Since the emergence of Bitcoin, the concept of a decentralized, trustless peer-to-peer (P2P) payment network has inspired an entire class of digital assets. The crypto markets are a product of Bitcoin's success, and the fast-growing space consists of more than 9,000 altcoins.

Now we have altcoins, which began to emerge in 2011 in an attempt to reinvent Bitcoin, with their own rules and improvements on different features.

Altcoin is a cryptocurrency alternative to Bitcoin its name is a portmanteau of "alternative" and "coin." Since Bitcoin is widely regarded as the first of its kind, new cryptocurrencies developed after are viewed as alternative coins or altcoins. The emergence of altcoins began around 2011, with the first generation formed using the same blockchain engine as Bitcoin.

The first altcoin was Namecoin, which is based on Bitcoin's code and was released in April 2011. Namecoin is integral to the history of altcoins in that it showed that there's enough room in the crypto markets for more than one kind of coin.

Blockchains today can run several hundreds of "altcoins," fueling similar currency projects with unique rules and mechanisms. Altcoins like Ethereum can provide developers with a toolkit and programming language to build decentralized applications into the blockchain.

To understand how altcoins work, it's good to first understand how blockchain technology works which is where all cryptocurrencies operate.

The blockchain network is a distributed ledger that stores data like cryptocurrency transactions, NFT ownership, and decentralized finance (DeFi) smart contracts. This ledger is often referred to as a "chain" comprising "blocks" of data, which are used to verify new data before additional blocks can be added to the ledger.

This network, on which Bitcoin operates, is groundbreaking because it's a decentralized, trustless, P2P payment network that functions without a central authority or entity facilitating transactions. And altcoins function on the exact same premise as Bitcoin: to operate using this blockchain technology.

However, there have been some altcoins that have emerged to instead improve on the flaws of Bitcoin or to achieve some other goal. For example, Litecoin was designed by former Google engineer Charlie Lee as a "lite version of Bitcoin."

A fork refers to an update in network protocol (the open source software blockchains run on). There are two kinds of forks: a hard fork and soft fork. A soft fork is a minor upgrade to the software, and typically means nothing for users. A hard fork is a major change to the network, and requires users/miners to update to the latest software in order to continue mining. If developers decide they do not like the direction a blockchain network is going in, they can do a hard fork and create a new coin. Since 2009, Bitcoin has seen over 400 hard forks.

In the news: In the past year, crypto and celebrity influencers have come under fire for promoting cryptocurrencies. Even social media platforms like TikTok have banned crypto promoters from the platform.

Here are the two key things to know about altcoins.

Altcoins are a highly speculative and volatile investment. Speculation is a powerful driver of the crypto markets so it's important to do your research before investing in any altcoin. Half-baked whims and trading based on rumors are exactly what the experts advise against.

"The altcoin space is full of innovation and change. There are some interesting projects, and always many new projects. You've got to be very well informed and somewhat cautious," says Shone Anstey, CEO of LQwD. "Before plunking down hard-earned money, you need to do the research. Who is the team behind it, especially on the engineering side? What problem are they solving? And who are the financial backers?"

The decentralized, intangible, and often misunderstood nature of cryptocurrencies in general makes predicting the long-term, steady success of an altcoin project difficult to predict. Some altcoins, like Ethereum, have maintained their position in the market through constant innovation and the strength of their community. Speculation has a more dramatic effect on newer altcoins. External factors like public perception, Bitcoin price fluctuation, or a meme on Reddit can oftentimes cause drastic price fluctuations.

While the crypto community stands united on its long-term bullish outlook for Bitcoin, the temptation of selling coins for short-term profits is built into the crypto zeitgeist. The crypto community created the term "hodl" in an effort to encourage people to hold on to their crypto assets for the long-term. "Hodl" means "hold on for dear life," and to resist the impulse of selling when the value of their crypto drops or rises.

Quick tip: Smart contracts are programs that are stored on blockchain that execute when certain conditions are met.

Cryptocurrency takes a toll on the environment. Bitcoin's energy consumption is a well-known flaw. As of August 2021, Bitcoin's energy consumption is 151.57 TWh according to Digiconomist's Bitcoin Energy Consumption Index that's comparable to what the entirety of Malaysia uses in energy.

The culprit for the tremendous costs of energy lies with the "proof of work" (PoW) consensus algorithm, which is how transactions are verified. And as Bitcoin mining has become more competitive, the computing power required to profitably mine new bitcoins is represented in factories loaded with servers all working toward solving the network's algorithms.

The PoW consensus mechanism is responsible for driving the competition for faster and more powerful computational processing power. The faster a miner's computer can complete the formula, the higher their odds of winning a block reward. Over time, miners have developed computer hardware with the sole function of processing the PoW consensus algorithm.

This has evolved from a miner running a program in the background of their PC to entire mining farms. Miners (or a pool of miners) will buy factories in countries where electricity is cheap and fill them with thousands of mining rigs. The energy required to keep the rigs running 24/7, combined with the fans and coolant systems to prevent overheating and fires, has made crypto mining an environmental disaster.

Bitcoin's carbon footprint has provided an opportunity for altcoins with greener consensus mechanisms to market themselves as "green coins." While proof of work is the main culprit for the Bitcoin energy crisis, blockchains like Polkadot (DOT) and Cardano (ADA) operate on proof of stake consensus mechanisms. Compared to the energy-hungry PoW, staking requires no mining in order to participate and earn coins. The success of Polkadot and Cardano prove that people can participate in crypto while being environmentally friendly.

Quick tip: Proof of work is the consensus mechanism used by Bitcoin and many other altcoins to audit transactions on the blockchain and "mine" new crypto. Crypto mining is solving computational formulas to audit transactions on the blockchain. Completing the formula means a chance at receiving a newly minted BTC reward.

Over time, there have been many altcoins that have come along. And now, there are the main types:

Quick tip: One of the main benefits of blockchain technology is transparency. If something is on the blockchain, it means it is visible, permanent, and accessible to the public. On-chain typically refers to a transaction that is performed and recorded on the blockchain. Off-chain is a transaction not directly recorded on the blockchain.

Staking is the passive-investing strategy where an investor holds funds in a cryptocurrency wallet in order to earn rewards over time. When an investor chooses to stake their holdings, the network can use it to forge new blocks on the blockchain. The process of staking supports the process of PoS work because it requires participants to support it. And so stakers are essentially helping to make this happen.

Also, staking is incredibly energy-efficient unlike mining. According to the Ethereum Foundation, the switch to a PoS system will reduce energy costs by 99.95%.

While no altcoin has managed to "dethrone" Bitcoin in value, many projects have proved themselves worthy enough to a global community of investors and developers:

The second-largest blockchain in crypto, Ethereum's evolution has taken it from an asset to an application. Founded by Vitalik Buterin in 2013, Ethereum is a distributed blockchain platform for smart contracts and dApps (decentralized applications). With its native token, ether (ETH), users can interact with the Ethereum platform. Ether can be traded on most crypto exchanges, used to pay transaction fees, or as collateral for ERC-20 tokens, which have DeFi utility.

Ethereum's integration with smart contracts via the Solidity programming language has distinguished the project from Bitcoin. A smart contract is a self-executing code that can run on the blockchain.

Launched officially in 2019 on the Ethereum blockchain, Chainlink is a decentralized oracle network that's meant to expand on smart contracts. In a nutshell, it connects smart contracts with "off-chain" data and services. The network is built around the LINK network and token and has two parts: on-chain and off-chain.

The on-chain component comprises oracle contracts on the Ethereum blockchain, which oversee and process data requests that come in from users. The off-chain component is made up of off-chain oracle nodes that connect to the Ethereum network, which are responsible for processing external requests that are later converted to contracts.

The AAVE is an open-source DeFi lending protocol that allows anyone to loan or borrow crypto without an intermediary. As a lender, you can deposit funds which are allocated into a smart contract where you can earn interest based on how Aave is performing in the market. Making a deposit means you can also borrow by using your deposit as collateral.

Rebranded from ETHLend following a successful ICO in 2017, Aave switched from a decentralized P2P lending platform into a liquidity pool model. This means loans are acquired from a pool instead of an individual lender. Since 2020, the Aave Protocol has been an open-source and non-custodial liquidity DeFi protocol for earning interest on deposits and borrowing assets. Holders of AAVE can decide on the direction of the project by voting on and discussing proposals.

Stellar is an open-source payment network that doubles as a distributed intermediary blockchain for global financial systems, designed so all the world's financial systems can work together on a single network. Stellar began in 2014 when Ripple co-founder Jed McCaleb disagreed with the direction of the Ripple project. The ethos behind Stellar's development is to make international money transfers possible for the everyday person.

While Stellar is an open-source network for currencies and payments, Stellar Lumens (XLM) is the circulating native asset on the network. Stellar keeps its ledger in sync using its Stellar Consensus Protocol (SCP). Instead of relying on a miner network, SCP uses the Federated Byzantine Agreement algorithm, enabling faster transactions.

Uniswap is a decentralized exchange ecosystem built on the Ethereum blockchain. Launched in 2018, Uniswap uses an on-chain automated market maker. One of Uniswap's unique features is that anyone can be a market maker by depositing their assets into a pool and earning fees based on trading activity.

Uniswap uses an automated market maker protocol that executes trades according to a series of smart contracts. The smart contracts automate price discovery, allowing users to swap one token for another without an intermediary. In traditional finance, market makers are usually brokerage houses with incentives that can cause a conflict of interest.

PotCoin is a Canadian-based digital currency that was launched in 2014 to allow consumers to buy and sell legal cannabis products. PotCoin was introduced as a solution for cannabis enthusiasts and the industry looking to legally transact at a time where banks were unable to do so.

PotCoin is an open source cryptocurrency forked from the Litecoin core. There are subtle changes to the PotCoin protocol including a shorter block generation time and the increased 420 million max supply of PotCoins. Potcoin switched from a Proof of Work mechanism to Proof of Stake in 2016 to make supporting the network more accessible and less harmful to the environment.

One of the first-generation of altcoins made in 2011, Litecoin is a cryptocurrency based off of Bitcoin. Key things that distinguish Litecoin from Bitcoin include blocktime (four times faster block times than Bitcoin), supply (Litecoin has a max supply of 84 million while Bitcoin max supply of 21 million), its hashing algorithm, and distribution.

Dubbed the "digital silver" to Bitcoin's "digital gold," Litecoin's goal was to optimize the Litecoin asset while preserving the best parts of Bitcoin.

Quick tip: The ERC-20 standard is a set of rules applied to smart-contract tokens on the Ethereum blockchain. The flexibility and fungibility of the ERC-20 token allows dApp developers to create utility tokens, security tokens, or stablecoins.

Altcoins have come a long way since 2011, and continue to prove themselves as more than just an "alternative to Bitcoin." The crypto space is a fast-moving and increasingly popular point of interest for investors. Thanks to the innovation and integration of crypto into mainstream business, people can safely and legally buy altcoins on their phone or computer.

Easy access to the crypto markets doesn't mean it isn't risky. Before investing in an altcoin, ask yourself: have you researched and performed enough due diligence? Would you be able to explain the project to your family or friends at the dinner table? Whether you want to trade altcoins full-time or just "hodl" onto your Bitcoin, the choice is yours. Listening to the experts, evaluating the risks, and assessing your financial goals are keys to investing responsibly.

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Altcoins 101: Definition, Explanations, Examples - Business Insider

I woke up on Monday morning, had a cup of coffee, and then nearly spit it out when an altcoin push notification came across the top of my phone. That notification read:

Celo (CELO) is up 105%

Now, for those who are unaware, our most exclusive altcoin research service Ultimate Crypto added the token Celo (CELO) to its portfolio of explosive altcoins on July 22. The price? Just $2.35.

About a month later, on Monday morning, it crossed above $10.50. Thats a 350% return in a month.

Now, Im not saying this to brag. Rather, Im saying this show you the veracity of the current cryptocurrency breakout!

About a dozen altcoins have more than doubled over the past 30 days. Five have more than tripled. One has risen by nearly 5X.

The whole cryptocurrency market is on fire and naturally, you have to ask yourself: Why?

The answer is astonishingly simple: Because everyone is using cryptos these days, and because every investor wants a piece of the action, even the big boys on Wall Street.

On the first point, you have to remember that sometimes, in financial markets, asset prices go up and down for no good reason. So, while you mightve looked at the Bitcoin chart this past summer and assumed cryptos were dying, the exact opposite was happening.

Altcoin usage was soaring!

According to Chainalysis, a leading blockchain data analytics firm, worldwide adoption of cryptos and altcoins is growing by 880% year-over-year in 2021. Thats based on the value and volume of all cryptos being exchanged in the world.

This data isnt isolated. According to a report released last month by Crypto.com, the number of crypto and altcoin users in the world more than doubled from January (106 million users) to June (221 million users).

Get the point?

While Bitcoin prices were plunging, the everyday consumers usage of cryptos to either buy something, sell something, or trade something was sharply rising.

The fundamentals of Bitcoin never changed. In fact, they only improved throughout the summer. The asset price decline, then, was nothing more than near-term noise in a long-term uptrend and, ultimately, a great buying opportunity.

Of course, that is exactly what the smart money did: They bought the dip in cryptos this summer, and now, theyre profiting big-time.

Software analytics firm MicroStrategy bought a whole bunch of Bitcoin this summer. They now own about 4,000 coins for total market value of ~$180 million.

Morgan Stanley acquired about 6.5 million shares in the Grayscale Bitcoin Trust (GBTC) this summer.

Billionaire investor Bill Miller picked up about 1.5 million shares of the same trust.

Coinbase is gearing up to add $500 million worth of crypto assets to its balance sheet.

Again, the point here is obvious. Big Tech companies Big banks Big investors Big hedge funds Theyre all loading up on Bitcoin.

So we come full circle to why the whole crypto and altcoin market is on fire right now and the answer is so simple.

Everyones using crypto. Everyones buying crypto. Crypto prices are soaring. Its really that simple.

Of course, the million-dollar question is whether this is sustainable. The answer there, too, is simple: it absolutely is sustainable.

Lets go back to the core idea of cryptos. They serve to disintermediate inefficient, corrupt, and expensive economic systems, and replace them with faster, fairer, and freer versions.

Of course, that means cryptocurrency projects have the most value where the incumbent economic systems are the most inefficient, the most corrupt, and most expensive. That would be in developing economies, like certain parts of Asia and South America, where the governments have a long history of utilizing centralized economic systems to oppress the masses.

It should be no surprise, then, that the aforementioned Chainalysis report found that the three highest countries with the most robust cryptocurrency adoption are all located in Asia and have a history of government oppression: Vietnam, India, and Pakistan.

That means cryptos are working. Not just as an asset class to make you rich. But as a technology platform to improve the lives of people around the globe.

Why else would the peoples of Vietnam, India, and Pakistan be using cryptos so much? Theyre not in it for a quick buck to retire early. Theyre in it to fundamentally reshape their societies to be better for everyone.

This reality gives us confidence that regardless of where the prices of Bitcoin and altcoins trend over the next few months, these projects will survive this volatility and proceed to change the world.

Long-term investors who can stomach the volatility and keep their focus on the big picture will score enormous returns.

Indeed, they already have. As I mentioned earlier, a dozen cryptos have already doubled over the past 30 days and two of them were added to our Ultimate Crypto portfolio before they doubled.

Ill stop there because Im being redundant, and simply sum it up like this

Want to make big money in the financial markets over the long run? Plug into cryptos and dont plug out.

Click here to get plugged in.

On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.

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It's Time to Plug Into the Altcoin Arrival - InvestorPlace

Image source: Getty Images

Bitcoin (CRYPTO: BTC) is likely the first word youll hear if you ask anyone about cryptocurrencies.

Thats because Bitcoin holds the claim of being the worlds first crypto. It was launched all the way back in 2009 by someone (or a group of folks) going by the name of Satoshi Nakamoto.

Fast forward 12 years and Bitcoin still has by far the largest market cap of any digital token, currently US$929.3 billion.

Thats more than twice its closest rival, Ethereum (CRYTPO: ETH), which has a market valuation of US$442.2 billion.

But its not Bitcoin or Ether driving a fresh wave of FOMO among crypto investors. Its the fast-rising altcoins these investors are hoping to make rapid gains from.

Altcoins, if youre not familiar, simply refer to any cryptocurrency thats not Bitcoin. And altcoins can potentially soar in price in a matter of hours. And, of course, they can fall just as quickly.

With that precaution in mind, we look at the top-performing altcoin over the past 24 hours and the top weekly performer.

First, the best performer of the past 7 days is Arweave (CRYPTO: AR).

Arweave is up 134% over the past week, compared to a 3% gain for Bitcoin. That comes despite Arweave tumbling 10% over the past 24 hours. (Theres that stomach-churning volatility for you.)

At the current price, the token has a market valuation of US$2.0 billion.

So what the heck does Arweave do? According to CoinMarketCap:

Arweave is a decentralised storage network that seeks to offer a platform for the indefinite storage of data. Describing itself as a collectively owned hard drive that never forgets, the network primarily hosts the permaweb a permanent, decentralised web with a number of community-driven applications and platforms.

Moving on to the best daily performer, we have FTX Token (CRYPTO: FTT).

FTT is up 41% since this time yesterday, giving it a current market valuation of US$6.5 billion.

CoinMarketCap tells us that, FTT is the native cryptocurrency token of the crypto derivatives trading platform FTX that launched on May 8, 2019.

Its currently trading at all-time highs of US$68.84, having just rocketed past the previous record high of US$61.25, set on 8 May this year.

Now, if youre feeling that old FOMO itching, Ill also point out that by 25 June it had fallen to US$23.36, a loss of more than 62%.

Taking a look beyond just Bitcoin, Yoni Assia, CEO of online exchange eToro said (quoted by Bloomberg):

Theres no doubt that theres a lot of excitement in crypto. You can definitely see it within the numbers in the industry, whether its looking at total volumes or looking at growth of companies Weve seen a lot of exuberance in the market.

Sam Bankman-Fried, CEO of crypto exchange FTX said: Theres generally been pretty positive crypto sentiment recently. NFTs have helped lead the revival, and the crash from May is further in the rearview mirror.

Michael ORourke, chief market strategist at Jones Trading, noted the record levels of global government stimulus and sounded the following words of caution:

With all of this money floating around, we should not be surprised that there are people paying exorbitant amounts of money for digital pet rocks and an endless amount of other digital assets that can be easily created.

Digital pet rocks? Or digital gold?

The jury remains out on that question.

But there is no question that Bitcoin and altcoins can lose value just as quickly, or quicker, than they can potentially gain it.

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These 2 altcoins are leaving Bitcoin in the dust this week - The Motley Fool Australia

Layer-1 smart contract platforms increased their market share throughout August after the Ethereum networkLondon hard fork did little to solve the major issues of high transaction fees and network congestion.

One top-10 protocol that has been gaining momentum, but has yet to experience a significant price breakout to new highs like some of its competitors is Polkadot (DOT), a multichain protocol focused on facilitating the creation of cross-chain bridges between separate blockchain networks.

Data from Cointelegraph Markets Pro and TradingView shows that after bottoming out at $10.36 on July 20, the price of DOT increased 205% to an intraday high at $31.70 on Aug. 31 as the chatter of an impending altseason begins to rise.

Three reasons for the increasingly bullish outlook for DOT are its upcoming parachain auctions, a rapidly growing ecosystem of projects interested in launching on the network and a steady increase in daily trading volume.

One of the biggest drivers of momentum for the Polkadot ecosystem is the upcoming parachain auctions where projects vie for community votes to obtain one of the limited slots available to launch on the network.

Polkadots wild cousin Kusama has been in the process of conducting its auctions, with the first batch having been chosen at the end of July and the second batch of auctions scheduled to begin on Sep. 1.

As part of the parachain crowdloan process, users vote for projects by locking up DOT tokens for a designated term as a way to bootstrap funding for projects that are chosen to fill one of the limited slots.

This has the effect of reducing the circulating supply of tokens available adding pressure on the price of DOT. The Polkadot network will undergo its own parachain auctions once all auctions are complete on the Kusama network. The process has been fully audited and to date, the Kusama-bas parachains are running smoothly.

Another reason for the recent strength of DOT is the large number of projects interested in obtaining a parachain slot and launching on the network.

As evidenced by the graphic above, the Polkadot ecosystem has seen extensive growth in terms of protocols and supporting infrastructure over the past year and this is outmatched by only a small number of competing networks in the space.

With the Polkadot parachain auctions expected, its likely that the ecosystem will continue to expand and welcome new projects and proof of this comes from the fact that the Kusama parachain process has thus far been a relatively smooth .

Related: Will Polkadot save decentralized finance from Ethereums scaling problems?

A third reason for the bullish outlook for DOT has been its surging 24-hour trading volume which is now back at levels not seen since the market-wide sell-off in late May.

According to data from CoinMarketCap, DOT's 24-hour trading volume surged more than 300% on Aug. 31 to a high of $5.41 billion as anticipation for the upcoming Kusama parachain auctions excited the Polkadot investors who view KSM's success as a proxy of what can occur with DOT price.

If the Kusama network can continue the smooth rollout of its auction process and clear the way for the process to begin on the Polkadot network, the demand for DOT could rise and this could translate to higher prices for the asset.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

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3 reasons why Polkadot could be the next altcoin to hit a new all-time high - Cointelegraph