In today’s world, there are several ways that an individual can grow their savings or money, to be precise. There are several ways to invest one’s money.
There are several types of cryptocurrencies, and Bitcoin is one of the most used cryptocurrencies that has also given rise to other cryptocurrencies. Two of these are 1. Stablecoins, and 2. Altcoins.
Key Takeaways
- Stablecoins are cryptocurrencies with a stable value, pegged to a fiat currency or commodity, while Altcoins are any cryptocurrency other than Bitcoin.
- Stablecoins are used to avoid the volatility of other cryptocurrencies, while Altcoins are seen as a high-risk investment opportunities.
- Stablecoins are suitable for day-to-day transactions, while Altcoins are mostly used for speculative trading.
Stablecoins vs Altcoins
A stablecoin is a kind of cryptocurrency that can enhance the financial process. In stablecoin, a third party is required. There are multiple subtypes of stablecoins. Altcoin is another type of cryptocurrency which provides various solutions. Bitcoin is not included in altcoins. Altcoins have various subtypes.
The cryptocurrency whose price is tethered to a cryptocurrency or fiat money or for trading commodities like valuable metals is known as stablecoins.
They are the alternate coins. The characteristic features of altcoins are somewhat similar to bitcoins, but there are some features of altcoins that are different from bitcoins.
Comparison Table
| Parameters of Comparison | Stablecoins | Altcoins |
|---|---|---|
| Meaning | The cryptocurrency whose price is tethered to a cryptocurrency or fiat money or for trading commodities like valuable metals is known as stablecoins. | All the cryptocurrencies other than bitcoin are known are altcoins. |
| Type of | Altcoins | Cryptocurrency |
| Subtypes | Fiat-collateralized stablecoins, Commodity-collateralized stablecoins, Crypto-collateralized stablecoins, Non-collateralized stablecoins etc. | Ethereum, Binance Coin, Thether, Cardano, Polkadot, XRP, Uniswap, THETA, Litecoin, Ripple, Dogecoin, Stellar Lumens etc. |
| Advantages | They make several financial processes quicker. They charge lower fees. They are borderless. They offer complete translucency. New features can be added to them according to the changing requirements. | They primarily serve as an option to Bitcoin. Their function is unique. They offer several solutions. The transactional fees are less. |
| Disadvantages | Third-party is necessary. They require external audits. The return on investment is less. | Less exposure, Limited usage, They have volatile values. |
What are Stablecoins?
The cryptocurrency whose price is tethered to a cryptocurrency or fiat money or for trading commodities like valuable metals is known as stablecoins. Stablecoins were introduced in early 2015.
Another cryptocurrency collateralizes a stablecoin’s value if it is a cryptocurrency-backed stablecoin. If the stablecoins are fiat-backed, their value is completely based on the currency’s value that backs them.
The stablecoins that are not asset-backed are also known as seigniorage-style stablecoins or non-collateralized stablecoins. They use a Seigniorage Shares System.
Several advantages of stablecoins include faster financial processes, lower fees, a borderless system, complete transparency, it is easily programmable, and new changes can be added according to the changing requirements. However, some disadvantages include the necessity of third-party, the requirement of external audits, less return on investment etc.
What are Altcoins?
All the cryptocurrencies other than bitcoin are known are altcoins. The Namecoin is considered the first form of altcoin that was introduced in April 2011.
Any cryptocurrency that is not a bitcoin is contemplated as an altcoin. However, altcoins were introduced after Bitcoin. The first altcoin, Namecoin, has several characteristics.
Altcoins provide capabilities in addendum like smart contracts and thus distinguish themselves from bitcoins. Altcoins overcome the limitations that Bitcoin possesses.
Several advantages of altcoins include unique functionality, fewer transaction fees, providing solutions etc. However, some disadvantages include less exposure, limited usage, volatile values etc.
Main Differences Between Stablecoins and Altcoins
- The two main types of stablecoins are asset-backed stablecoins and stablecoins that are not asset-backed. On the other hand, the types of altcoins include Dogecoin, Peercoin, Litecoin, Ethereum, Monero, Cardano etc.
- The stablecoins are not that prone to experience a spike in their values. On the other hand, altcoins are more likely to experience a spike in their values.
- https://link.springer.com/chapter/10.1007/978-981-15-0077-0_37
- https://voxeu.org/system/files/epublication/Economics%20of%20Fintech%20and%20Digital%20Currencies_0.pdf#page=74
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Chara Yadav holds MBA in Finance. Her goal is to simplify finance-related topics. She has worked in finance for about 25 years. She has held multiple finance and banking classes for business schools and communities. Read more at her bio page.
