LeoGlossary: AltCoin

7 mo (edited)
LeoFinance
2 Min Read
353 words

How to get a Hive Account


An altcoin is any cryptocurrency other than Bitcoin.

This can be a coin that is tied to a blockchain or a token that is part of a smart contract. Most are ERC-20 which were developed on the Ethereum network. This is compounded by forks of the EVM, creating blockchains such as Polygon and BSC.

There are over 10,000 altcoins listed on Coingecko. While many of these do not have much value, with little to no trading on the open market, it does show the potential of what tokenization can offer.

Tokens are created through the use of smart contracts. This is popular on the forks of Ethereum. These are often called layer 2 since they are usually tied to projects that are built on top of the base layer.

Securities

The altcoin world is facing some uphill battles regarding regulation.

Since it switched from Proof-of-Work to the Proof-of-Stake consensus mechanism, the Securities and Exchange Commission has repeatedly opined that Ethereum is now a security. This is in line with the long standing battle between the SEC and the cryptocurrency industry. The regulator has maintained that these digital assets are under its jurisdiction just like another other security.

Bitcoin is exempt from this since it was determined that the PoW mechanisms means it operates both like a currency and a commodity.

Stablecoins

One of the major innovations coming from the altcoin sector is the emergence of stablecoins. These are tokens that are meant to maintain a peg. Most of these are asset backed with a reserve built. The best known of these are USDC and Tether, both of which are backed by US dollars along with US Treasuries.

Stablecoins can also be algorithmic such as the Hive Backed Dollar (HBD). Under this scenario each coin is backed by a pegged amount of the backing agent. Here stablecoin can be converted to $1.00 worth of HIVE. Ultimately, it comes down to the market capitalization of the asset that acts as the back.

General:

Posted Using LeoFinance Beta