What Are Altcoins?
Before we take a look at altcoins in detail, it is important for us to understand what an altcoin is in general. Probably, among you, there are already cryptocurrency veterans, and therefore you can safely skip this part.
If you do not care enough to learn about various altcoin groups, then altcoin is all that is not Bitcoin. Even Bitcoin forks (for example, Bitcoin Cash) are altcoins.
The entire crypto industry is built on Bitcoin; it is the main driving force for the market, and its impulses push the crypto market to new peaks. Its falls roll the market down. Bitcoin is an important indicator for analyzing any period. The price of Bitcoin (or rather, its stability) shows how well crypto-economics feels in general. The market reacts very painfully to any BTC collapse.
The price of Bitcoin is the key to cryptocurrency stability. That is why, when you hear that Bitcoin collapsed and lost 5-7-10% per day, altcoins most likely fell even more. Usually, their fall in such situations is twice as high, at -10–20%.
But in addition to the price of Bitcoin, there is another important indicator — an indicator of dominance. It can be seen on any price tracking platform. For example, the CoinMarketCap value of BTCDOM (Bitcoin Dominance) is indicated at the top of the page.
What Is Bitcoin Dominance?
Bitcoin dominance is the share of Bitcoin capitalization in the total capitalization of the crypto market. For example, at the time of writing, the total capitalization of cryptocurrencies is 2.255 trillion dollars. Bitcoin capitalization: $908 billion (or 0.908 trillion). It is easy to calculate that Bitcoin's capitalization is 40.2% of the total market capitalization. This 40.2% is Bitcoin dominance.
What is Alt Season?
Altseason is a period when altcoins grow faster than Bitcoin. Much faster. So much so that capital from Bitcoin begins to flow into the top 100 on CoinMarketCap.
We can already say that the whole of 2021 was an alt-season (although many did not notice this). Bitcoin dominance from early May was below 50%.
The main role in the "launch" of the alt season is played by the ETH/BTC pair.
Ethereum and its dominance are another important trend that an altcoin investor should follow. Typically, the first indicators of future alt seasons become noticeable when, in an ETH/BTC pair, the ether breaks away.
It is important to invest in crypto that will not disappear in the medium and long term. For example, in 2017–2018, the concept of the "Ethereum Killer" was popular. The most striking example of such a project is EOS. An extremely popular cryptocurrency that brought together developers and investors around it but succumbed to a hit from the community for excessive centralization. As a result, the project simply drowned in the summer. However, it was possible to make a good profit at that time on this coin, but in the long term, the broadcast had been stronger than it turned out.
Checklist for Coin Selection
Ecosystem projects make the crypto industry accessible to more users around the world. And very often, beginners who come to crypto face a huge number of projects. The question arises: what to invest in so as not to burn out?
Each project, at its dawn, promises golden mountains. Most of them simply disappear, having received investor money.
Therefore, when choosing an altcoin for investment or speculation, you can be guided by the following parameters:
- Evaluation of the project from the point of view of the work done: is it interesting and promising whether there is a working MVP (minimum working prototype), what the roadmap looks like, how the work is moving, and whether deadlines are met?
- Evaluation of the project from the community's point of view: what is the general information field around the project, and how are branches conducted in specialized forums?
- Team assessment: who leads the project? Whether there have been successful projects in the professional history of the team;
- Evaluation of the project from the point of view of market valuation — whether the business really benefits and is necessary for the market;
- Evaluation of the project from the point of view of existing investors: if Grayscale or Microstrategy invested in the project, this is very likely a good project;
- Exchanges on which the project is traded. Better one, but in the first or second echelon, than many, but of poor quality.
Types of Altcoin Systems
1. Ethereum
This is the most important ecosystem at the moment. The dominance of Ethereum in the field of DApps and smart contracts is the main key to maintaining its place at the top.
Previously, the Ethereum ecosystem experienced large failures and overloads. For example, the Cryptokitties game once stopped the Ethereum network. More precisely, it slowed down transactions and increased their commission so much that most applications on Ethereum simply stopped working. That's why the killers of the broadcast were so popular. But this happened in 2017–2018.
And although the cost of transactions over Ethereum is sometimes prohibitive, this ecosystem is still firmly at the top. Now this system can process 15-20 transactions per second, but if Ethereum 2.0 is successfully launched, this number will increase to several thousand or tens of thousands. Everything will depend on the speed of implementation of this decision at all nodes in Ethereum.
To track the blockchain of Ethereum, it is best to use https://etherscan.io/.
This network became the main one for decentralized applications at the dawn of their appearance, and therefore most projects that began to work in 2017–2019 use the ETH blockchain. It was the constant increase in the number of these projects that caused the emergence of new, more advanced systems.
2. BSC (Binance Smart Chain)
Binance Smart Chain is a fork in the road.
Binance has long been playing its own game and building an ecosystem. Binance can be considered a super-app. This is a platform on which everything is available—opportunities for investors, traders, and developers.
BSC has a higher transaction speed than Ethereum, and they are much cheaper. This was made possible by another system of consensus. Until 2022, Ethereum still used POW. This is the same consensus algorithm as Bitcoin. Binance Smart Chain uses a hybrid between PoA and DPoS. Without going into technical details, note that BSC has a TPS value within 70–100 transactions per second.
Important: The Ethereum and BNB addresses for the user are identical. These two blockchains are mutually compatible. Selecting the wrong network in a transaction (for example, transferring tokens from the BSC to the ETH system) will not result in a loss of funds. This creates additional opportunities for users and developers, and it also allows you to use the cross-chain in your projects.
The BSC network has major support for developers.
3. Polygon
The Polygon network is working to increase the scalability of the network as well as reduce the cost of transactions. The polygon is an Ethereum sidechain. As Ethereum succeeded in implementing ETH 2.0, this can still become critical for Polygon. Therefore, the team now needs to focus on ensuring that the project becomes as widespread as possible among DApp developers, as well as implementing their plans to form a multichain system.
The main part of the project is the Polygon SDK. It is it that allows you to create DApps.
Polygon transaction speed is higher than on Ethereum — up to 50 TPS.
The Role of the MATIC Token in the Network
MATIC is used as a means of paying fees. The entire economy of the Polygon project is built around this coin. The emission is phased. Polygon has a PoS algorithm. Tokens also allow you to participate in the development of the platform.
You can easily track the Polygon blockchain here: https://polygonscan.com/
4. Near
Another protocol for creating DApps has been working on the consensus algorithm PoS since 2020. Compared to competitors, this blockchain is much faster and can process up to 100,000 transactions per second. A block is created every second, and then the transaction itself is also processed quickly with a minimum commission.
The central feature of the protocol is that it is easy to deploy to create its decentralized application. At the same time, the user of this application may not know that he is working on the blockchain. Near helps make the design of the application and its software architecture what users are used to. Thanks to this, application developers on Near can create products that reach more users around the world.
Near works with Ethereum thanks to the Rainbow Bridge. This allows for transactions between Ethereum and the Near Protocol.
According to TT, the Near Network has grown several times since its launch and continues to develop.
Conclusion
So we figured out what altcoins are. We studied the concept of alt-season and talked about different networks to create DApps.
Altcoins are cool. There is more profitability but less stability in the long term. At the same time, the best time for trading altcoins is the alt season. It is worth remembering that cryptowinter comes instead of all seasons. The bit in this situation feels better. And the buck feels better. Therefore, I strongly recommend keeping the briefcase so that it has a maneuverable field.
To earn money on altcoins, it is important to choose them wisely. At the same time, it is worth looking not only at the technical implementation and marketing components of the project but also at its reputation and demand among users. If you do not understand the essence of the project and its benefits for society, it is better to pass by or try to figure it out. Always make your seat
The crypto exchange rate is greatly influenced by listing on exchanges. Especially if it's Binance or Coinbase. The first is the largest exchange in the world, with its cool chips and instruments. The second is a convenient and reliable way to invest, more so for users from the States.
Investing in altcoins is better done before listing on the CEX or even the DEX. But there are very few such projects, and they are difficult to find at an early stage.
If you just believe in altcoins and the DeFi segment, hold DEX tokens and also look at DPI. It will show you how the real DEFI sector feels. In addition, the yield on DeFi is higher than the yield on Bitcoin.
Altcoins are a big profit, but they are also a big risk. DYOR.
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