated baffled under emerging terms like ‘stablecoin’ and ‘altcoin.’
The easiest way to start unravelling the terms you encounter in the world of cryptocurrency is to dive into the basics. What is a stable coin, and is it the same as an altcoin? The answers may surprise you.
What is an Altcoin?
Unsurprisingly, altcoin stands for “alternative coin.” It sounds impressive, but all this means is that the cryptocurrency token represents an alternative to Bitcoin, the original cryptocurrency. Any blockchain-based cryptocurrency that followed Bitcoin will fall under the category of altcoin.
Are Altcoins Important?
The Bitcoin concept started as an experiment. The idea was to create a trustless peer-to-peer system to reduce our reliance on centralised networks. On paper, Bitcoin was more successful than anyone could have imagined, but the reality is far different.
Bitcoin remains ill-equipped to handle high transaction loads because the authorisation of its transactions depends on consensus within the network. Every new entry enters a queue awaiting authorisation, and this can delay processing times and increase related costs. Ironically, the outcome is diametrically opposed to the Bitcoin developer’s lofty goals.
Altcoins address these inefficiencies by offering alternatives to those operating within the Bitcoin network. It takes Bitcoin’s decentralisation goal into a more practical model with scalable alternatives, and its reach develops as cryptocurrencies become more popular.
Types of Altcoins
Altcoins fall into one or more of the following categories:
- Stablecoins are asset-based. Should the currency crash, there is still value in the underlying assets to keep the altcoin’s prices steady.
- Mining coins offer evolving options—they emerge by solving algorithmic equations (similar to how a central bank would print money for circulation). Many of the earlier versions of altcoins fell under this category.
- Utility tokens are not investment vehicles. Rather, they pay for services within a network. You will not receive dividends or voting rights with these altcoins.
- Security tokens are the closest concept to conventional stock market instruments. Investors buy these altcoins as an investment and expect to receive part ownership or dividends in return.
Why are Stablecoins Gaining Popularity?
The first category of altcoin is the stablecoin. These stablecoins experience less price volatility than standard cryptocurrencies, thanks to their asset-backed structure. It underpins their value, providing more investor security and protection against market fluctuations.
Stablecoins represent a crucial step in the widespread acceptance of cryptocurrencies as a global payment method. Companies are loath to risk the fluctuations of a sentiment-driven market, including events like the 2017 Bitcoin price peak that dropped 50% of its value within the space of a few weeks.
Combined with the potential for altcoins to fail overnight and the lack of regulation, mainstream players find it too risky to accept volatile cryptocurrencies as a valid form of tender. Stablecoins solve this issue, sharing the risk to sellers through acquiring real assets and shoring up greater financial stability.
The Final Word on Stablecoins vs Altcoins
For now, Bitcoin is the most popular “coin” in the industry, and all other currencies take on the designation as altcoins. Stablecoins are one type of altcoin, but not all altcoins represent a stable investment. As stablecoins are closer in nature to traditional currency, it offers curious investors more of a sure bet for online shopping or gaming sites like Joker123.