The rising popularity of digital assets is undeniable. However, with an increased number of options, there is more confusion among the investors. One such confusion is the difference between Stablecoin and Altcoin. Let’s learn the differences between the two:
Altcoins or Alternate to Bitcoin refers to cryptocurrencies that are not Bitcoin, including Dogecoin (DOGE), Ethereum (ETC), and Litecoin (LTC). Most of the major cryptocurrencies in the market are modified versions of the original source code of bitcoin. This is a fresh concept that has been gaining popularity amongst buyers. By including features like smart contracts in the appendix, Altcoins have managed to separate themselves from bitcoins.
Stablecoins are cryptocurrencies that are backed by some other form of cryptocurrency. Flat-backed stablecoins are the ones whose value is determined by the currency’s value that is backing them. These were launched in the market originally as cryptocurrencies that were backed by fiat money. Another form of asset-backed stablecoin is commodity-backed stablecoins. Tether (USDT) is a form of stablecoin that is tied to US currency in a 1-1 ratio. A financial custodian, like a bank, keeps a certain amount of the currency and exchanges it for tokens. Users can spend these tokens by redeeming them for fiat currency at equivalent value.
The main difference between altcoins and stablecoins is that the latter doesn’t have a value rise because of their ties to the fund budget. With altcoins, you are more likely to experience a fluctuating value increase. Remember that all stablecoins are altcoins but not all altcoins are stablecoins.