CoinAppetite

Altcoin Guide: What are Altcoins and How To Avoid Being Scammed?

In the crypto world, Bitcoin (BTC) is not the only cryptocurrency. Many other crypto coins were created after the invention of BTC. All these other coins are known as altcoins. The coins have their own blockchains, wallets, and miners. There are many types of altcoins, each with their own unique characteristics.

Why Do Altcoins Exist?

Bitcoins was the first cryptocurrency. However, the crypto community soon realized that it was not perfect. For instance, Bitcoin requires a lot of computing power. Besides that, there can only ever be 21 million Bitcoin.

The developers behind BTC are very conservative and they do not like to make any major changes to the BTC blockchain. They have a good reason for this; Bitcoin is worth billions and many businesses rely on it. Major changes to BTC could upset this economy and cause it to crash.

Bitcoin Alternatives

Due to this resistance, many developers have taken the basic principle behind BTC and created their own version. These versions have different rules that meet the needs of the developers and the community behind them. As expected, there are thousands of different altcoins, which suit the needs of different niches.

A popular altcoin is Litecoin (LTC). It was amongst the most successful altcoins, which was released about 3 years after BTC was created. LTC is four times faster than BTC, which means that transactions on the network are confirmed much faster than on BTC.

LTC also has different mining rules; it ensures that all miners have a level playing field. To achieve this, LTC developers created rules that exclude expensive ASIC miners. As a result, those with more money cannot use it to push out everyone else.

The Emergence of Scamcoins

Not all altcoins have genuine goals. Thousands of altcoins exist for the sole purpose of defrauding people. These altcoins are usually announced on popular crypto forums. In most cases, they are pre-mined by the developers.

The developers of scamcoins use dubious tactics such as FOMO to gain the support of the community. Besides that, they will create paid ads and hire trolls to spread the buzz about their coin in order to increase their value. When they feel the value is high enough, the developers will sell off all their coins.

This is called the pump and dump scam. It is quite common in the altcoin scene. Even experienced investors will sometimes fall prey to these scams. To avoid these scams, here are some things you can watch out for:

  • Look for Genuine Utility

A good altcoin should have a real utility that makes it genuinely productive. For instance, some altcoins are designed for the exchange of solar power. If a coin is trying to creating real-world value, it is a good sign that it is genuine.

  • The Existence of a Real Team

Most scamcoins usually do not reveal the identity of the creators. They will use stock images and their profiles on popular altcoin platforms will be a few days or weeks old. Genuine developers will usually have profiles that are years old and they will be regular contributors on online platforms.

Summary

Altcoins can be projects created by enthusiasts or the basis for an entire business. There are also traders who are in the business of buying and selling altcoins, just like in the Forex market. In short, if you are thinking of buying altcoins, do a lot of background research.


Stay Up to Date

Bit Expert