Cryptocurrencies such as Bitcoin, Ethereum, and Dogecoin have become hot topics recently.
Nowadays, what was a previously niche asset has become one of the most desired investments in the world.
What are cryptocurrencies?
Cryptocurrencies are digital assets that use cryptography to verify transactions and validate new coins. Blockchain technology underpins cryptocurrency, but many different blockchain technologies have varying degrees of decentralization, privacy, and security.
As these assets are 100% decentralized, there is no single central authority or repository that distributes them. There are over 1,000 altcoins on the market today, each offering unique features and benefits (and drawbacks).
The main difference between altcoins and cryptocurrencies is their intended use. Cryptocurrencies tend to be used as a store of value/medium of exchange, while altcoins can serve many other purposes, such as smart contracts or decentralized apps (dApps), among others.
Cryptocurrencies are not issued by a government or any other person or organization; they’re created through a process called mining.
Mining creates new cryptocurrencies by solving complex mathematical problems with computers. This creates new coins and tracks transactions on the blockchain ledger that makes up the currency’s system of record (like how banks keep track of who owns what).
Fiat currencies derive their value from the fact that governments and their respective financial authorities back them. On the other hand, cryptocurrencies are 100% decentralized, which means that market forces determine their inherent value.
And this means that crypto valuations can fluctuate wildly depending on market forces like supply/demand and adoption rate changes over time.
What is an altcoin?
Altcoins are alternative cryptocurrencies to Bitcoin. They are not as popular as Bitcoin but they are still very important. You can use them to buy things and store them in one of the best altcoin wallets out there, but they’re not widely accepted like Bitcoin is.
Some of these coins have unique features that make them attractive to investors, though it’s worth noting that most have a lower price than Bitcoin despite having better technology.
Ethereum is one good example of this. While Ethereum has opened up the door for DApps and smart contracts, it is still nowhere near as valued as Bitcoin.
Is Dogecoin an Altcoin?
Dogecoin initially started life as a meme coin or what some would call a joke. As it is a coin other than Bitcoin, it is most certainly an altcoin.
However, Dogecoin first gained notoriety when it attracted the attention of eccentric billionaire Elon Musk.
In a series of Tweets, Musk would attempt to drive up the prices of Dogecoin by claiming that he was a diehard supporter of the token.
As a result, Dogecoin prices rose exponentially and investors started buying up tokens exponentially. Since the crypto crash, however, Dogecoin prices began to normalize as the market once again began cooling down.
Should you invest in Dogecoin?
The answer is both yes and no.
Like all cryptocurrencies, there is nothing backing the value of Dogecoin. And as a 100% decentralized and unregulated coin, its value is naturally highly volatile.
As it’s an altcoin, there is plenty of room for speculation, which can be immensely profitable. However, do keep in mind that price fluctuations can also work against you and cause significant losses.
What I would recommend is that you conduct your own research into the coin and fully understand the risks of investing in such an asset. Once you get that down, managing your risk exposures becomes a lot easier.
People often buy into the largest cryptocurrencies when they are just getting into crypto.
When you’re just getting into cryptocurrency, there are a lot of things to consider. You might be wondering whether altcoins are worth buying into at all.
After all, the top few cryptocurrencies have already been around for years and have a much larger user base than any other altcoin could hope to compete with—so why should you support something else?
The answer is simple: these prominent cryptocurrencies are widely used, secure, liquid, and have the highest market caps out there. In fact, they’re pretty much perfect in every way!
Conclusion
While there are some key differences between cryptocurrency and altcoins, the most important thing to remember is that both are still new technologies.
They can be volatile and unpredictable, but they also offer an opportunity for investors who want to stay ahead of the curve by getting involved early on in something big.
The question then becomes whether or not you believe in the future of blockchain technology, as well as how much risk you’re willing to take on before seeing any returns.
