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  1. Home
  2. Akademie
  3. 1.14 The fundamentals of altcoins
  • 1.01 This is why you can no longer ignore cryptocurrencies
  • 1.02 What are cryptocurrencies?
  • 1.03 Cryptocurrencies vs fiat money: similarities and differences
  • 1.04 Cryptocurrency coins vs tokens: what is the difference?
  • 1.05 Storing crypto: where and how?
  • 1.06 Understanding crypto wallet terms
  • 1.07 Best practices to keep your crypto safe
  • 1.08 What is Bitcoin?
  • 1.09 How Bitcoin price is defined
  • 1.10 Sending and receiving Bitcoin
  • 1.11 What is Bitcoin halving?
  • 1.12 Understanding Bitcoin nodes
  • 1.13 Can Bitcoin network be hacked?
  • 1.14 The fundamentals of altcoins
  • 1.15 The basics of blockchain technology
  • 1.16 Blockchain use cases
  • 1.17 What is mining in blockchain?
  • 1.18 How do mining pools work?
  • 1.19 Bitcoin mining difficulty & pre-mined coins
  • 1.20 What is Ethereum and how does it work?
Vorherige Lektion

1.14 The fundamentals of altcoins

In this lesson, you learn about the fundamentals of altcoins.

article
Zonda Team
13 Januar 2022
10 März 2022



Satoshi Nakamoto would not have imagined the scale at which the invention of Bitcoin panned out. Bitcoin laid the foundation atop which an entire structure comprising digital assets exist. Today, the cryptocurrency market with a capitalization of more than $2 trillion encompasses tens of thousands of digital currencies. These cryptocurrencies are broadly categorized into altcoins. From use-cases in different industries to tokens designed to follow an underlying asset - there are several types of altcoins. 

In this lesson, you learn about the fundamentals of altcoins. 

Contents

  • What are altcoins?
  • How do altcoins work?
  • Types of altcoins

What are altcoins?

Altcoins are the alternative coins to Bitcoin. The name altcoin is a mixture of the terms ‘ALTernative’ and ‘BitCOIN.’ Except for Bitcoin, all other cryptocurrencies are called altcoins. 

If Bitcoin, the first and oldest cryptocurrency, is the parent, altcoins are the children. Like how children resemble parents and have unique qualities, altcoins are similar to Bitcoin in certain terms and different in their ways. 

Most of the altcoins are created based on Bitcoin’s source code. Since Bitcoin is open-source, developers can create new blockchain-based protocols revising its source code. 

How do altcoins work?

As the fundamental source code is the same, altcoins work similarly to Bitcoin. Typically, altcoins have been developed to improve the current features of Bitcoin, such as transaction speed, along with extending its functionality to support specific use-cases. You may also come across altcoins completely different from Bitcoin’s original purpose: peer-to-peer payment network. 

Altcoins deploy a proof of work or proof of stake method to build their blockchain network. Bitcoin mainly works on a proof-of-work method which is an inconvenient and energy-expensive way to verify transactions. On the other hand, altcoins like Solana (SOL), Cardano (ADA), and Polkadot (DOT) use the proof-of-stake method. 

The Proof-of-Stake is a more energy-efficient method and enables an easier as well as quicker way to verify transactions compared to the proof-of-work. 

Types of altcoins

There are various types of altcoins catering to different use-cases and utility functions. Let’s take a look at the different categories of altcoins. 

Stablecoins

The main purpose of stablecoins is to control the constant price change in cryptocurrencies. Stablecoins follow the price of another stable asset like the US dollar (USD), Euro (EUR), etc. 

The use-case for stablecoins is mainly for savings or transactions but not for investments. Tether (USDT), USD Coin (USDC) are examples of stablecoins. 

Mining-based altcoins

Altcoins that use mining to verify transactions and create more coins fall into this category. Miners use hardware computers to solve mathematical equations in order to verify transactions and receive coins as rewards. 

Litecoin (LTC), Ethereum Classic (ETC), Monero (XMR) are examples of mining-based altcoins. 

Utility tokens

Think of utility tokens like the coins of a game. You need game coins to access and play. However, these coins do not represent a stake in the game. Similarly, utility tokens act as vouchers to access the products or services of a company. 

For example, Filecoin - a decentralized data storage platform, provides access to its services through its native token FIL. Basic Attention Token (BAT) enables a Web 3.0 ecosystem to reward creators and value user attention on the internet through its native utility token. 

Security tokens

Considering our example above, security tokens are like owning shares of the game. They represent a stake in an asset or a company. From an investment standpoint, the value of a security token derives from an underlying asset. For instance, a physical real-estate property can be digitally divided into equal shares which are represented by security tokens raised on the blockchain. In this case, the value of your security token is equivalent to the value of your share in the underlying asset - real-estate property. 

Examples of security tokens are Polymath, Swarm, Securitize, Bankex, etc. 

While altcoins open up innumerable possibilities to explore blockchain technology, they are highly volatile by nature. One thing is for sure, they have changed the landscape of the crypto industry.

DE

This material does not constitute investment advice, nor is it an offer or solicitation to purchase any cryptocurrency assets.

This material is for general informational and educational purposes only and, to that extent, makes no warranty as to, nor should it be construed as such, regarding the reliability, accuracy, completeness or correctness of the materials or opinions contained herein.

Certain statements in this educational material may relate to future expectations that are based on our current views and assumptions and involve uncertainties that could cause actual results, performance or events to differ from those statements.

BB Trade Estonia OU and its representatives and those working directly or indirectly with BB Trade Estonia OU do not accept any liability arising from this article.

Please note that investing in cryptocurrency assets carries risks in addition to the opportunities described above.

Nächster Lektion

1.15 The basics of blockchain technology

1.15 The basics of blockchain technology
Vorherige Lektion
16 / 1 / 22
Essentials
Economics
Investing

2.04 Understanding market capitalization

This lesson centers on understanding cryptocurrency market capitalization.

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2.04 Understanding market capitalization
16 / 1 / 22
Essentials

2.03 Common crypto trading terms

This lesson is a compilation of the most commonly used crypto trading terms.

Weiterlesen
2.03 Common crypto trading terms
16 / 1 / 22
Bitcoin
Altcoin
Essentials

2.01 Why to invest in cryptocurrencies

This lesson explains why cryptocurrencies might be a good asset to include in your investment portfolio.

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2.01 Why to invest in cryptocurrencies
14 / 1 / 22
Essentials
Trading
Investing

2.07 Measuring market depth and liquidity

This lesson explains market depth, market liquidity, and volatility.

Weiterlesen
2.07 Measuring market depth and liquidity
14 / 1 / 22
Essentials
Trading
Investing

2.08 Three major types of trade orders you need to know

This lesson explains three major types of trade orders and how they work. 

Weiterlesen
2.08 Three major types of trade orders you need to know
14 / 1 / 22
Essentials
Trading
Investing

2.09 Fundamental and technical analysis for crypto trading

This lesson focuses on explaining how fundamental and technical analysis will help you assess cryptocurrencies.

Weiterlesen
2.09 Fundamental and technical analysis for crypto trading
14 / 1 / 22
Essentials

2.10 Bull markets vs Bear markets

This lesson explains bull and bear markets and what you can do in each case.

Weiterlesen
2.10 Bull markets vs Bear markets
14 / 1 / 22
Bitcoin
Essentials

1.08 What is Bitcoin?

In this lesson, we dig deep into the roots of the crypto and blockchain tree - Bitcoin.

Weiterlesen
1.08 What is Bitcoin?
14 / 1 / 22
Bitcoin
Essentials

1.10 Sending and receiving Bitcoin

In this lesson, we explain how to send and receive Bitcoins.

Weiterlesen
1.10 Sending and receiving Bitcoin
13 / 1 / 22
Altcoin
Essentials
Ethereum

1.20 What is Ethereum and how does it work?

This lesson helps you decode Ethereum thoroughly.

Weiterlesen
1.20 What is Ethereum and how does it work?
13 / 1 / 22
Essentials
Safety

1.07 Best practices to keep your crypto safe

This lesson provides you with valuable tips and tricks to keep your cryptocurrencies safe.

Weiterlesen
1.07 Best practices to keep your crypto safe
13 / 1 / 22
Essentials
Safety
Wallet

1.06 Understanding crypto wallet terms

In this lesson, we take a deep dive into crypto wallet terms like public and private keys, wallet address, and ...

Weiterlesen
1.06 Understanding crypto wallet terms
13 / 1 / 22
Essentials
Safety
Wallet

1.05 Storing crypto: where and how?

In this lesson, we explain how and where to store cryptocurrencies.

Weiterlesen
1.05 Storing crypto: where and how?
13 / 1 / 22
Bitcoin
Altcoin
Essentials

1.04 Cryptocurrency coins vs tokens: what is the difference?

This lesson explains the differences between crypto coins and tokens. 

Weiterlesen
1.04 Cryptocurrency coins vs tokens: what is the difference?
13 / 1 / 22
Bitcoin
Altcoin
Essentials

1.03 Cryptocurrencies vs fiat money: similarities and differences

In this lesson, you will understand both the similarities and the differences between cryptocurrencies and fiat ...

Weiterlesen
1.03 Cryptocurrencies vs fiat money: similarities and differences
13 / 1 / 22
Essentials
Blockchain

1.15 The basics of blockchain technology

This lesson explains what blockchain is and why it is the frontier to the next revolution.

Weiterlesen
1.15 The basics of blockchain technology
13 / 1 / 22
Bitcoin
Altcoin
Essentials

1.02 What are cryptocurrencies?

In this lesson, you will learn about the basics of cryptocurrencies. 

Weiterlesen
1.02 What are cryptocurrencies?
12 / 1 / 22
Bitcoin
Altcoin
Essentials

1.01 This is why you can no longer ignore cryptocurrencies

Here are a few reasons for you to start with the Zonda Academy and take your crypto knowledge to the next level.

Weiterlesen
1.01 This is why you can no longer ignore cryptocurrencies

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