Crypto altcoins and their varieties
What comes to your mind when you hear the word “crypto”? Must be Bitcoin, right? Generally, ordinary people would think that “crypto” is synonymous with Bitcoin. This is very reasonable due to the fact that Bitcoin was the first crypto asset to appear. Gradually, many altcoins followed Bitcoin in the meta world. Altcoin stands for alternative coin. Let’s take a closer look at what altcoins are!
What are Altcoins?
The altcoin is a term for crypto assets other than Bitcoin. Crypto assets are divided into two types, namely tokens and coins. The term altcoin is a combination of the words “alternative” and “coin”. Altcoins use blockchain technology to securely carry out peer-to-peer transactions and are marketed through both “exchange centralized” (centralized) and “decentralized” (not centralized).
Also, read the article on the differences between Centralized Exchange (CEX) and Decentralized Exchange (DEX).
Getting to Know Altcoins
Mining-based
Mining-based coins are coins whose production is mined into circulation built by a network of computers capable of solving complex mathematical formulas. Bitcoin, Ethereum, Litecoin, and Dogecoin are altcoins that are classified as mining-based coins.
Stablecoins
Stablecoins are crypto coins whose value is stable and does not fluctuate like coins in other “cryptocurrencies”. Stablecoin prices refer to the value of a fiat currency such as the US dollar (USD) or the price of a commodity such as gold. Maybe you’ve heard the term Tether (USDT)? Well, USDT is a popular stablecoin. In addition to USDT, there are USD Coin (USDC), Binance USD (BUSD), and Dai (DAI). Stablecoins are very useful as a reference for the value of crypto assets along with the development of the De-Fi utility.
Memecoin
Named after a meme meaning a joke, meme coin is a popular altcoin whose value comes from its community buy-in value. Unlike Bitcoin, whose value is more closely related to market fundamentals such as scarcity and potential market cap, Memecoin often enters the crypto ecosystem in bulk and is bought by trend followers and influencers.
Similar to NFT, crypto insiders say that the value of Memecoin is shaped by the online community. Memecoin’s value is also constantly falling and rising, but its track record is lower than that of major cryptocurrencies like Bitcoin or Ethereum.
Take for example when Dogecoin entered the crypto scene in 2013, initially, Dogecoin was a satirical joke adapted from the word doge and created from the Shiba Inu dog meme. However, this meme coin went viral with a market cap of US$30 billion. High-profile celebrities like Elon Musk and Snoop Dogg are also known to own Dogecoin.
But no matter how popular Memecoin is, they will always depend on the community hype so investing in Memecoin is riskier than Bitcoin and other altcoins. Some crypto investors are also starting to speculate on determining the long-lasting Memecoin by factors other than popularity. Even the co-creator of Dogecoin is now being criticized for the potentially dangerous get-rich-quick trend of social media influence.
Security Tokens
Before discussing what a security token is, you should know what security and a token are. Securities are financial instruments with tradable values such as stocks, bonds, etc. Securities also have certain criteria that are monitored by regulators. Well, meanwhile token is a representation of a certain ecosystem, in this case, a company. Tokens represent assets or utilities issued and owned by a company or government. Then the tokens will be traded in a public sale.
So, it can be concluded that Security tokens are crypto assets that represent ownership in some company or external asset. Its value is pegged on a real assets such as gold, houses, commodities, real estate, and company shares. However, securities tokens remain digitally based on the blockchain, even if the underlying asset is in the form of real assets.
Securities tokens differ from utility tokens in that they are specifically designed to be investments. If a company issues a securities token, it will be marketed through an STO (Security Token Offering) which must be registered with the financial services authority of each country.
Governance Tokens
Governance tokens are utility tokens to buy voting privileges, for example, the opportunity to poll the entire blockchain. As the name suggests, Governance tokens give users voting power that can change the blockchain ecosystem.
In the world of Decentralized Finance (Defi), where crypto holders carry out complex transactions that generate large APY (similar to lending and trading transactions), the Governance token arises from ideas that are democratically pooled by coders, developers, and the crypto community.
However, the complexity of Defi can be a bottleneck for many people and can contribute to the level of volatility or price changes in cryptocurrencies in general. Most users consider Governance tokens after they have plunged into easier crypto investment instruments at the beginner level.
Utility Tokens
As the name implies, utility tokens are tokens that have a certain utility. This token can usually be used to buy various products from the token issuer. Although it cannot be considered like a coin, utility tokens still have value and have more functions than coins.
Utility tokens can provide value to investors in many forms. For example, giving users access to future products or services. When a tech start-up creates a digital product or service, it will make an ICO (Initial Coin Offering). Here the company will sell its Utility token which can be used by investors for payment toward products within the company platform.
For example, Uber tokens can only be used to pay for Uber cars, but cannot be used to pay for anything else. If you want to use Uber tokens to buy other products, then you must first exchange them for fiat or cryptocurrencies such as Bitcoin.
In practice, the use of coin and token terminology is still considered the same. However, the majority of blockchain industry insiders agree that coins are cryptocurrencies and tokens are crypto assets other than coins. Altcoins are alternative coins whose types have been mentioned in this article.
That’s the discussion about altcoins. Are there any altcoins that interest you? Don’t forget to visit the Litedex, Instagram, Twitter, YouTube, and TikTok websites to keep getting updated information from us!
