Altcoins are alternative cryptocurrencies that are being developed to break away from the monopolization of Bitcoin. They are created primarily to address Bitcoin's scalability issues and are often modified or improved versions of Bitcoin.
Yes, Bitcoin's peer-to-peer payment network is paving the way for altcoins. But they offer better privacy and more efficient transaction speeds.
Among the thousands of first introduced altcoins was Andrew Chou’s Namecoin back in 2011. But altcoins took off and grew exponentially, leading to the rise of ETH, XRP, DOT, ADA, BNB, etc. Ether (ETH) alone currently accounts for around 20% of the total cryptocurrency market cap, and there are over 10,000 other altcoins available today. While altcoins may be given recognition, one can no longer ask how an altcoin works and what prospects does it hold?
How do trading altcoins work?
Altcoins can usually be bought or sold on various cryptocurrency exchanges, both centralized and decentralized exchanges. But depending on the cryptocurrency exchanges, the types of altcoins that each exchange offers differ from each other. Most exchanges do not recommend buying altcoins using fiat transactions. This means that traders will need to buy BTC, ETH or USDT and exchange them for other altcoins.
While centralized exchanges (CEXs) often have a more extensive listing process, decentralized exchanges (DEXs) like Uniswap allow traders to buy publicly listed altcoins. Despite their drawbacks, CEXs are often a safer choice for large-scale traders.
However, the tricky part of trading altcoins is finding an exchange to store them in a wallet. While it is possible to store Bitcoin and altcoins on some CEXs, it all depends on the nature of the altcoins. Some altcoins support the public CEX wallet, while some can only be stored in a wallet created by the developers. Usually, most crypto exchanges offer refunds, but it is still better to be safe than sorry. Usually, altcoin traders store their cryptocurrency offline in a cold wallet to stay away from prying eyes.
