ALTCOINS v/s STABLECOINS v/s TOKENS v/s SHITCOINS

I was doing my research work on cryptocurrencies, when I came to know of many different terms like altcoins, tokens, shitcoins, etc. I got perplexed that what exactly is the difference between them and assumed that many of you would also not be crystal clear about this topic. Don’t worry this article will solve all your queries.

ALTCOINS- It is combination of 2 words

alternative

coin

So, what are altcoins? Altcoins are cryptocurrencies other than bitcoin. They are also based on blockchain technology. As Bitcoin is having lot of loopholes like it was mainly used for payments, with less functionalities and also followed pow(proof of work) mining process due to which altcoins came with more advance characteristics like executing smart contracts, and they follow pos(proof of stake) mining process. etc.

Types of altcoins

1. Mining based cryptocurrencies (solving algorithms to generate new coins-LITECOIN, RIPPLE, ETHEREUM)

2. Meme coins (inspired by a joke- DOGECOIN, SHIBA INU)

3. Tokens

4. Stable coins

Currently, there are 13194 cryptocurrencies of which approximately 60% are altcoins. Prices of many altcoins are influenced by bitcoin’s price because they were derived as an alternative to bitcoin. But in future due to development in technology and markets, price movement of altcoins will become independent. In simple words, altcoins are better version of bitcoin. Examples are- Litecoin which uses mining algorithm ‘Scrypt’ for faster transactions unlike bitcoin which uses SHA-256 algorithm to initiate transactions which are done slowly, like 1 block is generated in 10 minutes, Ethereum which helps in executing smart contracts, Bitcoin Cash, Binance coin, etc.

So which altcoins are gaining popularity?

This you can analyze by following their market cap/altcoin index. MARKET CAP= coins*exchange rate.

It is the value of cryptocurrency in the market. Assume, currently there are 2000 Ethereum coins and 1 Ethereum= 4217 $. So, their market cap is 2000*4217=8434000$

Assume, currently there are 2000 lite coins and 1litecoin=203$. So, their market cap=2000*203=406000$.

So, which altcoin is more popular? Ethereum. This will help you to analyze in which one to invest or connect with for future transactions.

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STABLECOINS- Suppose you buy bitcoin for attaining short term gains, today its price is $4125 and tomorrow its price becomes $3000, how heartbroken would you feel? To solve this problem stablecoins came into existence. It is a type of altcoin. How it is different? It is backed by fiat currency, precious metals, oil, other cryptocurrencies, etc. It was designed to manage price fluctuations and problems of inflation. Also, they help in faster transactions. Examples are DIEM, MAKER DAO, USDC, etc. TETHER was the 1st stablecoin.

Types of stablecoins-

· Fiat collateralized-TRUE USD, TETHER which is backed by $.

· Crypto collateralized- Many cryptocurrencies are backed by ether.

· Precious metals- DIGIX GOLD, SWISS REAL COIN which are backed by gold and other precious metals like silver.

· Non collateralized stablecoins- They are not backed by anything but their supply is governed by algorithms or other working mechanisms like central bank do- like managing interest rates to maintain a stable price. Example BASECOIN- Its supply is controlled with the help of smart contracts.

GEMINI USD is the1st regulated stablecoin.

Also, cryptocurrency exchanges like Coinbase, Gemini, circle have their own stablecoins for easy transactions.

Also, some stablecoins are coins and some are ERC20 tokens (under tokens). DAI is ERC20 stablecoin.

TOKENS

Tokens are mainly of 2 types

UTILITY TOKENS- It is offered by companies to let investors use products/services in future. Examples are amazon gift card, Starbucks gift card, etc.

SECURITY TOKENS-It is offered by companies as tradable financial assets for letting investors earn profit out of their investment.

Tokens are offered by companies to investors via 3 routes-

1. ICOs (INITIAL COIN OFFERINGS)- Through ICOs companies sell tokens to fund specific projects at a discount with no ownership stake given to investors. How it is done? Just like issuing shares a whitepaper is released by the company containing the project details. If investors find project worthful they invest in it by receiving tokens in exchange of cash or cryptocurrency. Via ICOs mostly utility tokens are traded. But, in case of security tokens high profits are earned by investors.

But major loophole is that they are very risky, as according to a report 80% ICOs are scams. They are not regulated and if minimum subscription is not fulfilled then money is returned to the investors as happened in Telegram company. GOOGLE, FACEBOOK have banned ICOs. Countries like CHINA, SOUTH KOREA have also banned ICOs. SEC shut down $15million ICO by Munchee.

2. STOs (SECURITY TOKENS ORGANISATION)- Due to problems in ICOs, STOs came. They are regulated like in US -STO need to be registered with SEC. STOs provide security tokens and give ownership rights to investors. They are traded on verified exchanges and also reduce scams. Like shares, bonds, security tokens are also a secure investment.

3. IEOs (INITIAL EXCHANGE OFFERINGS)- In this, companies pay fee and tokens to cryptocurrency exchanges which make it succeed for the company by bringing in investors for moderate amount of money and for utility purposes.

NOW HOW TOKENS ARE CREATED?

Process of creating tokens is known as tokenization. Tokens are created with smart contracts. To get tokens send some ether to smart contract which will be directly sent to the company. To generate your own tokens, write your smart contract. When you want to create your own tokens, you need to follow ERC20(Ethereum request for comments) – guidelines to follow when you want to create your own token.

THERE IS ALSO ANOTHER TYPE OF TOKEN-NFT (NON-FUNGIBLE TOKENS)

They are unique and cannot be exchanged with other items. They are recorded on a blockchain(mostly Ethereum). NFTs are smart contracts which give you the ownership right. Example, you can get a NFT for your unique piece like concert tickets, digital arts, etc. and sell it to some other person and give them the ownership right. Like, great paintings are sold at auction, NFTs are also sold at auctions. 1 more example- I can create NFT for my content via writing smart contract or using app ‘open sea’ and anyone of you can buy it and can be the owner.

SHITCOINS- Shitcoins are cryptos with no value, no functionality and are bad for investment purposes. Example DOGECOIN, SHIBA INU, DENT, etc.

DIFFERENCE BETWEEN COIN AND TOKEN

Coins

Coins have their own blockchain.

They are independent.

They are mainly used for initiating transactions, executing smart contracts, etc.

Tokens

Tokens need other blockchain to run on. Like, many tokens run on Ethereum blockchain.

They aren’t independent.

They represent security in company like real estate, gold certificates, etc.

You would have been eager to garner lot of information about certain other terms like smart contracts, erc20, POW, POS, mining algorithms, etc. after reading the article. Just keep some patience every week your problem will be solved.