Altcoins Beginner

What are altcoins, and which are the best ones out there?

Types of Altcoins

Key Takeaways

  • Any cryptocurrency that is not Bitcoin is called an altcoin.
  • Ethereum, the second-largest crypto, is an altcoin.
  • There are various types of altcoins such as stablecoins, memecoins, utility tokens, governance tokens, and security tokens.

Bitcoin is undoubtedly the most popular coin out there, but there is so much more to crypto than Bitcoin. This article is all about those other options—altcoins.

Altcoins: What are they?

Any cryptocurrency that is not Bitcoin is called an altcoin (short for alternative coins).

Currently, Bitcoin comprises nearly half of the crypto market cap, followed by an altcoin named Ethereum, which accounts for almost a quarter. Additionally, all the remaining altcoins constitute around 30% share of the market.

The blockchain network on which Bitcoin operates is pathbreaking because it’s an anonymous Peer-to-Peer (P2P) payment network that operates without a central authority overseeing its functioning (thus, the term “decentralized”). Altcoins run on the same basic structure as Bitcoin and use the same technology. So why do we need them?

Why did we need altcoins?

Because many of them do aim to improve upon Bitcoin or have a different goal. Not all altcoins are valuable and useful in terms of functionality and utility, but many are.

Fact Check: The first altcoin, Namecoin, was released in April 2011. Namecoin proved that there was room for more than one kind of coin.

An example of a coin with a different goal from Bitcoin is Litecoin. As the name suggests, this altcoin was created as a “lite version of Bitcoin.”

On the other hand, some altcoins try to overcome a problem that Bitcoin has not addressed. For example, since the algorithm Bitcoin uses to verify transactions—Proof of Work (PoW)—is not so eco-friendly, altcoins usually try to be green. Many of them use staking instead of mining to verify transactions, so energy-intensive computers are not needed.

Cardano (ADA), for instance, operates on a Proof-of-Stake (PoS) consensus mechanism, and soon Ethereum (ETH) is migrating to PoS too.

Types of altcoins

There are different types of altcoins. Some could cost thousands of dollars, whereas others could be selling for pennies. They may be grouped under the following categories:

Stablecoins

Stablecoins are essentially less volatile cryptocurrencies. They are linked or pegged to a fiat currency, such as the US dollar, to reduce the impact of volatility on them.

A lot of investors, especially beginners, use them to duck trading fees, as many crypto exchanges don’t charge fees when they are payable in USD.

The largest stablecoin is the Tether (USDT). It came into existence in 2014. USD Coin, another well-known stablecoin, was launched in 2018.

Memecoins

A “memecoin” is a crypto that originated from an internet meme or has some other humorous characteristic. They are highly volatile compared to major cryptos such as Bitcoin (BTC) and Ethereum (ETH). That’s partially because memecoins are largely community-driven tokens with many of them not having much utility.

Unsurprisingly, therefore, figures like Elon Musk are known to be able to influence the prices of these memecoins through tweets.

Another characteristic of meme coins is that they either have a massive supply or, in some cases, an unlimited flow! For example, Shiba Inu (SHIB) has a total supply of 1 quadrillion tokens, while DOGE has no cap and has over 100 billion tokens already in circulation.

Dogecoin (DOGE) and Shiba Inu (SHIB) are some of the most popular ones around.

Utility tokens

A utility token is a category of altcoins that has some special use cases. It operates within a specific ecosystem which is unique to it.

ETH is widely touted as the most versatile utility token of all. Another one called Filecoin enables one to buy space on the Filecoin blockchain network for file storage. Brave’s Basic Attention Token (BAT) is a third example.

Governance tokens

A governance token is a type of utility token that enables the purchasing of certain voting rights. Governance tokens allow users to have a say by way of voting on decisions that impact blockchain ecosystems. MAKER (MKR) is an example.

Security tokens

Security tokens are a means to record ownership stakes. Recording ownership is possible because blockchain records can’t be erased or tampered with in any way.

The 10 best altcoins

Beginning with the largest by market cap, the top 10 altcoins currently are:

  1. Ethereum (ETH): Market cap INR 2,97,24,92,13,84,195
  2. Tether (USDT): Market cap INR 62,65,50,04,07,728
  3. BNB (Binance Coin): Market cap INR 55,55,34,63,56,904
  4. USD coin (USDC): Market cap INR 3,82,15,94,53,465
  5. Solana (SOL): Market cap INR 29,13,24,81,48,407
  6. XRP (XRP): Market cap INR 28,64,45,73,80,070
  7. Terra (LUNA): Market cap INR 28,33,46,81,18,047
  8. Cardano (ADA): Market cap INR 26,51,82,01,14,218
  9. Avalanche (AVAX): Market cap INR 17,34,70,48,32,578
  10. Polkadot (DOT): Market cap INR 17,04,73,90,19,426

(Source: CoinGecko. Data as of June 14, 2022)

While altcoins are volatile investments, it may be worthwhile to consider them given the positives. These coins have made blockchain technology more robust and reduced transaction costs. And all of that is great, but do enough research before you make any buys, and don’t fall for FOMO.

Disclaimer : Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. The information provided in this post is not to be considered as investment/financial advice from CoinSwitch. Any action taken upon the information shall be at user’s own risk.

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