What is Altcoin? Which Coin Should You Invest First?

Posted on February 13, 2020 in Articles, Digital Assets 101
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What is an Altcoin?

An Altcoin is any digital assets that is not Bitcoin. Alt comes from “Alternative,” so it basically means the alternative to Bitcoin. After Bitcoin was created in the world in 2008, it inspired so many other people to invent their own digital assets. If you are not sure what Bitcoin is, check out our article about Bitcoin first.

At the moment, there are more than 5,000 Altcoins in the market. Similar to Bitcoin, you can trade Altcoin and make a profit as well. The trading volume of Altcoin makes up to 35% of the digital assets trading market capitalization as of April 2020. As you can see from the graph below, Bitcoin capitalization in orange dominated almost all of the market before, and then in 2018, Altcoin started to gain momentum. At one point, one of the most famous Altcoins, Ethereum, made up 30% of the digital assets market capitalization. Bitcoin recovered its dominance, but Altcoins are still an excellent option for many traders.

The graph shows Altcoin market capitalization increased

Each Altcoin has its pros and cons. Some might work like Bitcoin, which means you would need to mine them, while others are entirely different. Let’s take a look at some of the most famous Altcoins and get to know them better.

What is Ethereum?

Ethereum (ETH) is the second most popular digital assets after Bitcoin by market capitalization. ETH was created in 2015 without the goal to be any form of payment like Bitcoin. Instead, it is a decentralized software platform that allows Decentralized Applications (DApps) and Smart Contracts to be built and run without any fraud, control, downtime, or interference from a third party. Applications on Ethereum work on its platform-specific digital assets graphic token which is called Ether.

According to Ethereum, it can be used to ‘codify, decentralize, secure, and trade just about anything.  For example, if you want to buy a house in cash from a stranger, you are probably not sure if the seller will transfer you the house after you’ve already given the money first. While, if you are on the seller’s side, you probably can’t be sure if you will get the cash too if you don’t receive it first. Without a trustworthy middle man, you can use smart contracts to solve the problem. Buyers put their money down, which will then be transferred to the seller once the house ownership has been transferred.

Ethereum’s founder is Vitalik Buterin, a genius from Russia that was once in the development team of Bitcoin. It has received tremendous support from giant companies such as J.P Morgan Chase, Microsoft, and Intel.

Ethereum is actually a blockchain that uses Ether token. The New York Times explained Etherreum as “a single shared computer that is run by the network of users and on which resources are parceled out and paid for by Ether.”, which is similar to Bitcoin in terms of mining. It is a shared record of the entire history of transactions, but one (unlike Bitcoin) that allows developers to write their own programs. Read more about the technicalities in Ethereum’s white paper here.

What is Ripple?

Ripple (XRP) is both the platform and token name. It’s designed for instant transactions, especially cross-border ones. The main difference between XRP and Bitcoin is that XRP was not intended for personal uses, but rather created to disrupt the traditional transaction system on a global level. All the Ripple tokens were sold at the beginning; there is no mining like Bitcoin, which means it consumes a lot less computing power and cost.

The idea for Ripple started in 2004 but properly launched in 2013 when Jed McCaleb, one of the co-founders of XRP and a founder of Donkey network, invited investors to invest in Ripple Labs. Chris Larsen co-founded the project. To this day, Ripple has fantastic support from Google and even one of the biggest banks in Thailand, Siam Commercial Bank (SCB). The Bank joined RippleNet, Ripple’s institutional network for easier cross-border transactions intending to replace the current SWIFT system in place.

Some people say Ripple is like a joker card because the token can be exchanged for anything you want from USD to frequent flyers miles.

What is Litecoin?

Litecoin (LTC) was created by an ex-engineer at Google, Charles Lee. The intention was for Litecoin to be the improved version of Bitcoin for traders.

The main difference between Litecoin and Bitcoin is that a newLitecoin block is created much faster than Bitcoin. Bitcoin blocks are usually created at least every 10 minutes, which makes Litecoin transactions a lot faster. However, the block size of Litecoin is bigger than Bitcoin, which might cause orphaned blocks to occur easier.

Similar to Bitcoin, Litecoin has a limited supply. The maximum amount is 84 million coins and will need to be mined over a period of time.

What is Bitcoin Cash?

Bitcoin Cash (BCH) is the Altcoin that was hard-forked out of the main Bitcoin chain. BCH project started with Bitcoin miners and developers who have a concern about the scalability and speed of Bitcoin with more transactions in the future. They didn’t think there’s any other way besides starting Bitcoin Cash.

So August 2017, Bitcoin Cash started its own Blockchain and let miners join (like Bitcoin). The main difference is that it has a bigger block, which allows for faster transactions and more flexibility.

However, some people think that a fast transaction and lower cost of processing might come with weaker security. Even with the BCH, there is still concern about the scalably of Bitcoin and some think BCH is not the real solution to the problem. Yet, Bitcoin Cash has gained a lot of interest and support from the market with a decent trading volume.

Litecoin - Bitcoin Cash - Ripple - Ethereum

What coin should I trade first?

There are a lot of factors that you should consider when determining the best digital assets to buy at any given time. digital assets is a fantastic investment, provided one knows how to trade in it. However, it is not what it once was, having gone through lots of changes, since its dawn in 2009. So what is the best digital assets to buy? Hopefully, this article will guide you to the answer you seek.

digital assets had a bull run in 2017. The market cap of digital assets grew from $21 billion to about $454 billion. People generally start trading Bitcoin first since it’s the most dominant digital assets accessible. It started with a value of about $0.003. Over the years, its value has increased drastically. Currently, Bitcoin is worth a little over USD 170,000 as of when this article was written. This was initially the only digital assets available, but times have changed. Now, with more than 5,000 Altcoins available, choosing the right one to invest in is quite a difficult decision. The market is no longer just about bitcoin. With altcoins like Ethereum, Litecoin and Ripple that have performed exquisitely over the years, there is a lot to consider. Bitcoin was the first digital assets which currently has the highest value of all digital assetss. What originally started as a peer to peer electronic cash system has since turned into a store of value and more recently into technology in the form of blockchain. digital assets such as Bitcoin and Ethereum are decentralised. Hence, prices are volatile, so it is essential to understand this when first investing.

We might not be able to tell you exactly what to invest because each investor has his personal risk boundaries and needs. So today, let’s take a look at factors you can use when it comes to choosing Altcoins. At Zipmex, we only list tokens that are the tried and true ‘blue-chip’ ones in the industry. So you can trade securely with us with peace of mind.

Understand the market

As Warren Buffet once said, “Never invest in something you don’t understand.” The first step to investing in digital assets is understanding what it is and how it works. Now, research is not only limited to what digital assets is. Understand how the market works, the trends, and so on. Once you know how the market works, and determine how patterns or trends occur, your investments will be smarter. Understand that the digital assets market is very volatile. Shifts are somewhat unpredictable. Altcoins usually have more fluctuations compared to Bitcoin and have less trading volumes, which means less liquidity. Study the market and evaluate risks!

Learn about the utility

Most tokens were created with some utility in mind. Ethereum was created for a smart contract system, and Bitcoin was meant to be the new currency. Try to learn the utility of each coin and their benefits since that sets that coin apart from others and lets you see the underlying value. Read their whitepapers as much as you can. This extensive and detailed document benefits users by giving them knowledge about the coin and its purpose. Whitepapers are often a good wayof knowing whether a project is worth investing in or not. If the very people who launch it are unable to explain the utility of their token, then it may not be worth investing in. This knowledge can help one narrow down on the best digital assets to buy. Avoid investing in tokens with no utility (or asset to back it) because there’s a high chance it could lose value rapidly.

Don’t put all eggs in one basket

If you drop a basket, all your eggs will crack. Look at a few different coins and assets to diversify your portfolio. Invest a small amount first until you know the market better. If there’s a sudden unexpected change in one of the prices, you’ll always have other investments to balance the risk.

Look at many different kinds of token

There are more types of coins than you might think, such as a Stablecoin or Asset-backed token, which ties its value to assets. For example USDT’s value is tied to actual USD. Asset-backed tokens can be fixed against another digital assets, a commodity such as gold or even fiat money. These tokens are more stable on price because they don’t have high volatility like digital assets as existing businesses back them.

Unlike asset-backed tokens, securitized tokens are usually subjected to regulations imposed by government-related bodies. STOs are still very much a new thing, and have not been as widely seen or traded. One of the most common forms of STOs we see are real-estate securitized tokens. For example, a real estate company wants to raise money for a specific project they’re building. Instead of having to raise public funds for the whole company via an IPO, they can just raise on a smaller scale through STOs. On the other hand, not everyone can have access to pre-IPO stocks until they’re already publicly traded on the market. STOs allow anyone to participate in the primary fundraising process and also be able to sell (or buy more) once that token has been listed on an exchange.

Factor of choosing digital assets

We hope you understand now what an Altcoin is and what your options are. We hope that you now have a better understanding of each Altcoin and its pros and cons. At Zipmex, we are an officially regulated exchange that is ready to help you invest, while being protected by a world-class security protocol. Follow us on Facebook or Twitter for our promos.