In today’s world, there are several ways that an individual can grow their savings or money, to be precise. There are several ways to invest one’s money. These ways are either safe or too risky. These several ways include Public provident funds, Direct Equity, Equity mutual funds, Real estate, Physical gold, Cryptocurrency etc.
Cryptocurrency is a type of payment that is exchanged for commodities and services. There are several types of cryptocurrencies, and bitcoin is one of the most used cryptocurrencies that has also given rise to other cryptocurrencies. Two of these are 1. Stablecoins and 2. Altcoins.
Stablecoins vs Altcoins
The main difference between stablecoins and altcoins is that stablecoins do not experience a spike in their values as they are restrained to an external budget of funds. On the other hand, altcoins are more likely to experience a volatile spike in their values. Although, stablecoins are a type of altcoins.
The cryptocurrency whose price is tethered to a cryptocurrency or fiat money or for trading commodities like valuable metals is known as stablecoins. There are backed stablecoins that are a type of asset-backed cryptocurrencies. They hold significance in the market. Other types of stablecoins include fiat-backed stablecoins and cryptocurrency-backed stablecoins. They have their independent characteristics and are significant in the market.
All the cryptocurrencies other than bitcoin are known are altcoins. They are the alternate coins. The characteristic features of altcoins are somewhat similar to bitcoins, but there are some features of altcoins that are different from bitcoins. For example, altcoins provide capabilities in addendum like smart contracts and thus distinguish themselves from bitcoins. The primary types of altcoins include stablecoins, utility tokens, security tokens etc.
Comparison Table Between Stablecoins and Altcoins
| Parameters of Comparison | Stablecoins | Altcoins |
| Meaning | The cryptocurrency whose price is tethered to a cryptocurrency or fiat money or for trading commodities like valuable metals is known as stablecoins. | All the cryptocurrencies other than bitcoin are known are altcoins. |
| Type of | Altcoins | Cryptocurrency |
| Subtypes | Fiat-collateralized stablecoins, Commodity-collateralized stablecoins, Crypto-collateralized stablecoins, Non-collateralized stablecoins etc. | Ethereum, Binance Coin, Thether, Cardano, Polkadot, XRP, Uniswap, THETA, Litecoin, Ripple, Dogecoin, Stellar Lumens etc. |
| Advantages | They make several financial processes quicker. They charge lower fees. They are borderless. They offer complete translucency. New features can be added to them according to the changing requirements. | They primarily serve as an option to Bitcoin. Their function is unique. They offer several solutions. The transactional fees are less. |
| Disadvantages | Third-party is necessary. They require external audits. The return on investment is less. | Less exposure, Limited usage, They have volatile values. |
What are Stablecoins?
The cryptocurrency whose price is tethered to a cryptocurrency or fiat money or for trading commodities like valuable metals is known as stablecoins. Stablecoins were introduced in early 2015. They are primarily of two types, the stablecoins that are asset-backed and the stablecoins that are not asset-backed. They have their independent characteristics and advantages.
A stablecoin’s value is collateralized by another cryptocurrency if it is a cryptocurrency-backed stablecoin. If the stablecoins are fiat-backed, then their value is completely based on the value of the currency that backs them. The cryptocurrencies that were backed by fiat money are the first kind of stablecoins that were introduced in the market. Another type of asset-backed stablecoins is commodity-backed stablecoins.
The stablecoins that are not asset-backed are also known as seigniorage-style stablecoins or non-collateralized stablecoins. They use a Seigniorage Shares System. These type of stablecoins do not need collateral, and their value is regulated by the supply. They are not as famous as the asset-backed stablecoins.
Several advantages of stablecoins include faster financial processes, lower fees, borderless system, complete transparency, it is easily programmable, and new changes can be added according to the changing requirements. Although some disadvantages include the necessity of third-party, the requirement of external audits, less return on investment etc.
What are Altcoins?
All the cryptocurrencies other than bitcoin are known are altcoins. The Namecoin is considered the first form of altcoins that was introduced in April 2011. The introduction to the first altcoin gave rise to the inception of altcoins altogether. There are several altcoins in the market. The reason behind the presence of a large number of altcoins is that anybody can create an altcoin.
Any cryptocurrency that is not a bitcoin is contemplated as an altcoin. Although altcoins were introduced after Bitcoin. The first altcoin, Namecoin, has several characteristics. Other examples of altcoins include Dogecoin, Peercoin, Litecoin, Ethereum, Monero, Cardano etc. The characteristic features of altcoins are somewhat similar to bitcoins, but there are some features of altcoins that are different from bitcoins.
Altcoins provide capabilities in addendum like smart contracts and thus distinguish themselves from bitcoins. The limitations that are possessed by Bitcoin are overcome by altcoins. To minimise the time and energy consensus method is used in altcoins. Because of such many remarkable features, altcoins have distinguished themselves from bitcoins.
Several advantages of altcoins include unique functionality, fewer transaction fees, provide solutions etc. Although some disadvantages include less exposure, limited usage, volatile values etc. The shortcomings ought to be fixed in the upcoming years, and the advantages of altcoins are way more useful. They have created a significant place in the market because of their unique features.
Main Differences Between Stablecoins and Altcoins
- The stablecoins were introduced in early 2015. On the other hand, altcoins were introduced in April 2015.
- The stablecoins are a type of altcoins. On the other, altcoins are an independent entity and are a type of cryptocurrency.
- The first stablecoin that was introduced in the market was TETHER. On the other hand, the first altcoin that was introduced in the market was Namecoin.
- The two main types of stablecoins are asset-backed stablecoins and stablecoins that are not asset-backed. On the other hand, the types of altcoins include Dogecoin, Peercoin, Litecoin, Ethereum, Monero, Cardano etc.
- The stablecoins are not that prone to experience a spike in their values. On the other hand, altcoins are more likely to experience a spike in their values.
Conclusion
Cryptocurrencies are a great option for investing money, but one must always be careful and must know what they can face if ever there is a fall in the market. One must acquire complete knowledge before investing money in cryptocurrency.
Although, the advantages are much profitable if one is cautious enough while making a certain investment. A cryptocurrency is an evolving option for investment, and many changes and events are expected to be witnessed in the upcoming years.
References
- https://link.springer.com/chapter/10.1007/978-981-15-0077-0_37
- https://voxeu.org/system/files/epublication/Economics%20of%20Fintech%20and%20Digital%20Currencies_0.pdf#page=74