Upon first glance of the term, you might think that altcoin is a cryptocurrency, such as Bitcoin (BTC) or Monero (XMR). However, altcoin is a term used to describe bitcoin alternatives. Many different cryptocurrencies can be referred to as altcoins.
With hundreds of altcoins to choose from, it’s confusing when you’re new to mining or investing in cryptocurrency. In this guide, we have aimed to clear confusion around altcoin. We will also teach you how to evaluate altcoin value, and explain how to obtain altcoins.
What Is Altcoin?
Altcoins are alternatives to bitcoin. Most aim to either replace bitcoin or improve on an aspect of BTC. There are hundreds of altcoins you could choose to use. Also, developers continue to create new types of cryptocurrencies. Keep in mind while trying to select an altcoin that most of them don’t last long. You don’t want to invest in or mine a digital currency that won’t stay in existence for the long-term. It’s important to thoroughly research any type of cryptocurrency before mining or investing in it. Not only do you want to ensure longevity but you’ll need an understanding of how it works to be profitable.
Who Uses Altcoin?
A wide variety of people use this type of cryptocurrency. People who don’t like bitcoin turn to its alternatives until they find the right altcoin mining that works for them. Some bitcoin miners also use altcoin to supplement their bitcoin. A few clever bitcoin owners use Monero’s platform to transfer their BTC privately and anonymously. Monero has strong security and anonymity features to protect the identities and financial histories of its users.
Bitcoin transactions are public, whereas Monero transfers are private and untraceable. Alternative cryptocurrencies are beneficial because they prevent Bitcoin from having a monopoly. Competitors encourage Bitcoin to continue offering good service. Otherwise, they risk losing customers to alternatives. You also have many options in case a particular cryptocurrency doesn’t meet your needs.
How to Obtain Altcoin?
If you’re new to cryptocurrencies, you’re probably wondering how to make an altcoin. It involves a process called mining. Cryptocurrency mining is the use of your computer’s hardware to solve difficult math problems. The computer’s reward is a digital currency coin. Most computers aren’t equipped to profitably mine altcoins. Altcoin mining is an intensive process that drives up your electricity bill. You would spend more on your energy bill than what you earn from exchanging the altcoins for cash. The prices of these alternatives tend to be lower than BTC too.
In order to successfully mine, you need to buy an ASIC (application-specific integrated circuit). Another way you can obtain altcoins is to exchange bitcoin at a cryptocurrency exchange platform. If you plan on mining a cryptocurrency on your own, then download the client at the altcoin’s official website. Don’t mess with third party downloads because it can infect your computer with malware. Before mining, you’ll have to decide on whether to pool or not pool.
Unless you have a lot of fast mining computers, it’s unlikely you’ll be profitable mining solo. This is because payments aren’t given in a steady flow. They are rewarded when a certain milestone is hit. In a mining pool, the payment is divided among members based on how much computing power each person contributed. This is a reliable way to earn alternative coins.
3 Tips for Profiting with Altcoin
1. All Cryptocurrencies Are High in Volatility
This is something you should know before investing in alternative cryptocurrencies. They are very risky to invest in. Altcoins are susceptible to price manipulation due to low market caps. Wealthy traders sometimes invest large amounts into an altcoin that has a low price to build hype and skyrocket the price. After the price has spiked enough, they sell the altcoins to profit. Regarding this matter, Cryptocoins News declared the following.
Not only does this hurt greedy traders who did not take the time to do their homework, but it often proves to be the breath of an altcoin’s brief lifespan.
When wealthy investors do this, it’s called a pump and dump. Avoid falling for this damaging strategy. You can do this by only investing in altcoins that you think show long-term potential.
2. Consider the Well-Established Bitcoin Alternatives
Litecoin was one of the first altcoins and is still around, so it’s a good one to mine. This cryptocurrency has a larger number of units and uses a different hashing algorithm. Litecoin refers to themselves as silver to Bitcoin’s gold.
Other top alternative cryptocurrencies include Ripple, Darkcoin, and BitShares. Darkcoin is used for anonymous transactions. Meanwhile, BitShares describes themselves as the fair version of Wall Street. With Ripple, you can make inter-currency payments.
3. Check for a Strong Community, Proactive Developers, and High Liquidity
This will help you judge whether or not a cryptocurrency is good for investing in. Developers should regularly improve the altcoin’s source code instead of virtually abandoning the cryptocurrency or only updating once in a blue moon. Also check the altcoin on CoinGecko’s comprehensive coin metric analysis. It statistically analyzes a cryptocurrency’s developer involvement, liquidity, community, public interest, and market cap.
Community and public interest matters. This is because altcoin value is determined by how much someone is willing to pay for it. Another important fact to keep in mind while choosing a digital currency is ease of mining is inversely proportional to altcoin value.
To Sum All Up
Learning how to make an altcoin isn’t as difficult as it might seem at first. The most challenging part is probably determining what type of hardware your computer needs to profitably mine a certain alternative cryptocurrency. Altcoin prices are usually lower than bitcoin because they’re not the top dog in the industry. However, some alternatives increase in value as they become more popular. You may notice altcoin prices for a particular cryptocurrency suddenly increasing. Then, you should investigate whether or not wealthy investors are implementing the pump and dump for their own benefit. Or else you could end up investing in an altcoin that’s going to either decline in value or disappear from the market altogether.
Was our guide helpful in teaching you how to make an altcoin? Is there anything you’re still confused about? Leave us a comment below. We also welcome any advice you may have on altcoin mining and investing.
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