Ever wondered about the term “altcoin”? Well, first of all, you can accept altcoins as payment! Secondly, NOWPayments presents: all you need to know to understand why altcoin payments are cool.
Let’s start with the basic question first, what is an altcoin? In simpler terms, altcoins are all the cryptocurrencies other than Bitcoins. The name stems from the fact that they are a universal set of alternative digital currency or alternative cryptocurrencies that are not Bitcoins. The major constituents of the altcoin market are mining-based cryptocurrencies, stablecoins, security tokens, and utility tokens. In terms of their market cap, Ethereum and Ripple are the two largest altcoin entities after Bitcoin.
In total, the altcoin list includes more than 5,000 cryptocurrencies. As per the latest estimates published in February 2020, the altcoin market cap occupies 34% of the entire cryptocurrency market.
How Do Altcoins Work?
Although an altcoin is defined as an alternative currency that is different from Bitcoin, the core functional scheme of altcoins is quite similar to that of Bitcoin. One requires a private key to authorize a transaction from one wallet to another. The records of these transactions are kept permanently in a distributed ledger. The ledger is available publicly. Similar to Bitcoins, the blockchain network of altcoins is secured by algorithms which confirm transactions in blocks.
Types of Altcoins
Altcoin analysis shows that there are four major types of altcoin categories.
- Mining-based cryptocurrencies: In this system, new coins can be generated by solving challenging problems to unlock blocks. In terms of its functional dynamics, mining-based cryptocurrencies are the closest to Bitcoin in nature. Ethereum, for example, is an altcoin belonging to this category.
- Stablecoins: These altcoins have been developed to solve the volatility-issue of Bitcoin. They are called stable coins because their value is tagged to less-volatile conventional fiat currencies or other asset classes such as gold.
- Security Tokens: These altcoins are used primarily to raise funds. They are launched through ICOs or initial coin offerings and carry the promise of some kind of a dividend as it happens with traditional stocks. The dividend can be a share of the ownership of a company.
- Utility Tokens: Filecoin is an example of a utility token. These tokens carry a right to stake a claim on a specific type of service. For example, one can avail of decentralized file storage space in exchange for Filecoins.
Altcoin Vs Bitcoin
| Bitcoin | Altcoins |
| A digital currency that facilitates transactions based on the decentralized blockchain network | Digital currencies other than Bitcoin. Designed as substitutes for BTC to sort out its limitations |
| The encryption algorithm: SHA-256 | Ethereum: Ethash |
| Transaction speed can take up to 10 minutes | Faster. For example, for DASH it can be 1 second per transaction |
| 21 million Bitcoins to be mined. | Litecoin: 84 million Litecoin |
As an alternative to Bitcoin, altcoins try to address and resolve the limitations and drawbacks of Bitcoins. Therefore, to emerge as a credible and efficient alternative cryptocurrency to Bitcoin, an altcoin must have some competitive advantages over Bitcoin.
Many of these alternative cryptos try to offer transaction solutions on the Internet that would be less expensive and more efficient than Bitcoin. How these alternative currencies manage to offer increased efficiency at a lower cost is what we would discuss in the segment below:
- The developers of Bitcoin conceived of it as a catch-all currency. They did not probably envision the multiple use cases that the blockchain technology could have. Then came the alternative cryptos which gave a fresh look at the paradigms of transactability and speed of payments. Ripple, for example, was designed as an altcoin that would allow centralized cross-chain transactions between large corporations and institutions.
- Dash, another altcoin cryptocurrency, focused on the speed of the payment and claims to provide transaction speeds of 1 second per transaction. Many of the other altcoin cryptos have similarly worked on other aspects such as security, the convenience of the ecosystem, manageability, etc.
- To keep itself relevant amidst the ever-growing volume of altcoins, Bitcoin is adding new functionalities, features, and tools allowing new projects to develop on its platform. For example, the RSK technology developed on Bitcoin equips users with smart contract capabilities. This, in turn, opens the doors for app development. With this capability integrated, Bitcoin has been able to recover much of the ground it had lost to Ethereum, the altcoin that used to provide superior smart-contract features.
- To speed up transactions, Bitcoin integrated tools like Lightning Network that took the burden off the main Bitcoin blockchain making it faster for the peripheral transactions.
In its entirety, the altcoin vs Bitcoin tussle has been useful for both segments. The competition has encouraged both of them to improve their features and enhance their functionalities. Ultimately, it’s the blockchain technology and its users who have turned out to be the real beneficiaries.
Altcoins as Investments
Are altcoins a good investment? The answer is yes. However, one needs to be aware of the larger market of altcoins to decide which altcoins to buy. In terms of their market cap, some of the top altcoins include Ethereum, Ripple, Bitcoin Cash, Tether, Litecoin, etc. But, there are several altcoins with amazing features and capabilities currently waiting in the development phase. As happened in the case of Bitcoin, it is the early-stage investors who make the most out of their investment in the world of cryptocurrencies. Therefore, as an intelligent investor one must always keep a track of exciting in-development projects that have the potential of giving larger returns in the future.
Altcoins as Payments
To accept altcoin payments, there is a wide range of payment gateways available in the market. These altcoin payment gateways work as an app to securely trend any type of digital money on the smartphone. Some of these apps are also coming up with options to add coins to the wallet and carry out mining through the app as well.
The popularity of altcoins as a means for payments is proven by the fact that “how to accept altcoin website” is a popular search term on Google and various search engines. To accept altcoin payments via websites, several platforms have also developed powerful API gateways that can be instantly integrated with the portal. These gateways also provide specific plugins for particular e-commerce websites that are visited the most. Apart from providing multi-coin services, some of these gateways are also available in a host of fiat currency representations and multiple languages.
The Future of Altcoins
Whether an altcoin will last long depends on its utility and the competitive advantages it provides over other coins with nearly similar features. The global market of cryptocurrency, overall, is expected to witness a double-digit growth rate between 2019 and 2027. The combined worth of the market is expected to cross 1.7 billion dollars by 2027. It can be reasonably assumed that currencies other than Bitcoin will have their fair share of growth as well. However, to become a sustainable option, in the long run, altcoins will have to work on their price volatilities.
As newly emerging coins, they are expected to have some fluctuations in their prices, but drastic alterations in prices would discourage a huge chunk of the investors. They would try to move away towards more secure and guaranteed options. Additionally, altcoins would have to provide high-security. Since its inception, the world of cryptocurrency has been subjected to cyber-attacks, hacks, and frauds. A solid protection mechanism would encourage many investors to join the chain and invest.
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Why use NOWPayments.io?
NOWPayments is the easiest way to accept online payments in a wide variety of cryptocurrencies. This service is custody-free, has competitive fees and is available worldwide.
- Over 50 cryptocurrencies are accepted on the platform with an in-built exchange feature;
- API, widgets, plugins and a donation button are all easy to integrate;
- It is a non-custodial service ensuring the security of your funds;
- A very simple setup