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| Q. | What’s the difference between Bitcoin, Ethereum, stablecoins and altcoins? |
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The short answer
They are all crypto assets, but each one is built for a different job. Bitcoin works as digital gold, a scarce, decentralized form of money with only 21 million coins that no central bank or government controls. Ethereum is programmable infrastructure that developers build applications on, using smart contracts. Stablecoins are designed to hold a steady value, usually linked to the US dollar, which makes them useful for payments and for moving money internationally. Altcoins is the broad name for almost any cryptocurrency other than Bitcoin, and they range from serious projects with real users to tokens with very little, if any, underlying value.
Viv's answer
Transcript4:55 · lightly edited
The question
Hi, and welcome to Ask Viv, where I answer your cryptocurrency questions simply and honestly.
Today's question is: what's the difference between Bitcoin, Ethereum, stablecoins and altcoins?
Not the same thing
If you're newer to crypto, you've probably heard of all of these, and it can be pretty confusing. They are all basically the same thing? Not really. They are cryptocurrencies or crypto assets, but they have very different purposes.
So let's break down the differences in simple terms.
Bitcoin as digital gold
Let's start with Bitcoin. Bitcoin is the original and was the first major cryptocurrency, launched in 2009, and its primary purpose is to act as a decentralized form of digital money and a store of value.
A simple way to think about Bitcoin is digital gold. There will only ever be 21 million Bitcoin, and no central bank or government controls its supply.
People use Bitcoin for different reasons. Some use it as an investment, some use it as a way of transferring value, and others see it as protection against monetary inflation or currency debasement.
So if you remember one thing, Bitcoin is primarily about scarce, decentralized digital money and value.
Ethereum as programmable infrastructure
Next up is Ethereum. Ethereum is different because it isn't just designed to be digital money. Think of Ethereum more like a global programmable computer or financial infrastructure layer. It allows developers to build applications on a blockchain using something called smart contracts. Those applications can include decentralized finance, tokenization, games, digital identity, and many other use cases.
The cryptocurrency associated with Ethereum is called Ether, or ETH. ETH is used to pay for transactions and activity on the Ethereum network, and it can also be held or used within applications built on Ethereum.
So Bitcoin is more like digital gold, while Ethereum is more like programmable financial and digital infrastructure.
Why stablecoins are useful
And then we have stablecoins. As its name suggests, stablecoins are designed to maintain a stable value, usually by being linked to something like the US dollar. For example, a stablecoin might aim to maintain a value of approximately 1 US dollar.
Why is that useful? Because crypto can be extremely volatile. Imagine you want to move money globally using blockchain technology, but you don't want the value of the money moving up or down 10 or 20% while you're transferring it. That's where stablecoins come in. They're increasingly being used for payments, trading, moving money internationally, and accessing digital financial services.
So you can think of stablecoins as a digital version of relatively stable currencies that operate on blockchain networks.
Not all altcoins are created equal
And finally, we have altcoins. Altcoins basically means alternative cryptocurrencies to Bitcoin. So broadly speaking, almost any cryptocurrency other than Bitcoin can be referred to as an altcoin. That can include assets such as Solana, XRP, Cardano, Avalanche, and many, many others.
But here's the important point. Not all altcoins are created equal. Some are connected to serious projects with real technology, users, and economic activity. Others may have very little, if any, underlying value and can be extremely speculative and risky.
So you shouldn't assume that because something is a cryptocurrency, it has the same characteristics or risk profile as the likes of Bitcoin or Ethereum.
A simple way to remember it
So if you want a really simple way to remember all of this: Bitcoin, digital gold. Ethereum, programmable blockchain infrastructure. Stablecoins, think relatively stable digital money. And altcoins, think of a broad category of alternative cryptocurrencies with very different purposes and risk levels.
And that's one of the most important things to understand when entering crypto.
Ask what it's designed to do
Don't just ask, what is the price? Ask, what is this asset actually designed to do? Because understanding the purpose behind an asset is the first step towards understanding its value and its risk.
Closing
And so remember, if you've got a cryptocurrency question you'd like me to answer, I'd love to hear it.
Thanks for watching, and I'll see you in the next Ask Viv.
Worth knowing
Ask what an asset is designed to do before asking what it costs. Understanding the purpose behind an asset is the first step towards understanding its value and its risk, and it is the question that tells these four apart.
The altcoin label covers almost any cryptocurrency other than Bitcoin, so it says little about any one of them. Some are connected to serious projects with real technology, users and economic activity, and others may have very little underlying value. Being a cryptocurrency does not give a token the characteristics or risk profile of Bitcoin or Ethereum.
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