Altcoin: the disadvantages and advantages of investing in an alternative to bitcoin in coin

What is altcoin?

14 Jan, 2020 Endy Callahan

In the cryptocurrency community, the word "altcoin" has become widespread. It means any digital coin except bitcoin. This division is convenient because you do not need to list a lot of cryptocurrencies to get your point across to someone.

Why do we need an alternative to bitcoin?

Alternative coins appear for various reasons. Some want to repeat the success of bitcoin, others seek to eliminate the shortcomings of the world's №1 cryptocurrency.  

The main weaknesses are the following:

  • Low level of anonymity. Developers of the cryptocurrencies have put a lot of effort to ensure the high level of security and to encrypt transactions. However, their algorithms are still vulnerable and senders and recipients may still suffer from hacker attacks. Modern altcoins implement effective encryption methods to prevent that.
  • Low functionality. Bitcoin can perform different functions, one of the main is to act as a tool for calculations. However, some altcoins allow you to create smart contracts, which is a huge step up from bitcoin.
  • Long term transactions. It is possible to speed up the payment, but this requires new algorithms. Bitcoin blocks are very massive, so the execution of operations takes a long time.
  • Expensive and complex mining. The network hash rate is constantly increasing. Creating new blocks on the blockchain requires more resources. Altcoins do not face this issue, as many of them use different protocols.

How to choose an altcoin for investment

Many have noticed that alternative coins can provide a stronger price increase than bitcoin. Without a doubt, any crypto investment portfolio would be incomplete without bitcoin, though looking into other options would be a smart decision.

When choosing a digital asset, you can consider the following indicators:

  • Liquidity. The more cryptocurrency exchanges support altcoin trading and the higher sales volumes, the better. This indicates that market participants are serious about this asset and see it as a potential for growth.
  • Communities. If altcoin is a hot topic across social media and forums, it worth to pay some attention to it.
  • Forecast of analysts. Naturally, you should consider the opinions of well-known experts, not members of the development team.
  • Public interest. How often are search engine users interested in this cryptocurrency? What can we say about the links with its name? It is important to see whether the general public is interested in an altcoin, to find out what the market trend is.
  • Development and support. It is useful to get information about how actively and purposefully developers are trying to improve the platform. If it is abandoned or the creators have lost enthusiasm, there is no point in getting behind such team and investing.

Altcoins have a powerful potential for growth. Often they allow you to earn more than bitcoin. In addition, modern coins are more functional and convenient to use. Their purchase should be approached seriously, especially if the transaction is for an impressive amount. Be sure to do deep research and find answers to the questions raised in the article. This will minimize the risk of losses. Go to the list of cryptocurrency ratings, the figures given there will help you choose a more profitable coin for investing.