What Are Altcoins?

What Is an Altcoin?

To put it simply, any cryptocurrency that isn't Bitcoin is altcoin. Altcoins are a type of digital currency that is an alternative coin to Bitcoin.

Altcoins have many uses, and they can be anything from stablecoins to security tokens to utility tokens. Each type has its ideal use case, and understanding how they differ is essential before investing in altcoins.

What Are the Advantages of Altcoins?

Every investment has pros and cons. Let's discuss the pros of altcoins.

Many Use Cases

There are many uses of altcoins, and more are being created constantly. The wide variety of coins dramatically extends the use cases available.

Potential for Higher Return

Bitcoin has had wide adoption, but it has taken time to achieve this. Early adopters have faired well financially and have the potential for higher returns. Altcoins can present investment opportunities, though they also come with higher volatility and risk.

Many Options

The cryptocurrency ecosystem offers many options, and new altcoins are coming into the marketplace. As an investor, you have many to choose from, and many entry points.

What Are the Cons of Altcoins?

We've covered the pros of Altcoins, but what are the cons of using and investing in Alcoins?

Here’s what to keep in mind. 

Less Liquidity

Generally speaking, most altcoins are less liquid than Bitcoin due to the lower number of investors without Bitcoin's popularity.

Niche Market Concerns

This is a double-edged sword. Altcoins in niche markets are limited, which can be seen as a con. On the other hand, a niche that meets demand could also take off quickly if it serves a gap in the marketplace. However, niche markets usually have less broad appeal.

More Scams

With so many new altcoins coming into the market, investors need to be cautious of scams. Sometimes, this concern can be a barrier for an altcoin to gain popularity and get the traction it needs to succeed in the marketplace.

What Are the Main Types of Altcoins?

While thousands of altcoins exist, they often fall into categories such as stablecoins, security tokens, utility tokens, meme coins, and governance tokens. The purpose of the altcoin determines the category it fits into. Some altcoins fit into more than one category but all fit into at least one of these purposes.

Let's talk about some examples of altcoins that are in the market today.


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What Are Some Examples of Altcoins?

There are many different types of altcoins, each created with their unique purpose to fill an existing gap or a niche. Listing every altcoin would read like a novel, but we've outlined some of the more popular and interesting altcoins below.

Ethereum (ETH)

Ethereum is a second-generation blockchain technology created to expand use cases in the cryptocurrency ecosystem. It allows additional types of data to be stored on the blockchain using smart contracts. Ethereum focuses more on the programmability aspect than the payment aspect.

Unlike Bitcoin, Ethereum is not used in a scenario of peer-to-peer payments but serves more complex transactions well, and requires a shorter block time. Some don't consider ETH as an altcoin, so this is up for debate, depending on who you ask.

Litecoin

In 2011, Litecoin was among the first altcoins to be forked from the blockchain. This occurs when a new implementation is made or it can occur when a split in the blockchain happens. Litecoin is known for creating a global payment system, yet boasts a decentralized network that's light on costs but offers speed.

Tether (USDT)

Tether is a widely traded altcoin and some would say it's the most innovative due to it's link to the blockchain system, yet offers the liquid and simple attributes of fiat currency. This trusted altcoin is widely used in personal transactions, yet is also attractive in commerce markets.

Cardano (ADA)

Designed with flexibility in mind, Cardano is one of a kind, as it's the first altcoin to be developed on peer-reviewed research. Besides speed and lower costs than many other altcoins, this altcoin has high hopes of being the most sustainable blockchain platform in our environment.

Dogecoin (DOGE)

When you think of cryptocurrency or altcoins, the first thing that comes to mind isn't likely a meme, but that is precisely how Dogecoin got started in 2013. That's right — this now famous altcoin began as a joke, yet quickly gained a fan base and garnered attention from cryptocurrency enthusiasts, as well as the media.

Despite Dogecoin not being a mainstream cryptocurrency, it has risen in popularity quickly. Dogecoin took off around 2021 with the help of some celebrity endorsements. One investor, famous for more than one reason, Elon Musk, spearheaded the popularity of Dogecoin.

One fun way Dogecoin is used is by social media users who may award content generators with tips in the form of Dogecoin as the currency.

How To Start Investing in Altcoins

Consider if you plan to be a long-term or a short-term investor, and do your homework to find out the history and tenure of the altcoins you’re considering. 

Choose an exchange you’re comfortable with and ensure that it has a good reputation — like Gemini, a full-reserve, highly-regulated custodian. 

Next, create an account. You’ll need to use fiat currency or buy BTC on an exchange in order to invest in altcoins. The best practice is to keep two separate wallets – one for BTC and one for your alternate coins or altcoins. 

Consider your timing before making the exchange from BTC to altcoin, just as you would with any other currency exchange. 

Once the exchange is completed, go ahead and move your altcoins to a dedicated altcoin digital wallet. Watch the cryptocurrency market and review how your altcoins are doing in the marketplace. 

Investors should do their research before selecting altcoins and understand that all investments have a threshold of both risks and rewards. For more information, visit all things cryptocurrency on the rest of our Cryptopedia.