The success of bitcoin led to the rise of new alternative coins. As a bitcoin, many altcoins are built on a peer-to-peer network. But despite the similar functions, altcoins are very different from each other.
All altcoins can be divided into four large groups: mining-based coins, stablecoins, Security and Utility tokens. Below we will have a look at the features of each group.
These cryptocurrencies are very similar to bitcoin because they are mined in the same way. Users need to solve a certain mathematical task in order to receive cryptocurrency into their account. The most well-known mining-based altcoin nowadays is Ethereum (ETH).
The main idea of stablecoins is to reduce volatility by pegging to fiat currencies, other cryptocurrencies, or physical commodities. Usually stablecoins are backed by US dollars, euros or gold. The most popular stablecoin today is Tether (USDT), backed by the US dollar.
These coins are usually associated with a business and used during an ICO (Initial Coin Offering). Security tokens resemble traditional stocks and promise some dividends to “contributors”.
These tokens are called “utility” or “product” tokens. They represent assets that are issued for the purpose of financing the issuer's network. Most of the Utility tokens are based on the Ethereum blockchain.
The very first altcoin is Namecoin, based on the bitcoin code. This coin was released in April 2011 and, like Bitcoin, is capped at 21 million. Unlike the Bitcoin, Namecoin promised greater anonymity to users using their own .bit domains.
Another famous altcoin – Litecoin – appeared in October 2011 and was supposed to be “silver”, while Bitcoin was “gold”. Despite its strong similarity to Bitcoin, Litecoin allowed for more frequent confirmation of mining transactions and provided for the creation of 84 million coins, which is 4 times more than Bitcoin.
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