What Exactly Is An Alt-Coin?

Many people who don’t know much about cryptocurrency think Bitcoin is the only thing out there.

They are mistaken.

There are hundreds of cryptocurrencies called “alt-coins” or “alternative coins.” These alternatives, like Ethereum and Monero, have proven to be legitimate investments that fill useful niches in the global economy.

There are quite a few reasons investors should consider putting their money into alt-coins instead of just Bitcoin.

Don’t Put All Your Eggs in One Basket

The above heading is one of the biggest rules in investing.

Investment account managers do not sink all of your money into one powerhouse company like General Dynamics, Exxon-Mobil, or General Motors; instead, they put your money into all three (plus dozens more), because spreading your money around reduces your risk.

If you invest everything you have in General Dynamics today, and it goes tits-up tomorrow, you will have lost everything. But if your money is spread out across several companies, you cannot lose as much.

The same goes for investing in cryptocurrency.

It is safer to spread your money across several coins and tokens to mitigate your overall risk. Instead of sinking your money into Bitcoin, consider playing it safe by dividing it up between Ethereum, Monero, or other coins and tokens you think will perform well.

Bitcoin Is Not Anonymous

Many people buy Bitcoin because they believe it is anonymous.

But Bitcoin is not private; it is pseudo-anonymous at best.

Bitcoin users operate under an address that works like a pseudonym, and every transaction using that address is recorded and saved on the blockchain…forever. Curious eyes can look at those transactions and establish a pattern that links that address to the owner.

Privacy alt-coins are better for people who place a high value on their online privacy.

For example, Monero uses advanced cryptography to obscure the details of the sender and recipient. As a result, outsiders cannot see what was paid for or how much was spent on it.

There is nothing wrong with wanting to buy and sell anonymously. People should have a right to engage in private commerce or transactions without having someone looking over their shoulders 24/7.

But buy the right coin for the job. If your commercial privacy is important to you, get Monero.

Tokens and Staking

It is possible to put your crypto to work for you.

Bitcoin uses a system called “proof-of-work” that involves using thousands of computers called ASICs to validate transactions. Whenever a transaction is validated, whoever is responsible for the ASIC that validated the transaction gets a Bitcoin in return. However, ASICs are expensive and energy-intensive, and you need to buy hundreds, if not thousands, to be successful.

A cheaper alternative to that is proof-of-stake.

Proof-of-stake is similar, but instead of using ASICs, transactions are validated using tokens that the owner stakes on the blockchain. In return for staking your coins on the blockchain, you get compensated with cryptocurrency. It is a relatively inexpensive method for generating passive income in a way that cannot be done with Bitcoin.

Beware of Fraud and Useless Coins

As the old adage says, all that glitters is not gold. That classic line from Shakespeare also applies to cryptocurrency.

Many coins are created to perpetrate fraud, while others are created but serve no purpose at all.

These fraudulent coins often look legitimate, but they are made so that the owners can inflate the price and then sell. As a result, they enrich themselves while fleecing investors.

The coins that serve no purpose are called “shitcoins” or in some cases, memecoins. These coins are often minted as jokes. Examples are DogeCoin and Shina Ibu.

Bitcoin Is Not the Only Game in Town

There are many more alternatives to Bitcoin than what I mentioned here. Each has different purposes and each gives investors different and unique opportunities they would not otherwise get with Bitcoin, such as privacy and staking.

Regardless of where you put your money, remember to have a plan, and never invest more money than you can afford to lose.

——————

When it comes to investing, it may be worth asking if crypto is a good hedge against inflation, despite the risks involved.

Thinking about making a move? Slip on your sandals and check out why Florida has become the most crypto-friendly state.

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