Published on November 8, 2021 in Bitcoin Blockchain & Crypto.
What are altcoins in the world of cryptocurrencies? Are they worth learning more about...and why are there so many altcoins? These are all great questions which we'll answer in today's video.
Here are links and resources mentioned in today's video. Enjoy!
Okay so what is an altcoin? Well, an altcoin is any alternative cryptocurrency other than bitcoin. So that would include Ethereum and many others -- in fact in just a second we'll outline some of the top altcoins and what they're all about.
For now though, what's crazy is that after bitcoin came out in wake of 2008 financial crisis, other crypto projects began emerging, wanting to push the technology even further.
These additional crypto projects wanted to take bitcoin's underlying technology -- blockchain -- improve upon it, make it faster, and use it in all sorts of other ways.
So here's the best way that I've heard altcoins described:
Imagine the smartest, brightest, most skilled and visionary people in the world in the areas of finance, technology, and mathematics all getting together and saying, "We're going to solve all the world's problems, and how we're going to do it is, we're going to break up into small groups and solve little bits of each problem at a time."
What I'm getting at here is that each altcoin solves different needs. We've never seen anything like this before -- the biggest brains on the planet solving the problems of the financial system, law, contracts, and everything else imaginable.
But this begs the question: Why are there so many altcoins? Well, because there are so many problems to solve! In fact, you can think of altcoins like software projects or start-ups.
Really though, this is only partially true. The reality is practically anyone, any entity, organization, or business could start their own altcoin.
Some are passion projects, others are connected to brands, many seek to improve upon the limitations of bitcoin or solve some kind of specific problem...and others are just jokes, like Dogecoin.
Others still, like Ethereum, provide developers, programmers, entrepreneurs with a toolkit and platform to build upon.
So what we’re seeing now is an explosion in the number of cryptocurrencies and blockchain projects that are all coming in the wake of bitcoin and Ethereum. In fact, it’s impossible to keep up with them all.
According to statista.com, as of 2021 there are over 6,000 different cryptocurrencies. But depending on where you look and who you ask, this number could be even higher. Why so many?
Because of the rapid development and adoption of blockchain technology in any and every possible way. See, every altcoin either has it’s own unique blockchain or it builds on top of an existing blockchain network, like Ethereum.
Further, each has their own monetary component which is used as an incentive for network operators to run and maintain the blockchain network.
For example, the bitcoin network's crypto coin is of course BTC. Ethereum's blockchain token is ETH. We as outside investors can buy, hold, and transact in these cryptocurrencies.
So how about some examples of altcoins and what they can do? Well, if you've heard of cryptocurrencies like Ethereum, Cardano, and Solana, these are all examples of altcoins.
So in no particular order, here’s a quick look at three altcoins to help get you started.
To start us off, let’s look at Cardano. Cardano seeks to solve some of bitcoin and Ethereum’s inefficiencies — specifically, things like scalability, energy use, number of transactions per second, transaction speed, and so on. Really, it’s a platform for developers. So it can support things like smart contracts and DeFi projects.
Interestingly though, Cardano seeks to provide interoperability between other blockchains and cryptocurrencies. What this means is the movement of crypto coins between various blockchains, which is a very interesting concept.
There's also a monetary component to the Cardano blockchain, called ADA that regular folks like you and I can buy, hold, and trade with.
Next up, let’s take a look at XRP, which was developed by RippleLabs. XRP aims to decentralize and improve upon global money transfers.
If you’ve ever had to send money overseas, you know that this can be a slow and expensive process. XRP’s goal is to remove banks, financial institutions, and other intermediaries, and make sending money anywhere in the world as easy as sending an email.
Now perhaps confusingly, the native token for the XRP blockchain is also called XRP. Unlike other blockchains however, XRP isn’t a true currency (although it can certainly be held and traded). Instead, it’s purpose is to serve as a bridge currency, facilitating transfers between other currencies.
The final altcoin we’ll take a look at is Chainlink. Chainlink is designed to take data from the outside world and plug it into smart contracts.
Data from the outside world includes information like weather reports, retail payments, account balances, investment market data, when your driver’s license expires...and really anything else that doesn’t reside on a decentralized blockchain.
Chainlink wants to connect to centralized sources for this sort of data and connect them to smart contracts.
Now interestingly, Chainlink’s coin, LINK, is an ERC-20 token, meaning it runs on the Ethereum blockchain. Limited to 1 billion coins, LINK serves as a method of payment for node operators, however crypto investors like you and I can also hold and trade LINK too.
And you know, the list goes on! There are of course many, many more exciting and interesting blockchain projects and altcoins available — really great ones that haven’t been mentioned here. There’s Polkadot, Litecoin, and a very interesting one called Internet Computer...among countless others.
An entire universe of altcoins and blockchain projects is developing rapidly, and it's exciting to watch it all unfold...and to be a part of it in some small way.
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