What’s the Difference Between Bitcoin, Altcoins, Privacy Coins, and Stablecoins?
There are thousands of cryptocurrencies in the market. That’s why an absolute beginner and prospective investor might find it hard to comprehend where to best put their money. If you’re trying to get into cryptocurrencies yourself, it’s imperative that you do your research on the asset you want to acquire before you start dedicating your resources to it.
The good news is that cryptocurrencies are more accessible than ever before. From what used to be a fringe interest that only makes sense to tech-savvy individuals, cryptocurrency is now a familiar term for many regular individuals. At the same time, there’s also the wide availability of different tools and solutions that you can use to maximize this type of asset.
Just the same, before you create an account in an exchange or subscribe to a Monero wallet service, you need to have a good idea of what you’re committing yourself to. This often starts with the type of coin that you want to own or add to your growing cryptocurrency portfolio.
Now, there are many names for cryptocurrencies. People refer to the totality of digital coins as bitcoins, altcoins, privacy coins, stablecoins, or other types of digital tokens. This can cause a bit of confusion for total beginners. Let’s take a closer look at what each term really refers to.
What is Bitcoin?
Bitcoin specifically refers to the first cryptocurrency, and there’s no uniform convention about the word’s capitalization. Released in 2009, bitcoin is the first proof of the viability of a currency system that uses peer-to-peer technology. It is not dependent on central authorities or establishments such as banks or government agencies.
More than a decade after its release, Bitcoin or BTC has become the most popular and highly valued cryptocurrency. In 2021, for example, the value of the coin reached an all-time high of USD 68,000 per unit. If you’re planning on putting your money on bitcoin, you need a big investment to own a whole coin. However, it’s also an option to acquire a fraction of a bitcoin. Keep in mind that some platforms that allow this also require a minimum amount and charge fees.
What are Altcoins?
Altcoins, generally speaking, refer to cryptocurrencies other than the original cryptocurrency bitcoin. In a way, these alternative coins are chipping away at the market share that BTC currently has. As of November 2021, there are more than 14,000 altcoins in the market.
Yes, the term altcoins can even refer to popular cryptocurrencies such as Ethereum (ETH), Litecoin (LTC), Cardano (ADA), Monero (XMR), or the memetic Dogecoin (DOGE). If you’re holding on to cryptocurrencies other than bitcoin, then you have altcoins in your asset portfolio.
Many of these altcoins are patterned after bitcoin. Therefore, it’s no wonder that the original crypto coin influences their growth. However, altcoins offer investors qualities, and features that they may feel are lacking in bitcoin. For example, some altcoins can be mined more quickly and efficiently, use better privacy features, be made popular by a meme, or can be used in an exclusive network to pay for niche goods and services. Digital coins used for these purposes have also acquired a few monikers on their own, including the next cryptocurrency classifications.
What are Privacy Coins?
Privacy coins are altcoins that focus heavily on the security and anonymity of the transactions made through the currency. Typically, these currencies are developed to obfuscate the origin and destination of each transaction, enabling their users to complete their deals without having to worry about whether they’ll be censored or traced by government or financial institutions and regulatory bodies. Among the most popular privacy or security coins these days are Monero (XMR), Zcash (ZEC), and Dash (DASH).
What are Stablecoins?
The cryptocurrency market is especially volatile. But, if you’re looking for a coin that offers a bit of stability, then you should look into stablecoins. These altcoins aim to reduce price volatility by pegging their value to a basket of goods like precious metals, fiat currency, or even other cryptocurrencies. Because the value of stablecoins is tied to the value of other goods or currency systems, their price fluctuations are kept at a minimum compared to other cryptocurrencies with no ties to external references.
If you want to play it a bit safe in your first foray as a cryptocurrency investor, perhaps you could try putting your money in stablecoins backed by fiat money, other cryptocurrencies, algorithms, or even gold and other goods. Among the most popular stablecoins in the market are Tether (USDT), Binance USD (BUSD), and USD Coin (USDC).
Are you planning to invest in bitcoin, or would you rather put your money in altcoins? If it’s the latter, are there specific qualities that you want your preferred crypto asset to have? Answering these questions can help you narrow down your cryptocurrency investment options.