What are altcoins exactly?
Altcoin is a combination of “alternative” (coin) and “coin”. It refers to all alternative to Bitcoin. Altcoins can be described as cryptocurrencies that have similarities to Bitcoin (BTC). Altcoins and Bitcoin share a common basic structure. Altcoins function much like Bitcoin’s peer-to-peer (P2P), and share code.
There are many differences between Bitcoin, altcoins and other cryptocurrencies. Altcoins use a different consensus mechanism to verify transactions and produce blocks. Bitcoin uses the proof of work (PoW), but altcoins use the proof-of stake (PoS) consensus mechanism. There are many altcoin types, which can be best defined by the unique functions and consensus mechanisms they use.
These are the most popular altcoins.
Mining-based altcoins employ the proof-of work method, also known as PoW. This allows systems to mine new coins. Mining involves solving complicated problems in order to create blocks. Monero (XMR), Litecoin, and ZCash are just a few examples of mining-based altcoins.
Stablecoins are designed to decrease volatility, which has been a hallmark of crypto trading since its inception. Stablecoins are valued at the same value as a basket of goods like precious metals or fiat currencies. In case of cryptocurrency problems, the basket acts as a reserve. Stablecoins include USD Coin (USDC), Tether (USDT), and Dai (DAI).
A security token, true to its name is very similar to traditional securities that are traded on stock markets. They look like traditional stocks and can be used to represent ownership or dividends. Because of their high likelihood that they will appreciate rapidly, security tokens are attractive to investors.
Because Memecoins represent a ridiculous take on popular cryptocurrencies, they are named such. These coins are often promoted by celebrities and other influential figures in the crypto world. For example, popular meme coins Dogecoin and Shiba Inu are often inflated by Elon Musk (Tesla’s CEO and well-known crypto enthusiast).
Utility tokens can be used to offer services such as rewards, network fees, and purchases within a network. Utility tokens don’t offer equity like security tokens. Filecoin (FIL) is an example of a utility token that can be used to buy storage on a decentralized storage system.
How can you assess altcoins?
Altcoin fundamental analysis is the process of analyzing and evaluating all information available about an altcoin. To fully evaluate and understand the best altcoins, it involves analyzing the cryptocurrency’s use case and network.
Altcoins or any other cryptocurrency can be analysed to determine if the asset is under or overvalued. Avoid overvalued assets. Undervalued assets are better. Overvalued assets are likely to underperform and fall back to their true value. Assets that are undervalued have greater potential for growth and are more profitable.
An in-depth analysis will assist you in making the right investment decision.
These are some useful guidelines to help you analyze cryptocurrency before you invest.
Step 1: Analyze whitepaper to find value proposition
The whitepaper of a token will give you a lot more information, such as its goals, use cases and team vision. You must have a clear picture of the altcoin’s value to its users in the whitepaper.
Bitcoin’s value proposition is, in essence, the following: “A decentralized digital currency without a single administrator or central bank that can be sent between users on a peer to peer network without the need of intermediaries.”
As you analyze more information about altcoins, you can use the value proposition to guide you.
Step 2: Look out for rising demand and stable (or declining) supply
One of the best ways you can assess your next investment in crypto is to look at both supply and demand. Once you have a clear understanding of the altcoin’s value, it is time to examine how it manages supply and demande.
The altcoin must have incentives to encourage demand growth in a way that supplies are constantly decreasing or stabilizing. Prices rise when demand exceeds supply. This can fuel even more demand.
You can access resources such as Cointelegraph’s Price Indexes, Market News, and Coin 360’s Heatmap, and CoinMarketCap to do this.
Step 3: Evaluate the team and other stakeholders involved in the project
Once you have an understanding of the project, it is important to evaluate the team responsible for the project. The whitepaper provides information about the team, but you should also do your own research. You can visit the team page on the project’s official site as well as their LinkedIn profiles, which should be made publicly available to everyone.
When looking at the background of each member, ask these questions:
Are they past successful and reputable project managers?
It is important to determine if the team behind a project is knowledgeable and experienced. To supplement your research, you can also look at blockchain explorers and on-chain analytics platforms. You can also look at their social media profiles and check Twitter to see the conversations they are involved in.
Ethereum has a strong investment community. This is because everyone who works on Ethereum creates value. Despite the difficulties of slow transactions and high fees, top developers and community builders still want to be part of Ethereum-related projects.
OpenSea and AAVE are two examples of platforms built on Ethereum. It creates a ripple effect by having a strong core team behind the project. Strong, talented people will attract more forward-thinking, credible project leaders, which allows for more projects to be developed on the platform. This is similar to Ethereum. They are constantly improving on the available platforms and initiatives that relate to the project, creating more value for currency owners.
What altcoin platforms offer the greatest potential?
There are many options available for altcoin investment. It is important to identify which ones are most likely to make a wise investment.
Ethereum. There’s a reason Ethereum is known as the “King Of Altcoins”. It was founded in 2013 by Vitalik Buterin, and other cofounders. Ethereum is a smart-contract platform that allows you to create decentralized apps (DApps). Solidity is Ethereum’s own programming language for smart contract creation. Most of the decentralized finance industry relies on Ethereum’s blockchain. The native token Ether (ETH), however, continues to improve in its utility. Chainlink: Chainlink elevates smart contracts by incorporating real-world data. Chainlink allows Ethereum smart contracts to make calls to other interfaces as well as take action on global occurrences. Chainlink continues to grow in value as it adds valuable stakeholders such as Eric Schmidt, former Google CEO.
Stellar Lumens – Stellar’s decentralized platform aims to unify global banking systems. It uses unconnected payment methods such as Alchemy Pay or Single Euro Payments Area. These systems are connected via the Stellar network, which uses a decentralized ledger. Ripple is in direct competition with Stellar, which has been exposed by the SEC. Stellar is now in a strong position to become the world’s top payment network. Aave: Aave has been a top lending protocol for years and offers security and anonymity to its borrowers. Due to its popularity, borrowers must offer more collateral than they borrow. The collateral is kept in safe escrow for the entire term of the loan. The smart contract automatically pays the lender in the event of default.
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