It can be challenging to comprehend everything that is going on when there are thousands of circulating cryptocurrencies: what exactly are these coins, other than Bitcoin?
There are currently over 2000 cryptocurrencies listed on various exchanges, and this number is growing.It would be impossible to research all of these projects.However, you never know when you might come across a fantastic investment opportunity.
You might not want to pass it considering the staggering crypto returns.Buying lesser-known altcoins, on the other hand, is more difficult and risky than it appears.It's a good thing you found this guide because it will teach you how to buy altcoins safely in 2019.
What is an altcoin?
Bitcoin was the first cryptocurrency to emerge in 2009.It has had the following set of parameters since the genesis block:
Only 21 million Bitcoins can exist.
Every ten minutes, brand new coins are produced.
It takes a lot of computing power to mine Bitcoin and keep it safe.
It was made to be a payment method.
As can be seen, the use case, parameters, and niche of Bitcoin are predetermined.But because Bitcoin is a technological breakthrough, its technology opens up numerous additional opportunities.In addition to being the first digital currency with no central authority, it also opens the door to a wide range of other projects and cryptocurrencies.
Distributed ledger technology (DLT) has the potential to change the way we live in thousands of ways, according to a number of pioneering entrepreneurs and technology innovators.That's where altcoins come into play.
Altcoins are known as "alternative coins" by definition.The term can be applied to practically any cryptocurrency other than Bitcoin.Ethereum, Litecoin, Ripple, Tron, Verge, and EOS are all examples of popular altcoins.
Numerous altcoins are merely forks of Bitcoin's open-source protocol.Others are merely money-grabbing endeavors or unsuccessful experiments.Despite this, there are also a lot of exciting projects with original value propositions, solutions, and features.It only takes separating the wheat from the chaff.
It is all too easy to get lost in the growing sea of crypto startups and projects.To make things easier, let's divide crypto assets into five groups:
Digital Currencies Digital currencies, also referred to as cryptocurrencies, digital coins, or currency tokens, are made to make peer-to-peer transactions faster and more secure.This category includes a number of alternatives, including Bitcoin.In point of fact, many of them were created by merely altering the core code of Bitcoin.
Litecoin, Bitcoin Cash, Dash, Zcash, and numerous others are examples of such coins.Other digital currencies are completely new.Despite employing distinct strategies, projects like Monero, Bytecoin, Ripple, Stellar, and Nano still accomplish the same objective.
Utility tokens are tokens that give users specific rights, like access to services, functions, and privileges on the platform.They are also known as app coins.The majority of the time, utility tokens are distributed through Initial Coin Offerings (ICOs) and are issued on a particular blockchain or DLT platform (like Ethereum).Crowdfunding for project development is done through ICOs.
Tokens for the platform are given to investors in ICOs.In some projects, token holders can stake their tokens for bonus rewards or cast votes on significant governance decisions.Basic Attention Token (BAT), Golem (GNT), Status (SNT), Revain (R), and Augur (REP) are a few well-known examples of utility tokens.
Equity or security tokens provide buyers with a portion of the project's ownership.In some instances, they function as digital company shares and even pay dividends to holders.However, regulatory constraints necessitated the cancellation of numerous security token offerings.Nevertheless, they are gaining traction at an ever-increasing rate.
Security tokens are popular with investors because of their benefits, and projects can profit from investors' money.Also, note the distinction between tokenized securities and security tokens.The former is simply an on-chain representation of an existing asset, while the latter is an explicitly issued security on a distributed ledger.
What exactly constitutes a security token has been the subject of numerous heated debates, but the definition is still somewhat murky.The Howey Test is one example used by the Securities and Exchange Commission (SEC) in the United States.A security token must meet the following requirements, according to the test:
It is a financial (or other asset-based) investment.
The investment is in a typical business.
The work of others is expected to bring in money.
Equity tokens become subject to federal regulations when they are classified as securities.Additionally, security tokens go through a unique issuance procedure known as the Security Token Offering (STO).Security tokens cannot be traded on standard cryptocurrency exchanges once they have been issued.
They are traded on specialized security token exchanges that are only open to investors who have been granted accreditation.BCap (Blockchain Capital), the Science Blockchain fund, and Lottery.com are the most prominent examples of tokenized securities.Polymath (POLY), Harbor, Securitize, and Swarm are projects that assist businesses in establishing STOs.
Asset Tokens Asset tokens are backed by a variety of commodities, including oil, gold, and fiat currency.They have value because they are a digital representation of the underlying assets.When compared to conventional cryptocurrencies, the majority of asset-backed tokens maintain a relatively stable price. Asset tokens introduce a novel method of utilizing blockchain, and their market is likely to continue expanding.
In essence, they facilitate the purchase of goods without increasing logistics and transportation costs.Tether (USDT), TrueUSD (TUSD), and Digix Gold Token (DGX) are popular examples of asset-backed tokens.
Rewards Tokens Users can use reward tokens to indicate their status within an ecosystem.They are used on specific platforms, just like utility tokens, but instead of buying them, users collect them as rewards for participating actively.
Typically, their purpose is to encourage users to complete ecosystem-supporting tasks.However, they can be traded in the exchanges for other currencies.The reward tokens Steem (STEEM), Lympo (LYM), and BitDegree (BDG) are a few intriguing examples.
There are some coins and tokens that fall into multiple categories and are too difficult to classify.Additionally, there is a subset of cryptocurrencies that appears to serve no significant purpose at all.These projects are often referred to as "joke coins."It is all too easy to get lost in the growing sea of crypto startups and projects.To make things easier, let's divide crypto assets into five groups:
Digital Currencies Digital currencies, also referred to as cryptocurrencies, digital coins, or currency tokens, are made to make peer-to-peer transactions faster and more secure.This category includes a number of alternatives, including Bitcoin.In point of fact, many of them were created by merely altering the core code of Bitcoin.
Litecoin, Bitcoin Cash, Dash, Zcash, and numerous others are examples of such coins.Other digital currencies are completely new.Despite employing distinct strategies, projects like Monero, Bytecoin, Ripple, Stellar, and Nano still accomplish the same objective.
Utility tokens are tokens that give users specific rights, like access to services, functions, and privileges on the platform.They are also known as app coins.The majority of the time, utility tokens are distributed through Initial Coin Offerings (ICOs) and are issued on a particular blockchain or DLT platform (like Ethereum).Crowdfunding for project development is done through ICOs.
Tokens for the platform are given to investors in ICOs.In some projects, token holders can stake their tokens for bonus rewards or cast votes on significant governance decisions.Basic Attention Token (BAT), Golem (GNT), Status (SNT), Revain (R), and Augur (REP) are a few well-known examples of utility tokens.
Equity or security tokens provide buyers with a portion of the project's ownership.In some instances, they function as digital company shares and even pay dividends to holders.However, regulatory constraints necessitated the cancellation of numerous security token offerings.Nevertheless, they are gaining traction at an ever-increasing rate.
Security tokens are popular with investors because of their benefits, and projects can profit from investors' money.Also, note the distinction between tokenized securities and security tokens.The former is simply an on-chain representation of an existing asset, while the latter is an explicitly issued security on a distributed ledger.
What exactly constitutes a security token has been the subject of numerous heated debates, but the definition is still somewhat murky.The Howey Test is one example used by the Securities and Exchange Commission (SEC) in the United States.A security token must meet the following requirements, according to the test:
It is a financial (or other asset-based) investment.
The investment is in a typical business.
The work of others is expected to bring in money.
Equity tokens become subject to federal regulations when they are classified as securities.Additionally, security tokens go through a unique issuance procedure known as the Security Token Offering (STO).Security tokens cannot be traded on standard cryptocurrency exchanges once they have been issued.
They are traded on specialized security token exchanges that are only open to investors who have been granted accreditation.BCap (Blockchain Capital), the Science Blockchain fund, and Lottery.com are the most prominent examples of tokenized securities.Polymath (POLY), Harbor, Securitize, and Swarm are projects that assist businesses in establishing STOs.
Asset Tokens Asset tokens are backed by a variety of commodities, including oil, gold, and fiat currency.They have value because they are a digital representation of the underlying assets.When compared to conventional cryptocurrencies, the majority of asset-backed tokens maintain a relatively stable price. Asset tokens introduce a novel method of utilizing blockchain, and their market is likely to continue expanding.
In essence, they facilitate the purchase of goods without increasing logistics and transportation costs.Tether (USDT), TrueUSD (TUSD), and Digix Gold Token (DGX) are popular examples of asset-backed tokens.
Rewards Tokens Users can use reward tokens to indicate their status within an ecosystem.They are used on specific platforms, just like utility tokens, but instead of buying them, users collect them as rewards for participating actively.
Typically, their purpose is to encourage users to complete ecosystem-supporting tasks.However, they can be traded in the exchanges for other currencies.The reward tokens Steem (STEEM), Lympo (LYM), and BitDegree (BDG) are a few intriguing examples.
There are some coins and tokens that fall into multiple categories and are too difficult to classify.Additionally, there is a subset of cryptocurrencies that appears to serve no significant purpose at all.These projects are often referred to as "joke coins."