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What Are Altcoins? A Guide to Alternative Cryptocurrencies

9 mins
Updated by Artyom G.
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Bitcoin’s debut in 2009 marked the beginning of the cryptocurrency era. So popular was bitcoin that its name became synonymous with cryptocurrency. Soon, alternative coins (altcoins) sprung up to compete against bitcoin in the crypto markets. So, what are altcoins? How do they differ from bitcoin? What else do they bring to web3? Here’s what you need to know.

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What are altcoins?

what are altcoins

Altcoins are alternative cryptocurrencies to Bitcoin. They are also often described as other digital currencies besides Bitcoin and Ethereum. Thousands of altcoins exist in the crypto space and come in various forms. 

While some digital currencies are serious products, some sprung up as memes and joke coins, gaining popularity through online influencers and often with the help of Reddit threads. Some examples of altcoins are Litecoin, Dogecoin, and Ripple.

It’s worth noting that Bitcoin commands a 40% share while altcoins take up 60% of the total crypto market cap. These alternative digital currencies use similar technology to Bitcoin and are all blockchain-based. The differences are found in the features and use cases.

Types of altcoin

types of altcoin

There are altcoins for every investor as developers design more digital assets guided by their vision of the ideal coins. Altcoins take different categories as new ones enter the market with new solutions. The following are common categories of altcoins.

Stablecoins

Stablecoins were created to minimize price volatility in crypto and maintain a stable value. They are usually pegged to a fiat currency or other stable asset. Examples include Tether and USDC. Tether (USDT) pegs on USD to ensure its value remains stable, providing a haven for investors during market downturns. While Tether has faced its share of controversy, including allegations of price manipulation and regulatory legal fights, USDT remains the world’s largest stablecoin with over $71 billion in assets.

USDC is also pegged to the US dollar. The stablecoin runs on the Ethereum blockchain and is fully collateralized.

Tokens

Tokens are digital assets built on top of existing platforms like the Ethereum blockchain. They represent a share in a company, a physical asset, or a certain service.

The classification of tokens is unclear as their definitions and characteristics are evolving. For example, security tokens represent ownership of an asset. 

Like traditional fiat currency, payment tokens act as a medium of exchange. Utility tokens give holders access to a specific product or service or facilitate community governance of a protocol or platform. Tokens mostly incentivize users to participate in a platform or ecosystem by granting access to certain features or functionality.

Mining-based and other coins

A crypto coin is any crypto that has its own standalone blockchain. So, bitcoin (BTC) is a “coin,” as is ether (ETH) and ADA (the coin built for the Cardano altchain). Coins must be exchanged through crypto exchanges due to the fact they are built on different, non-standardized code protocols.

Mining-based coins run on proof-of-work (PoW) consensus’ and arise through mining. The process involves miners competing using powerful computer systems to solve complex equations and add new blockchain blocks. As a result, miners earn rewards in the form of new coins.

Ethereum uses the Ethash algorithm, where miners get new Ethereum coins as rewards for adding new blocks to the blockchain. Litecoin uses the Scrypt algorithm, whereas Monero uses the CryptoNight algorithm for mining.

Memecoins

The Shiba Inu coin, which uses the Doge meme and SafeMoon, is also a memecoin. However, investors and traders take Shiba Inu less seriously than doge. Its value is highly speculative and subject to sudden changes. 

The good side and bad side of altcoins

The good and bad side of altcoins

It’s paramount to note that the past performance of cryptocurrency doesn’t guarantee future results. Here are the potential benefits and drawbacks of altcoins:

Benefits

  • Innovation: Altcoins introduce new features and utilities that are not available with Bitcoin or other established cryptocurrencies
  • Diversification: Investing in various altcoins can help to diversify a portfolio and reduce the potential risk
  • High returns potential: Some altcoins have seen significant price appreciation in the past, providing investors with the potential for high returns.

Drawbacks

  • Volatility: The prices of altcoins are highly volatile, making them risky investments.
  • Lack of regulation: The cryptocurrency market is not regulated as traditional financial markets. It is challenging for investors to assess the risk of an investment.
  • Lack of adoption: Many altcoins face challenges in gaining mainstream acceptance and do not realize increased value.
  • Scams: There are several scams and projects with no real use case in the altcoin market. Carrying out research and understanding the underlying technology and the team behind it is paramount when trading altcoins.

What are the best altcoins?

To a large extent, the best altcoins depend on personal preference, risk tolerance, and investment goals. 

Some altcoins have witnessed significant price appreciation, but past performance doesn’t guarantee future results. The crypto market is volatile, and altcoin prices often fluctuate. 

Some altcoins have withstood the time test, showing potential regarding technology, adoption, community, and market capitalization. Looking at the project or protocol behind a coin or token is imperative. Here are some details on some of the best altcoins.

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1. Ether

Ethereum is a blockchain that allows developers to build decentralized applications (DApps) and smart contracts. Its native cryptocurrency, Ether (ETH), settles transaction fees and computational services on the blockchain network. It is the second largest cryptocurrency after Bitcoin by market capitalization. Ethereum has the largest community and ecosystem of all altcoins, integrating thousands of DApps and ERC-20 tokens.

2. Litecoin

Litecoin is the “silver to bitcoin’s gold.” The network was launched as a Bitcoin fork in 2011. Some key differences include faster block times and a different mining algorithm. Litecoin has been around for a long time and has a solid track record and a large community of developers. LTC posts a higher number of transactions per second (TPS) than Bitcoin, making it suitable for small and fast transactions. Many crypto users hold LTC due to its cheap and efficient nature.

3. Ripple (XRP)

Ripple is an exchange and remittance network created by Ripple Labs Inc. It runs on a distributed open-source protocol that accepts tokens representing fiat currency, cryptocurrency, commodities, or other value units. XRP, Ripple’s native coin, bills itself as a fast, environmentally sound digital asset that can facilitate quicker and more affordable cross-border transactions than currently offered by traditional banking services.

4. Bitcoin Cash (BCH)

Bitcoin cash

Bitcoin Cash is a fork of the Bitcoin blockchain that came in 2017. It has larger block sizes than Bitcoin, allowing faster transaction times and lower fees. Bitcoin cash serves as peer-to-peer electronic cash, a utility originally envisaged for, by unrealized by, the original bitcoin (BTC). Like the first crypto, the bitcoin cash protocol ensures scarcity: there will never be more than 21 million BCH coins.

5. Cardano (ADA)

Cardano is a smart contract platform that delivers more advanced features than previously developed protocols. It runs on a proof-of-stake consensus algorithm and is the first blockchain platform in the Haskell programming language. The Cardano blockchain has two layers. The Cardano Settlement Layer (CSL) runs the ADA cryptocurrency, and the Control Layer runs the smart contracts.

6. EOS.IO (EOS)

EOS.IO is a blockchain platform designed to allow the development and deployment of decentralized applications (DApps) and smart contracts. The EOS.IO platform uses a consensus algorithm called delegated proof-of-stake (DPoS). It aims to provide faster and more efficient transaction processing than other blockchain platforms.

EOS.IO runs on its cryptocurrency, EOS, which helps pay for the resources to run DApps and smart contracts on the platform. EOS is also a governance token that allows holders to vote on proposals and elect block producers.

7. Polkadot (DOT)

Polkadot (DOT) is a multi-chain layer-0 platform that enables interoperability between blockchain networks. The network aims to improve energy efficiency, security, governance, and scalability within the web3 ecosystem

Polkadot allows holders to vote among the governance tokens and elect validators responsible for validating transactions and maintaining the network. DOT is the native crypto; it supports staking and facilitates network governance and para-chain bonding.

Chainlink (LINK) aims to connect smart contracts on the blockchain with real-world data. It is a decentralized network of oracles that provide data from various sources, such as APIs and IoT devices. 

Chainlink allows for the creation of more complex and powerful smart contracts. In addition, Chainlink uses a proof-of-stake (PoS) consensus algorithm, which allows token holders to stake their tokens and earn rewards. The network demonstrates clear utility with organizations, including FedEx and AccuWeather, currently using Chainlink as a data verification platform. LINK, the native crypto of the Chainlink oracle network, supports staking and plays a major role in securing the network.

9. Binance Coin (BNB)

BNB is the native of the Binance exchange-the largest cryptocurrency exchange in the world. Binance Coin helps users pay transaction fees on the Binance exchange and offers them discounts.

Binance Coin is a utility coin and entitles users to participate in the Binance Launchpad platform and purchase other cryptocurrencies. Recent market sentiments suggest the BNB can maintain its price footing despite a certain amount of FUD (fear, uncertainty, and doubt) around the Binance exchange. This includes an accusation by Forbes in late February 2023 claiming that the cryptocurrency exchange misuses customer funds similarly to FTX.

Are altcoins safe to invest in?

Investing in altcoins, like any investment, comes with a degree of risk. While some altcoins have the potential to provide high returns, it’s vital to remember that the cryptocurrency market is highly volatile, and prices fluctuate regularly. As such, conducting thorough research before investing in an altcoin is crucial.

We recommend joining crypto communities and groups which give reputable crypto trading signals, such as our BeInCrypto free premium Telegram channel. Learning basic technical analysis and keeping note of price predictions and key market sentiments relevant to the crypto you are interested in is also worthwhile. As a precaution, always diversify your portfolio, and don’t invest more than you can afford to lose.

Frequently asked questions

Are altcoins a good investment?

Is ethereum an altcoin?

What are some altcoin examples?

Are altcoins the real deal?

Where can you buy altcoins?

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Chris Adede
Chris Adede is a versatile professional with five years of experience in content creation, IT, and project management. He has expertise in cryptocurrencies, fintech, and blockchain and has published author work with BeInCrypto, Hanshow, and NFT Monday. A project manager at Smart Prop Trader, Chris holds a number of professional qualifications and a BSC in Information Science from Moi University. Previously, Chris worked as a Digital Marketing Manager at Webnavs, where he honed his skills in...
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