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What are Altcoins – Everything You Need to Know

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Breaking into the world of cryptocurrency and web3 is more challenging than other industries.

Here, some terms describe things other than the regular day-to-day word usage. One of them is ‘Altcoins’.

READ ALSO:100 Ways to Make Money as a Kid, Teenager, or Youth.

This term describes a certain number of coins in the industry, leaving the other with a different name.

Altcoins have existed for many years, but they were not the first coins. If you want to learn more about what altcoins are and everything about them, you are at the right place.

We have filled this article with enough information about the topic, everything you need to know. So, keep reading for more information.

What are Altcoins

Breaking down the term word into the simplest terms, Altcoins are any coin in the cryptocurrency industry aside from Bitcoin. As the name implies, there are alternative coins to Bitcoin and conventional authorized money. Altcoins came into existence in 2011.

The first Altcoin was Namecoin, launched in April 2011 with Bitcoin codes. As years passed, the number of cryptocurrencies under this category increased. There were about 10,000 active altcoins in 2021, and it has seen even more increase since then. The main factor behind the creation of Altcoins was to make an improved version of Bitcoin.

So, the alternative coins are cheaper than Bitcoin; they offer faster transaction speed and various other benefits. Some of these are the staking advantages they offer, allowing the worth of your coin to grow by the added interest they give. Bitcoin is a fixed coin, while Altcoins allow transactions related to DeFi and NFTs.

They use a unique consensus mechanism to validate transactions and build blocks – Proof-of-Stake (POS). Meanwhile, Bitcoin uses Proof-of-Work (POW), which is a crappy method compared to the POS. These analogies explain the difference between Altcoins and Bitcoin, justifying the creation of the thousands of existing Altcoins.

The prices of the coins under this category can be likened to the trajectory of that of Bitcoin. It is because they originate from Bitcoin, the first cryptocurrency. As the market sees more growth and a developed ecosystem, Altcoin prices will start disassociating from Bitcoin, taking independent forms.

According to a CoinMaketCap report, altcoins make up about 40% of the cryptocurrency market worldwide. Compared to another sector of the market, it has the highest share, raising billions of dollars for developers, traders, and other crypto investors.

The future value of Altcoins is still being determined; even the developers can’t predict it. The factor that determines Altcoins’ value and existence is the constant usage and development of its blockchain.

Types of Altcoins

There are tens of thousands of Altcoins in existence, and they are all categorized based on their functionalities. Developers make these coins to perform certain tasks they couldn’t get from other available coins.

Note: Not every Altcoin gets forked from Bitcoin. Some of them come from other Altcoins that could have offered developers the specific benefits they wanted. Also, an Altcoin can fall into different categories.

Below are the functionalities by which Altcoins are categorized:

1.     Stablecoins

One major trait of cryptocurrency trading is volatility. Some tokens have high volatility, creating difficulty in trading them, which is why stablecoins started. The main purpose of stablecoins is to reduce the overall volatility of the industry. They follow the prices of other assets in real life. They do this by attaching their values to fiat currencies, other cryptocurrencies, precious metals, precious stones, and a few others.

Some stablecoins peg their value to the US dollars, and it makes them have almost the same value in the financial market. Such coins are some of the biggest stablecoins in the market. The developers of the coin take steps to correct fluctuations when the currency it mimics falls or rises.

In other words, stablecoins don’t increase in value due to the number of investors buying them. They stay at a fixed price, and people mostly don’t choose it as a cryptocurrency investment trading. To many, it is effective for savings or transactions involving sending and receiving money.

The only interest earning means that stablecoins offer allows you to lend to other people via particular saving protocols. Here, the borrowers will be refunded with an agreed interest rate. Some notable stable coins are USD Coin (USDC), Tether’s (USDT), MakerDAO’s DAI, and a few others thriving in the space.

2.     Governance Tokens

Some cryptocurrencies majorly run an operation where only the Devs hold all the power to make and mar the coins. The only power holders have the number of coins they hold; they decide what to do with their assets. However, governance tokens exist to improve on this aspect.

These coins give holders more rights in the community than others. It offers voting rights, which helps to shape the future of the project in the market. Furthermore, holders of coins in this category can create proposals or vote on other available ones. These proposals usually relate to the cryptocurrency, suggesting how to make it better.

Cryptocurrencies under this category are a decentralized project. One factor responsible for this is that all holders can make contributions, regardless of how little they hold. It doesn’t leave decision-making to a central authority, making a decentralized autonomous organization (DAO). Some of the governance tokens are also utility tokens.

Many times, after a conclusion has been reached on a token, smart contracts apply it automatically. This could be risky for the developers, so they sometimes hire professionals to apply the best proposal manually.

A notable example of a governance token is Maker (MKR), which allows voting on decentralized finance (DeFi) protocol decisions. Not just any DeFi protocol but the ones that decentralized stablecoins run on. One example is the liberty to vote a change on the intricate financial rules that Maker holders have.

One such rule allows DAI to keep a stable price, and it oversees the decentralized lending of the token. The holders voted, and what the majority agreed on got implemented.

3.     Staking-based

In cryptocurrency, staking is the process of getting rewards for holding some tokens. Cryptocurrencies that are staking-based reward holders with interest after a while. They use the staking process to confirm transactions and add more coins for holders.

Here, holders can decide to stake their coins, pledging the coins to process transactions. The protocol of the blockchain is that the cryptocurrency operates under select members for block transaction verification. Peercoin is a staking-based token that first introduced the staking concept, then others followed.

However, Peercoin has yet to become a household name, regardless of the history it made. Staking has grown in influence and popularity in this industry because of its energy efficiency.

4.     Mining-based

Mining coins is an essential section of cryptocurrency. Tokens that are mining-based verify transactions through the mining process. With this, they add more coins to the holders’ supply, making it a profitable process for the developers and holders. Here, miners solve mathematical equations with certain devices.

Hence, offering the chance to verify a block of transaction to the first miner that solves the equation. The block transaction verification comes with a reward for the miners. Although Bitcoin is not an Altcoin, it is mining-based and the first cryptocurrency. Therefore, the first cryptocurrency transaction processing method was mining-based.

Some Altcoins that are mining-based are Litecoin, Bitcoin Cash, Bitcoin SV, and Monero. Also, Monaco, Vertcoin, Ethereum, Bitcoin Gold, ZCash, Haven, Grin, Ravencoin, and a few others.

5.     Security Tokens

Cryptocurrencies under this category use tokenization to trade assets in real life; they are available in stock markets. Tokenization is the process of transferring the values of an asset to tokens and making it available for investors’ prowess. The good news is that any asset can go through tokenization, ranging from stocks to real estate.

However, assets can only go through the process if holders secure and hold them. They will be worthless. The reason for this is that the coins will only represent something if they are secure. The regulations of security tokens, as the name implies, depend on the Security and Exchange Commission. For the reason that the developers create the tokens to act as securities.

An instance is when Exodus, a Bitcoin wallet firm, completed a Reg A+ token offering and qualified for the Securities and Exchange Commission. The movement happened in 2021, and it paved the way for common stock shares worth $75 million to convert to tokens.

This transaction took place on the Algorithm blockchain, and it was the first of its kind where asset security offered equity in an issuer that is US-based. Therefore, security tokens represent ownership of an asset, company, and a few other things.

6.     Utility Tokens

Blockchains are the most essential part of the cryptocurrency industry, as everything runs on them. However, there are certain products and services of blockchain-based ecosystems kept out of the reach of coin holders. The developers of the utility tokens created the coins to tackle such issues. Utility token grant holders assess certain products and services within an ecosystem that is blockchain-based.

Unlike security tokens, utility tokens don’t offer or represent ownership or investment stakes in any project or asset. They have use cases that can influence the concept they provide. They are best for long-term investors. Holders usually participate in the network because of the discounts and rewards it offers.

The creation process of utility tokens is through token sales or an initial coin offering. Here, investors and holders buy the tokens in exchange for Bitcoin, Ethereum, and a few other cryptocurrencies. Then, they can use the coins for different purposes within the blockchain ecosystem. Some of such purposes include paying for transactions, taking part in the governance, gaining access to premium services, and more.

Some notable utility tokens are Launchpad XYZ (LPX), Bitcoin Minetrix (BTCMTX), and yPredict (YPRED). Others include eTukTuk (TUK), Chimpzee (CHMPZ), Arbitron (ARB), Ethereum (ETH), BNB, The Sandbox (SAND), and a few more.

7.     Meme Coins

According to the suggestion of the name, meme coins originate from jokes or funny presumptions of other coins. For their funny nature, they have gained a level of popularity amongst top coins in the cryptocurrency field. Also, they became popular because of the consistent hype social media influencers give to them. These coins are best for short-term investments and gains.

Within April and May in 2021, the value of a few altcoins rose in the market. People referred to the run-up between that time and meme coin season because the coins are well-known for quick hikes in the market. They offer large gains during their run-ups, but they tend to come as fast, making them best for short-term investors.

Some of the top meme coins available in the market are Dogecoin (DOGE), Shiba Inu (SHIB), Pepe, and Bone ShibaSwap (BONE). Also, FLOKI, Baby DogeCoin (BabyDoge), Doge Killer (LEASH), Doge Mars (ELON), HarryPotterObamaSonic10Inu (ERC-20), MonaCoin (MONA), and many more.

8.     Privacy coins

As the name suggests, privacy coins provide more privacy in crypto dealings than conventional cryptocurrencies. They are not as popular as some of the top coins in this industry, but their usefulness must be considered. There are features built into these coins that keep transactions completely or almost untraceable.

Privacy coins also have other features like ring signatures, stealth addresses, and a few more. The features function as an obstruction to the identity of the holders of the coins and allow secure transactions. They enhance confidentiality and anonymity.

Zcash (ZEC), Monero (XMR), Verge (XVG), and Dash (DASH)are cryptocurrencies under this category. Grin (GRIN), Horizen (ZEN), Oasis Network (ROSE), Decred (DCR), and a few others are under this category.

9.     Payment Token

Payment tokens allow holders to pay for goods and services with them. Some of them are also stablecoins. Merchants from anywhere in the world with the knowledge of digital assets can take payment tokens in exchange for their products.

These coins are like regular fiat currencies. Although Bitcoin is not an Altcoin, it is a notable example of a payment token.

10.  Native Coins

Native coins are great for exchanging value between different parties in a certain network or platform. They empower the internal finance of the ecosystem. Some prominent examples of notable coins are Filecoin, Cardano, Solana, Tron, Ethereum, and a few more.

PROS and CONS of Altcoins

Altcoins are great, but they have drawbacks. Here are a few advantages and disadvantages of Altcoins.

PROS

  • Altcoins are better alternatives to other cryptocurrencies: Altcoins are improved versions of Bitcoin and every other coin they get forked from. Developers target certain areas a coin needs to catch up in and create altcoins to fill the gap.
  • There are vast options to pick from: With Altcoins, investors have vast investment options because there are over 10,000 of them. Investors can choose coins based on the acceptability of the coin, return on investment (ROI), and a few more.
  • Altcoins are stable: Altcoins are stable, making the volatility of their prices low. This further makes them great options for investment, as they can yield much profit.

CONS

  • Altcoins are risky to invest in: Some Altcoins are not real; hungry developers create them to scoop funds from investors and run with them. Also, some Altcoin projects still need their predicted run-ups, making investors lose money. These factors and more investment in Altcoins are risky.
  • They have a small market: This might affect some long-term investors hoping to earn huge profits after the long wait. The Altcoin investment market is smaller than Bitcoin’s, and the market has fewer investors and activities.
  • Usage complexity: Altcoins are categorized by their unique functionalities, and it can be tasking to differentiate them by their uses. With this, one might use an Altcoin for the wrong reason.

Future of Altcoin in 2025

The Future of Altcoins can hardly be predicted, given the unpredictable nature of the market. However, it is a fact that some altcoins will become worthless as more new ones take over the market. This is because investors will move troops into the new altcoins, having seen potential in them.

The more investors leave a coin, the more worthless it becomes over time. Nonetheless, some Altcoins like Ethereum and a few others that hold a large percentage of the market will see more growth. It is safe to say that altcoins will exist for many more years to come, even if some will become worthless.

Note that as long as the blockchain the Altcoin was built for is still in use, the coin stays alive. This is regardless of how many people hold the particular coin.

Best Altcoin Payment Methods

Instead of the regular fiat currencies, users can make payments with Altcoins. There are, however, certain methods to make payments. Also, you need gateways to perform payment transactions with Altcoins. Below are a few payment methods and a few good Gateways for alternative coin payment.

Altcoin payment gateways

  • Binance

Binance is a cryptocurrency exchange platform with many other functions. With it, crypto asset holders can send and receive cryptocurrencies from anywhere in the world with low fees. It is easy to use, reliable because of its reputation, and fast.

  • Coinbase

Coinbase is another platform people can use to send and receive cryptocurrencies. It is one of the best because it is beginner-friendly and easy to use. Coinbase has its limitations, but its advantages are even more. One of which is an almost instant transaction reflection.

  • Skilling

Skilling is one of the best Altcoin payment methods. It is also best for trading Altcoins with leverage, making it a go-to for investors with leverage-trading intent. It has over 1,200 top CFD instruments in 7 classes of assets. The prices are competitive.

How to pay with Altcoins

  • Pay with a crypto debit card.

Crypto is a great payment method. People can use them to convert cryptocurrencies to cash. It allows crypto holders to spend their assets anywhere in the world, converting them to cash. All it takes is loading up the crypto debit card with any coin and start spending with it. Users can earn rewards on specific purchases on some cards.

  • Send coins directly to merchants who accept cryptocurrency as a form of payment.

Some merchants make it easy for customers without fiat currency but cryptocurrency; they accept crypto assets as payment. Therefore, holders only need to select a gateway and choose the currency they want to use for the transaction. Next, scan the merchant’s QR code or input their receiving address of the same coin, write the amount, and send.

  • Make peer-to-peer (P2P) payments from your crypto wallet to a receiver’s wallet.

Peer-to-peer payment is an easy and popular kind of payment method in cryptocurrency. Open your wallet and input the receiver’s wallet address or scan the QR code. Next, write the amount of crypto assets you want to send, and then send it. It works similar to the previous method.

Conclusion

Altcoins are all other cryptocurrencies aside from Bitcoin; Ethereum is also an Altcoin, even if some people don’t agree that it is. These coins are improved versions of Bitcoin or other coins that get forked form. Note that Altcoins can originate from other Altcoins with different uses.

There are over 10,000 Altcoins in the crypto market, and the different types are categorized by their uses. Some of them are native coins, payment tokens, privacy coins, stablecoins, meme coins, and a long list of others. The good news is that Altcoins are here to stay, even if some of them are worthless in the long and short run.

FAQs

Is Bitcoin an Altcoin?

Altcoins include every other cryptocurrency other than Bitcoin. Therefore, Bitcoin is not in any way an Altcoin, even if it has some similarities with a few of them.

What is the most useful Altcoin?

Ethereum is the most useful Altcoin. It was launched in 2015, and the same year, it gained popularity among investors and has grown even more since then. It is the most valuable Altcoin.

What is the fastest Altcoin?

XRP is currently the fastest Altcoin. It processes transactions in 3 to 5 seconds. Other Altcoins are slower; this fact is arguable.

Sources:

CoinMarketCap

Coinbase

Coinmarketcap

Techopedia

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