In the wide universe of cryptocurrencies, bitcoin (BTC) was the first asset of its kind. Of course, it also occupies the first position in market value and established itself as something revolutionary back in 2009. However, there are thousands of digital currencies of the most diverse categories out there. Considered “alternatives” to the main crypto asset on the market , they are commonly referred to as “altcoins” by the crypto community.
CoinMarketCap data from April 2022 shows that there are over 17,000 cryptocurrencies on the market , outside of niche tokens, NFTs and other cryptocurrencies. All these digital currencies could be called “altcoins”. However, it is not an official category, but a term popularized as other cryptocurrencies have emerged since the launch of bitcoin.
So, in a nutshell, “altcoin” refers to any type of cryptocurrency other than bitcoin . Even ether (ETH), the second highest market cap digital currency according to CoinMarketCap data , is still an altcoin (and the most popular among them). As for its origin, the term is an abbreviation for “alternative currencies”.
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Among them, we find names such as:
- Ether (ETH)
- Ripple (XRP)
- Tether (USDT)
- Cardano (ADA)
- Polkadot (DOT)
- Stellar (XLM)
- USD Coin (USDC)
- Dogecoin (DOGE)
- Chainlink (LINK)
- Uniswap (UNI)
- Shiba Inu (SHIB)
What types of altcoins?
If you know anything about cryptocurrencies, you know that the names listed above belong to several different sub -categories . Each of them shares common characteristics, such as purpose, origin and functioning. Even so, it is worth noting that some digital currencies can fit into more than one type and that this categorization is constantly evolving as more assets are created and technology advances.
I will not cover all the existing categories, but I will briefly describe the main ones to show a little better how diverse altcoins can be:
- Stablecoins : These are cryptocurrencies whose value is backed by another less volatile asset, such as USDT and USDC, that are paired with the US dollar. In practice, they are typically geared towards transactions and storing value with greater stability.
- Memecoins : as their name suggests, they are crypto assets based on jokes and internet memes. Dogecoin and shiba inu are perhaps the most popular in the category. They usually bring very low unit prices, huge coin supply and high volatility. They are also a source of much engagement in communities that embrace their comedic nature. Even celebrities like Elon Musk have joined in the fun in 2021.
- Utility Tokens : Again, the name is already somewhat self-explanatory. They are cryptocurrencies traditionally geared towards some sort of practical functionality within crypto projects. In this sense, ether can be fitted here, as it is one of the most used digital currencies for blockchain transactions and trades.
- Governance Tokens : While the name of the subcategory also includes “tokens”, these assets have a very different purpose than what was described above. Basically, they manage the rights of their holders, according to the amount of accumulated coins, in the crypto universe. They are particularly heavily used in the world of decentralized finance (DeFi).
Is investing in altcoins a good deal?
While bitcoin has already established itself even in the business world, altcoins are seen as cheaper investment alternatives. However, each one has its own characteristics and not all are geared towards this purpose.
Memecoins, for example, have explosive upside potential, but the opposite also applies. Therefore, they are extremely volatile and high-risk digital assets. Stablecoins, on the other hand, serve as a store of value and are best leveraged for transactions while maintaining a stable value.
That way, it’s up to you to decide whether you prefer a higher or lower risk. Also, know where you are putting your money. Study the cryptocurrency in question to avoid falling for scams and not suffer from sudden devaluations that could have been predicted.