Altcoins are cryptocurrencies launched after Bitcoin. The term “altcoins” is an abbreviation for “alternative coins” and refers to all cryptocurrencies on the market other than Bitcoin. In 2021, there were more than 9,000 altcoins in circulation, and they accounted for over 43% of the total cryptocurrency market.
What are Altcoins?
The term “altcoin” is a combination of two words – “alt” and “coin” – and includes all alternative cryptocurrencies to Bitcoin. The success of Bitcoin, as the first peer-to-peer digital currency, paved the way for the proliferation of alternative cryptocurrencies and laid the groundwork for a strong expansion of the entire crypto phenomenon. Most altcoins are intended to become a better alternative to Bitcoin, coming with unique advantages and facilities that Bitcoin cannot offer.
Most altcoins are built on the structure provided by Bitcoin. These are peer-to-peer cryptocurrencies that try to provide efficient and inexpensive ways to online transactions. There are several types of altcoins, and in this article we will discuss their advantages and disadvantages.
What are the most popular altcoins?
Out of thousands of alternative cryptocurrencies, the most popular altcoins are:
- Ethereum (ETH)
- Solana (SOL)
- Binance Coin (BNB)
- Tether (USDT)
- Cardano (ADA)
- Polkadot (DOT)
- Terra (LUNA)
- Avalanche (AVAX)
- Stellar (XLM)
- USD Coin (USDC)
- Dogecoin (DOGE)
- Chainlink (LINK)
- Uniswap (UNI)
- Litecoin (LTC)
- Namecoin (NMC)
- Polygon (MATIC)
- Tron (TRX)
- Shiba Inu (SHIB)
- SafeMoon (SAFEMOON)
You can check today’s cryptocurrency prices at CoinMarketCap.
What types of altcoins are available on the crypto market?
As altcoins evolved, a number of distinct categories emerged. The main types of alternative currencies include mining-based cryptocurrencies, stablecoins, security tokens, utility tokens, memecoins and forks. There is also a current trend towards separating the concept from altcoin, and if this trend continues, altcoins could only refer to mining-based cryptocurrencies other than Bitcoin.
- Mining-based altcoins
These alternative cryptocurrencies are based on a mining process, with new currencies being generated by solving challenging blockchain issues. Compared to other altcoins, they are more like Bitcoin, Ethereum being currently the most popular mining-based altcoin.
- Stable cryptocurrencies (stablecoins)
Stablecoins aim to increase the popularity of Bitcoin and the crypto industry in general by reducing volatility. In practice, this is done by linking the value of stablecoin cryptocurrencies to traditional currencies (FIAT). The most popular options for supporting altcoins include the US dollar, the euro and gold.
- Security tokens
These altcoins are business-related and are often launched during an initial coin offering (ICO). Security tokens resemble traditional stocks and often promise to offer a certain type of dividend. Since blockchain records can’t be erased or altered, security tokens are a great way to record ownership stake in something.
- Utility tokens
Utility tokens provide a demand for services and they are sometimes sold as part of an ICO. Filecoin is an excellent example of an utility token offered in an ICO. Filecoin cryptocurrencies are designed to be offered in exchange for decentralized storage.
Named after social media jokes, memecoins represent a type of altcoin whose value comes from community buy-in. Unlike Bitcoin, whose value is directly connected to market capitalization, memecoins often hit the crypto ecosystem in mass quantities and are often bought by trend-followers and media influencers. Similar to NFTs, memecoins only bring value in online communities. Unfortunately, just like the value of NFTs, memcoins often rise and fall.
A fork is an altcoin that emerges after coders have made a significant change in a blockchain’s protocol. This action alters how cryptocurrencies are recorded, traded and received. There are “soft forks” and “hard forks”. Forks can either tweak the currency slightly, branch off into a new type, or upgrade the blockchain system hard enough to make old forms of transactions invalid. Forks can happen on any blockchain and may require upgrades across all computer systems that keep it running.
Advantages and disadvantages of altcoins
Altcoins are usually seen as promising alternatives to Bitcoin, although they occupy a much smaller share of the market and they often have different uses. Because Bitcoin dominates the cryptocurrency market in the blockchain industry, many companies still rely solely on Bitcoin when interacting with the world of cryptocurrencies.
However, altcoins like Ethereum compete strongly against Bitcoin and are gaining more user trust over time. Also, most of the traditional criticisms of Bitcoin have been solved once altcoins emerged on the crypto market.
Advantages of investing in altcoins
- Altcoins offer many choices – There are thousands of altcoins on the market and that variety makes it easier for an investor to choose his favorite altcoin. The choice should be made based on returns, acceptability and other competitive advantages.
- Transaction speed – When it comes to transaction speed, many altcoins are superior to Bitcoin.
- Unique functions – Unlike Bitcoins, altcoins are built with many new functionalities, so they are more than just a token.
- Stability – For altcoins, the price fluctuations are generally low. This is a great benefit since altcoins are more stable, unlike the volatility associated with Bitcoins.
- Accessibility – Trading altcoins is much easier as compared to Bitcoins.
Disadvantages of investing in altcoins
- Risks – There are some risks involved when investing in altcoins, since they could be prone to scams or other failures.
- Market value – Many investors were not aware of altcoins until recently. Bitcoin is still the most popular cryptocurrency and has a high market value as compared to altcoins. As a general rule, investors don’t want to invest in something that provides them with lower returns.
- No security in case of loss – Security is one of the major concerns for every investor in cryptocurrency. The main problem is that altcoins don’t provide any security in case of loss.
- Oversupply – There are currently too many altcoins circulating in the Crypto market.
Altcoins worth investing in 2022
Namecoin is the oldest altcoin based on the Bitcoin code, since it used the same proof-of-work algorithm. Like Bitcoin, Namecoin is limited to 21 million coins. Launched in April 2011, Namecoin detached itself from Bitcoin by ensuring improved anonymity and by allowing users to register their own .bit domains in order to increase their anonymity and resistance to censorship.
Launched in October 2011, Litecoin is another alternative cryptocurrency, very popular today. Although similar in code and functionality to Bitcoin, Litecoin differs from it in several essential ways. First of all, Litecoin allows faster approval of transactions, which Bitcoin often lacks. There will also be a total of 84 million LTC coins, which is exactly four times the 21 million Bitcoin limit. There are rumors that Litecoin could be an even better investment than Bitcoin.
The future of cryptocurrencies looks very promising, with more and more new altcoins appearing on the market, each with its own challenge for Bitcoin. For investors who want to diversify their portfolio in the market of cryptocurrencies, altcoins are the ideal choice to increase the degree of profitability. There are truly amazing cases in which alternative cryptocurrencies have increased their value 40-50 times in a relatively short time since they launched.
As for the price of an altcoin, it ranges from 1 dollar or even less, to about 3,800 dollars for an Ethereum (the price in January 2022), or even more in the case of cryptocurrencies with a large market capitalization, and a reduced total fund.
Which is the best altcoin for investments?
When it comes to market capitalization and user popularity, Ethereum is the main choice when it comes to alternative cryptocurrencies. ETH is the most important altcoin, occupying for many years the 2nd place in the top of the best cryptocurrencies, after Bitcoin.
While you can buy and trade Ethereum as an investment like Bitcoin, it’s so much more than that. Ethereum is also a software platform that developers can use to create new applications designed to buy, sell and use cryptocurrency. These applications may be anything from lending apps to payment platforms.
Since the beginning, the main advantage of Ethereum has been the use of smart contracts. Smart contracts are coded, self-executing contracts that facilitate, verify and apply unique and specific functions on a blockchain network when the specified conditions in the contracts are met.
Entrepreneurs have seen Ethereum as a platform that could be used to raise funds by creating new cryptocurrencies and selling them to global consumers in what came to be known as “initial coin offerings” (ICOs). ICOs have taken advantage of Ethereum’s ability to develop new cryptographic assets on its blockchain, using token standards without creating a new code from scratch.
Entrepreneurial projects that now have their own live blockchains and cryptocurrencies (such as Tron and OmiseGo) have been initially launched as tokens on Ethereum, later delivering a new technology.
Final thoughts on altcoins
In conclusion, since altcoins account for over 40% of the total cryptocurrency market, they are becoming a continuing challenge for Bitcoin’s dominance. It is only a matter of time before the ratio reverses. While virtually everyone has heard of Ethereum, most of the nearly 9,000 alternative currencies retain their own potentially attractive investment opportunities in the medium to long term.
If you plan to engage with cryptocurrency and learn more about DeFi, you may want to start educating yourself on the types of altcoins and their uses. All you have to do is do your own market research and identify the best investment opportunities for you.