As someone who’s crypto curious, you might already be familiar with Bitcoin. But then, you come across the word ‘altcoins’ and you get confused all over again. Lucky for you, this article will demystify these concepts and shed light on the key distinctions, especially for the faith-based community look to invest in halal crypto. By the end of this article, you’ll have a clearer understanding of Bitcoin, altcoins, and their compliance with Halal principles in the crypto world.
What is an Altcoin?
Altcoin is a portmanteau of “alternative” and “coin,” it refers to all cryptocurrencies other than Bitcoin. While Bitcoin is the pioneering cryptocurrency, altcoins represent a diverse range of digital assets that have emerged in its wake.
What is Bitcoin?
Bitcoin, often called “digital gold,” is the first and most well-known cryptocurrency. It was created by an anonymous entity known as Satoshi Nakamoto in 2008 and introduced to the world in 2009. Bitcoin operates on a decentralized ledger called the blockchain, which records all transactions transparently and securely. It’s often used as a store of value and a medium of exchange, much like traditional money.
Types of Altcoins
Altcoins are not a homogeneous group; they come in various forms, each serving a distinct purpose. Here are some common types of altcoins:
Stablecoins: These cryptocurrencies are designed to have a stable value, often pegged to a fiat currency like the US Dollar. Examples include Tether (USDT) and USD Coin (USDC).
Utility Tokens: Utility tokens are used to access a specific service or platform. For instance, Ethereum’s Ether (ETH) is used to pay for transactions and smart contract executions on the Ethereum network.
Security Tokens: These tokens represent ownership in real-world assets, such as real estate or company shares. Security tokens aim to bring traditional assets onto the blockchain while complying with regulatory standards.
Bitcoin and Altcoins: Similarities
Now, let’s explore the similarities between Bitcoin and altcoins:
- Decentralization: Bitcoin and most altcoins operate on decentralized networks, meaning they are not controlled by a central authority like a government or a bank.
- Blockchain Technology: Both Bitcoin and altcoins rely on blockchain technology to record transactions securely and transparently.
- Digital Assets: Bitcoin and altcoins are purely digital assets that can be stored in cryptocurrency wallets.
- Volatility: Cryptocurrencies, including Bitcoin, are known for their price volatility, which can present both investment opportunities and risks.
Bitcoin and Altcoins: Differences
Now, let’s dive into the key differences:
- Market Dominance: Bitcoin holds the largest market share among all cryptocurrencies, often accounting for over 40% of the total market capitalization. Altcoins collectively make up the remaining percentage.
- Use Cases: While Bitcoin primarily serves as a digital store of value and a medium of exchange, altcoins have a more diverse use case, including enabling smart contracts (Ethereum), providing privacy (Monero), and facilitating cross-border payments (Ripple).
- Development Teams: Bitcoin has a well-established and decentralized development team, whereas altcoins may have smaller or more centralized teams, which can impact their development and security.
- Regulatory Status: Bitcoin has gained wider acceptance and regulatory recognition in many countries. Depending on their use cases and compliance, altcoins may face varying regulatory scrutiny and acceptance levels.
Are Bitcoin and Altcoins Halal Crypto?
For those keen on supporting and investing in halal crypto, it’s crucial to consider the compliance of cryptocurrencies with Islamic finance principles. Due to its decentralized and non-interest-based nature, Bitcoin is generally considered Halal. However, not all altcoins share the same characteristics.
The permissibility of altcoins in Islamic finance depends on various factors, including their underlying technology, use cases, and compliance with Shariah principles. To determine whether a specific altcoin is Halal, it’s advisable to consult with scholars or use dedicated tools like the Sahal Wallet app.
Halal Bitcoin and Altcoins on Sahal Wallet
In summary, Bitcoin and altcoins represent diverse facets of the cryptocurrency universe. While they share commonalities in decentralization and blockchain technology, their differences lie in their use cases, market dominance, and regulatory status. It’s essential for faith-based individuals to be aware of these distinctions and to seek guidance when considering investments in cryptocurrencies.
To ensure that your crypto investments align with Islamic finance principles, we recommend downloading the Sahal Wallet app on the Apple or Android app store. This multichain self-custodial SuperDapp lists only halal cryptocurrencies that were vetted by MRHB Shariah Scholars. This gives you peace of mind and ease when investing or trading in halal crypto.
Knowledge and understanding are your most valuable assets in the rapidly evolving world of cryptocurrency. Stay informed, seek guidance when needed, and make choices that align with your financial goals and Halal principles.