Stablecoins and Altcoins are different

An Introduction to Stablecoins

They came into being in 2015. Their prices fluctuate in alignment with the current pricing of fiat currencies, digital currencies, and trading commodities (An example is valuable metals). Stablecoins are tethered to the above-mentioned items.

Stablecoins may be asset-backed, or not asset-backed. Each type has its own independent aspects and benefits.

Asset-backed Stablecoins may be backed by the pricing of other digital currencies. It indicates that they are cryptocurrency-backed Stablecoins. Similarly, fiat-backed cryptocurrencies are dependent upon the existing value of the concerned currency backing them. Some Stablecoins have the backing of trading commodities. Therefore, the pricing of the latter affects the pricing of the former.

Non-asset-backed Stablecoins are non-collateralized/seigniorage-style coins. Since a Seigniorage Shares System comes into play, the value of the Stablecoins moves in alignment with existing supplies. Admittedly, investors do not favor them much.

Stablecoins award several advantages to investors. For instance, they initiate rapid financial processes. Then again, they are affordable and easy to program. They operate on complete transparency. It is possible to use them all over the world, as there is no border system is in place. It is also possible to add new changes in alignment with changing trends.

Certain disadvantages exist. For instance, third-party interference is present, return on investment is less, etc.

An Introduction to Altcoins

Barring Bitcoin, all other digital currencies come under the umbrella of Altcoins. The very first altcoin came into being in 2011, in the form of Namecoin. Today, there are many altcoins in the crypto marketplace. It is because developers find it easy to create them. Some of them, are Cardano, Dogecoin, Litecoin, etc. While most of their features are borrowed from Bitcoin, some features are different too.

Altcoins prove their worth via their addendums. One of them is the initiation of smart contracts. Therefore, they cover the limitations displayed by Bitcoins. They even do better in energy consumption for mining, and time is taken for every transaction on the concerning blockchain. Thus, they are highly popular.

Investors enjoy the feature of paying lesser transaction fees, unique operational methods, problem-solving capacities, etc. At the same time, they fear volatility, limited exposure, limited usage, etc.

Differences between Stablecoins and Altcoins

Stablecoins run on the Ethereum blockchain. It is because they are Ethereum tokens, meant to remain at fixed values. Only when the value of ETH changes, the value of Stablecoins will change.

Altcoins are alternatives to Bitcoin. They leverage the digital currency network, built-in alignment with open-source, advanced blockchain technology. They serve as alternatives to a traditional financial system. They are also alternatives for high-tech organizations.

The value of Stablecoins is tethered to a fiat currency, cryptocurrency, or trading commodity. Therefore, they are chained to an external budget of funds. As a result, Stablecoins remain distant from spikes in values.

In contrast, altcoins are consistently exposed to volatility in crypto marketplaces. The volatility could be due to global economic downturns, a specific countrys restrictions, etc. As a result, it is difficult to predict when altcoin marketplaces display a bullish or a bearish trend.

Stablecoins may be commodity-collateralized, fiat-collateralized, crypto-collateralized, etc. Tether was the first Stablecoin.

Altcoins consist of Binance, THETA, Stellar Lumens, XRP, etc. Namecoin was the first altcoin.

Stablecoins serve to speed up financial processes. Furthermore, their fees are affordable. They are not confined by national/international boundaries. They prefer transparency in functioning. They are compatible with all kinds of changes.

Altcoins are unique in their operations, offering several solutions to problems. Furthermore, they charge less for transactions.

Stablecoins are prone to external audits, and entry of third-party intermediaries. Additionally, they do not bring heavy returns on any kind of investment.

Altcoins are limited in both, usage, and exposure. They are susceptible to volatility in global marketplaces.

To conclude, both, Stablecoins, and altcoins have their respective pros and cons. It would be worthwhile to undertake careful research before investing in either of them.