“Altcoin” has come to refer to all cryptocurrencies other than BTC since the birth of ETH. Today, however, many people no longer qualify altcoins.
Idea
All cryptocurrencies other than Bitcoin (BTC) were first described as altcoins for one reason only: There was a proliferation of projects that copied and pasted Bitcoin’s source code. Early-stage cryptocurrencies weren’t unique enough to have a special term, so “altcoins” fit their description best. The community, at the time, didn’t put too much thought into other cryptocurrencies due to Bitcoin’s progressive potential – future price growth, use cases, mainstream adoption, etc. is a leading company in the field of electronic money.
But everything changed when people came across Ethereum’s smart contract platform, as it can generate “smart contract tokens” – cryptocurrency that is capable of performing smart tasks on a single basis. autonomous way.
This causes the community to differentiate altcoins from tokens. Altcoins are now coins with their own blockchain, and tokens are defined as cryptocurrencies created on a smart contract platform. The other factor that is currently at work is that there are many blockchain projects that are scaling rapidly and reducing Bitcoin’s dominance.
The community began to notice weaknesses in Bitcoin’s correlation with other coins as other interesting new projects emerged, which caused the crypto world to rethink the way crypto is viewed. .
Now, every altcoin distinguishes itself in the market by offering a unique set of features related to things like transaction management, scripting languages, mining mechanisms, and consensus algorithms. While altcoins’ out-of-the-box features may outperform Bitcoin in one way or another, their value is still entirely dependent on Bitcoin’s market capitalization.
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The community began to envision a world where various cryptocurrencies, not just Bitcoin, could disrupt the world. Now, with Ether (ETH)’s growing dominance in the market, it’s clear that Ethereum is the leader of crypto innovation. A large percentage of tokens today are Ethereum ERC-20 smart contracts, so the way token mints categorize their projects is easily normalized in the community.
The Role of Ethereum in Cryptocurrency Classification
Ethereum’s ecosystem is responsible for all the development of cryptocurrencies and for the main good, starting with initial coin offerings (ICOs) – this broke the model of initial public offering. start by allowing anyone to buy the project’s coins at launch. The attention from ICOs has led to multiple use cases for ERC-20 tokens, with developers turning their next cryptocurrency into an Ethereum-based token and crypto users having Engine learn more about this technology. With the wide variety of ERC-20 tokens, our human nature has to step in to categorize and associate everything.
The term “altcoin” is no longer an acceptable way to define a project, as it is ambiguous – especially with decentralized finance (DeFi). People want to know what it is, whether it’s staking, liquidity mining coins, crypto derivatives, stablecoins, utility tokens, etc. They are aware that cryptos do More than sending and receiving payments.
“Meme tokens” have also entered the crypto lexicon
“Meme token” is a term most crypto users are familiar with due to Elon Musk tweeting to the world about Dogecoin (DOGE). But the crypto community must distinguish between tokens and meme tokens, as cryptocurrencies have high intellectual capacity. Tokens based on social media content can influence how the crypto sector is perceived, so a deeper categorization needs to be established.
The proliferation of non-usable tokens (NFTs) has proven that the crypto community is ready to join and learn about new definitions. Imagine if NFTs were described as altcoins? By definition, they are technically what they are, but there’s just so much the NFT can do that makes their difference. The community acknowledges that NFT is an ERC-721 token and acknowledges the capabilities they possess. For starters, they are structured to make cryptocurrencies unique, no two tokens share the same value.
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“GameFi” (DeFi playing activity) is another term that has been added to the crypto dictionary. It deals with merging blockchain technology with NFT, liquidity mining, and other DeFi protocols. The result are games where people can earn real crypto and trade assets. GameFi is still new, so it’s likely that something trendy will emerge and lead to further categorization in the space.
Cryptocurrency community is getting smarter
The crypto community’s overall understanding of the space is rapidly improving. Content creators, influencers, and YouTubers are also good at converting complex jargon into easy to understand information. The community realizes that the correct classification of cryptocurrencies will increase the chances of finding good new projects early. For example, telling someone that a revolutionary NFT is just an altcoin will affect their first impression and possibly make the NFT less valuable.
Cryptocurrency classification helps to compare them. To effectively compare cryptocurrencies, you must know what they are and whether others are doing the same. That’s why you can’t compare Sprint to something like ADA – one is a payment cryptocurrency, while the other is a proof-of-stake smart contract platform’s utility token.
Another argument for the fall of the Bitcoin vs. altcoins are different correlations between BTC and other coins. While the correlation was high in some pairs, others showed weaker interdependence. For example, ADA and XRP show a lower correlation with other digital assets, not to mention that stablecoins like Tether (USDT) show a negative correlation.
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Classification also helps with diversification. You can distribute your crypto between several coins, but the phrase “don’t put all your eggs in one basket” may apply to you if all your coins fall into the same category.
While more and more new crypto concepts are emerging, we can still put them all – DeFi, GameFi, NFTs, and meme tokens – under the umbrella of altcoins. From the traders’ point of view, many believe that altcoins will have greater returns in the future, although there may be a weaker consensus than Bitcoin currently.
As a Bitcoin maximist and CEO of a crypto exchange, I am pleased to see more classifications arise, as it is difficult for the industry to achieve mass adoption. series with only Bitcoin.
Johnny Lyu is the CEO of KuCoin, one of the largest cryptocurrency exchanges, launched in 2017. Prior to joining KuCoin, he has accumulated rich experience in the e-commerce, umbrella, and e-commerce industries. luxury and luxury.