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Today, I’m giving you an introduction to Altcoins, the types, the differences, how to buy them, where to buy them, and if you should invest in them. Let’s get started.
What is an Altcoin?
When you hear the word “cryptocurrency” the first that comes to your mind is probably Bitcoin, and that’s fair since Bitcoin is the most popular cryptocurrency. Asides being the most popular, Bitcoin takes up half of the total crypto market cap.
With BTC being at the forefront of the crypto market, the rest are referred to as Altcoins.
As of February 2022, there are over 17,000 types of cryptocurrencies.
As earlier mentioned, Bitcoin takes up half of the total crypto market cap, Ethereum takes up nearly a quarter while Altcoins occupy the remaining market share which is roughly about 40%.
“Altcoin” is simply short for “Alternative coins” and means other cryptocurrencies besides Bitcoin. Ethereum is the most popular Altcoin.
Types of Altcoins
Below is a list of major categories Altcoins fall into:
1. Stablecoins:
Stablecoins are cryptocurrencies with their value fixed and not backed by any assets. They were designed to counter crypto’s volatility and provide a convenient way for crypto traders to preserve their fiat value without having to cash out of the market and to allow users to pay for everyday goods.
Some advantages of Stablecoins include:
- They are less volatile compared to other cryptocurrencies.
- They facilitate international payments and make abroad payments easier.
Examples of Stablecoins:
- Tether
- USD coin
- Binance USD
- Dai
- Paxos Standard Token (PAX)
- Terra USD/UST
- TrueUSD/TUSD
2. Memecoins:
These are cryptocurrencies that gained their popularity due to association with memes. They are inspired by popular social media jokes, sarcasm, puns, and memes.
According to Coinmarketcap, there are over 130 memecoins in circulation today. Unlike major cryptocurrencies that are created with a purpose, memecoins don’t have a goal and specific reason.
An example of a popular Memecoin is Dogecoin which was inspired by Kabosu, a Shiba Inu dog.
Although Memecoins are seen as a joke and not taken seriously,
Dogecoin has gained a massive following over the years. It had a huge spike in May 2021 but levelled off eventually. Dogecoin is currently sitting at the number 11 spot on CoinMarketCap’s Top Coin list.
Some examples of Memecoins are:
- Dogecoin (DOGE)
- Shiba Inu (SHIB)
- Dogelon Mars (ELON)
- Samoyedcoin (SAMO)
- MonaCoin (MONA)
- Floki Inu (FLOKI)
- Wakanda Inu (WKD)
3. Utility Tokens:
A utility token is a cryptocurrency token that serves some use within a specific ecosystem. These tokens allow users to perform some action on a certain network.
The big potential of Blockchain technology has been talked about from many industry professionals, the platform upon which all cryptos are coded. Industry professionals inside the crypto world and beyond say blockchain could one day be everywhere as the internet currently is, with some even referring to it as “Web 3.”
With all this new functionality, users need a way to pay for transactions, including fees to publish art, mint tokens, trade services, and receive certain access within any particular blockchain network. Enter utility tokens: a category of altcoin developed for just this kind of functionality.
Some examples of Utility Tokens include:
- Filecoin
- Siacoin
- Golem (GNT)
- Basic Attention Token (BAT)
4. Governance Tokens:
These are a type of utility token that purchases certain voting privileges, such as the ability to participate in blockchain-wide polls.
Like the name suggests, governance tokens allow users to vote on decisions that influence blockchain ecosystems.
Some examples of Governance tokens include:
- Luna
- Maker (MKR)
And so much more
5. Security Tokens:
Security token is a digital liquid contract representing fractions of a real asset with value, like real estate or a business. Because blockchain records can’t be erased or altered, security tokens are a way to record ownership stake in something.
Examples of security tokens are:
- Stocks
- Bonds
- ETFs
- Options
- Futures
6. Forks:
A fork results in a kind of altcoin that comes from coders making a significant change in a blockchain’s protocol that alters how cryptocurrencies are recorded, traded, and received.
Forks can either tweak the currency slightly, branch off into a new type, or upgrade the blockchain system enough to render old forms of transactions invalid. Forks can happen on any blockchain and may require upgrades across all computer systems (nodes) that keep it running.
An example of a Fork is Bitcoin Cash. It is a spin-off of Bitcoin and was created when a large enough number of Bitcoin stakeholders sought to create a different version of Bitcoin that would be better suited for everyday payments.pin-off of Bitcoin and was created when a large enough number of Bitcoin stakeholders sought to create a different version of Bitcoin that would be better suited for everyday payments.pin-off of Bitcoin and was created when a large enough number of Bitcoin stakeholders sought to create a different version of Bitcoin that would be better suited for everyday payments.
Conclusion
Although There are several “dead” altcoins that ended up sinking investor dollars, Certain altcoins, such as Ethereum’s ether and Cardano’s ADA, have already gained traction among mainstream institutions, resulting in high valuations.
To trade these Altcoins, you have to pick a suitable crypto trading app that list the coin you wish to buy/sell.
