Grassroot Crypto Education (Vol.2) - Bitcoin, Altcoins and Stablecoins | 10% Payout to @steemkidss
Introduction
It's another wonderful time to write again in the community. The previous volume of grassroot crypto education began with the basics of cryptocurrency and I hope you had a great read and research while you attended the lecture/homework task. In this edition, we would be looking at Bitcoin, Altcoins, and Stablecoins and see how each differs from the other. Let's begin.
Designed with Adobe Photoshop
What is Bitcoin?
One of the first things to talk about Bitcoin is highlighting that it is a cryptocurrency. Now delving deeper, Bitcoin is the first cryptocurrency that came into existence in the year 2009 and its creation is attributed to an anonymous person or group of persons known as Satoshi Nakamoto, with this, it means the identity of the creator of Bitcoin is not known till today.
In addition, Bitcoin is not just the first cryptocurrency but also the biggest cryptocurrency by market capitalization (ranked number 1), and its price per unit is around 35,485 USD as of the time of writing this article. Bitcoin uses a decentralized system aimed at facilitating payments between peer to peer nodes (users) without involving third parties. As such, the validation of transactions is done by the nodes in the Bitcoin system (which are interconnected computers), and these validators are regarded as miners.
The rank of Bitcoin and its price at the moment of writing the lecture | Source: CoinMarketCap
Bitcoin uses the Proof of Work (PoW) consensus mechanism to verify the authenticity of transactions on the network, (...do not worry about consensus algorithms, for now, you would be taught about it later). In the previous lessons, we highlighted that cryptocurrency uses cryptography and blockchain technology, in Bitcoin, cryptography is used to secure the transactions while the transactions are recorded on the public blockchain which makes it accessible to everyone to check details of each transaction any time.
Key Highlights of Bitcoin
- Bitcoin is a decentralized digital asset aimed at making payments in the absence of intermediaries.
- It is the first cryptocurrency and the biggest by ranking at the moment, it's ranked at number 1.
- It utilizes the Proof of Work (PoW) consensus mechanism for transaction validations.
- The transactions are secured by cryptographic algorithms and recorded on the public blockchain thereby making it a digital asset with characteristics transparency.
What are Altcoins?
Altcoins can be seen as a combination of two words, alternative and coins. Altcoins are alternative coins to Bitcoin, in essence, they are cryptocurrencies other than Bitcoin. Remember, we talked about having thousands of cryptocurrencies in the previous lecture which include Bitcoin and others, other cryptos which are not Bitcoin in the crypto ecosystem is what is called Altcoins.
The first Altcoin is Namecoin which was created in the year 2011 and it exhibited most of the features of Bitcoin, for example, both utilizes the Proof of Work (PoW) consensus mechanism to verify transactions on their network. Other examples of Altcoins are; Ethereum (ETH), Steem (STEEM), Fantom (FTM), Avalanche (AVAX), Binance Coin (BNB), Polygon (MATIC) and many others you can find in the crypto ecosystem except Bitcoin.
What are Stablecoins?
Stablecoins are cryptocurrencies, precisely, Altcoins which have their value pegged to a particular reserve asset which could be a conventional currency of a country and other assets (Cryptocurrencies, Gold and so on). Stablecoin eliminates the volatility feature of cryptocurrencies and as such stores value for your money without falling or rising. In essence, stablecoins stores value for your crypto assets as backed by another asset.
Some examples of Stablecoins are; Tether (USDT), USDC (USD Coin), Binance USD (BUSD), Dai (DAI) and many more. For example, Tether (USDT) is a stablecoin that is pegged at the ratio 1:1 to the USD, simply say it's backed by USD (US Dollar) reserves. As such, 1 USDT = 1 USD which remains stable over time without being affected by the Volatility feature of cryptocurrencies. To understand it better, see an illustrative example below.
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From the illustration above, it is assumed that Joe stored 1 Bitcoin when the value per unit was 35,485 USD and Jane stored 35,485 USDT which is equivalent to 35,485 USD (remember USDT ratio to USD is 1:1), for a period of 6 months. After the period, we assumed that the price of Bitcoin rises and Joe now has his 1 Bitcoin to worth 65,700 USD but Jane's USDT remained 35,485 USD because it's a stable coin. I hope you now understand how stablecoins differ as compared to other cryptocurrencies with characterized volatility. In the illustration given, if the price of Bitcoin falls below 35,485 USD after the period, in that case, Joe's 1 Bitcoin value (in USD) would decrease while Jane's USDT value (in USD) still remain the same.
Conclusion
In conclusion, Bitcoin is the first-ever cryptocurrency and the biggest at the moment, sitting at the number 1 ranking by market capitalization while we have Altcoins to be other cryptos other than Bitcoin, for example, ETH, DOGE, ADA and many more. Stablecoins are the types that have their value pegged to other assets in the quest to maintain stability. I believe you have learned a lot in this piece, I look forward to seeing your entries, and don't forget, the next volume is going to be great again. Thank you.
Homework Task
- What are Bitcoin, Altcoins, and Stablecoins? Explain them under separate subheadings and list at least three (3) examples of Altcoins and Stablecoins.
- Do you prefer Stablecoins to other cryptocurrencies or otherwise? Why? You can explain with Joe and Jane's illustration given in the lecture.
Guidelines
- Write an article of at least 250 words. Keep your explanation as simple as possible.
- Include the tag #grassroot-education2 among the first 4 tags and tag me @fredquantum in your homework entry.
- For Verified Steem kids alone.
- I will check your articles and drop comments on the entries submitted now till 11:59 pm UTC, 29/01/2022.
Cc:-
@steemkidss
@steemitblog
@steemcurator01
@steemcurator02
Hi @fredquantum,
Here is my entry 🤞
https://steemit.com/hive-139765/@chimeroselam/grassroot-crypto-education-vol-2-bitcoin-altcoins-and-stablecoins-or-10-payout-to-steemkidss-by-chimeroselam
Congratulations, your post has been upvoted by @scilwa, which is a curating account for @R2cornell's Discord Community. We can also be found on our hive community & peakd as well as on my Discord Server
Felicitaciones, su publication ha sido votado por @scilwa. También puedo ser encontrado en nuestra comunidad de colmena y Peakd así como en mi servidor de discordia