What is an altcoin?

Every day, new altcoins emerge in the crypto market. These are cryptocurrencies alternative to Bitcoin. Let’s learn more about altcoins by exploring their definition, use cases, advantages, and disadvantages.

Definition: What does Altcoin mean?

Altcoin is a combination of the two words: “Alternative” and “coin.”

Difference between Bitcoin and Altcoin

As the name suggests, Altcoin is a cryptocurrency alternative to Bitcoin. Altcoins and Bitcoin differ in some aspects:

• Goals: The basic goal of Bitcoin is to facilitate international transactions and ensure their transparency by bypassing intermediaries. In contrast, altcoins are generally created for more specific use cases and to address specific issues. For example, transaction processing speed, transaction privacy, blockchain-based gaming, etc.
• Functioning: Bitcoin relies on the Proof of Stake consensus mechanism and mining to operate. Altcoins may borrow certain characteristics from Bitcoin, but the mechanisms are more varied. Notably, we find Proof of Work, Proof of Authority, Delegated Proof of Stake, etc.

Different types of Altcoins

Altcoins are classified based on their purpose. Thus, there are different types of altcoins, such as:

• Payment tokens: these assets are used as currencies to make transfers, purchase goods, and services. Their difference from traditional currencies (euro, dollar) is that they operate on the blockchain.
• Governance tokens: they grant their holders voting rights on decisions related to the project. Votes may cover project direction, updates, use of funds held by the DAO, changes in project team members, etc.
• Utility tokens: they are created for specific functions or to access specific services. Utility tokens can, for example, serve as transaction fees, rewards, etc.
• Real asset tokens: they represent a real asset, but only on their blockchain. The value of the underlying asset changes over time, such as stocks, commodities, or real estate.
• Stablecoins: these are cryptocurrencies pegged to safe-haven assets such as the US dollar or gold. As the name suggests, stablecoins aim to bring stability to the highly volatile market.
• Memecoins are coins that leverage the popularity of memes on the internet. They are created for entertainment, to satire a subject, or to ride on new trends. The strength of memecoins generally relies on the popularity of the meme used and the size of their community.

List of the most popular Altcoins

Discover the top altcoins as well as the most promising ones.

The Top 10 altcoins by market capitalization

Here are the top 10 largest altcoins in terms of market capitalization:

1. Ethereum (ETH): is the platform dedicated to dApps and smart contracts. ETH, which is a utility token, serves as transaction fees and rewards for validators.
2. Tether (USDT): is a stablecoin whose value is pegged to that of the USD. It helps protect against the high volatility of cryptocurrencies.
3. Binance Coin (BNB): is the native token of Binance, the world’s largest crypto exchange. As a utility token, BNB allows for reduced trading fees, earning passive income, participating in IEOs, etc.
4. Ripple (XRP): XRP is the utility token of the Ripple protocol. Its goal is to offer faster and more secure transactions. Its offer is mainly aimed at banks and financial institutions.
5. Solana (SOL): is a blockchain that offers fast, scalable, and low-cost solutions for DeFi projects and NFTs. SOL is its utility token used primarily to pay transaction fees and secure the network through staking.
6. Cardano (ADA): is an open-source blockchain designed to offer better scalability, security, and flexibility for executing smart contracts and dApps. Its utility token ADA serves as a means of payment on the network.
7. Dogecoin (DOGE): is the most popular memecoin launched in 2013. It is designed for sending and receiving digital payments processed by the blockchain.
8. Tron (TRX): is a blockchain aiming to offer free content and give back control of data to content creators facing difficulties in remuneration.
9. Polygon (MATIC): is a layer 2 protocol aiming to improve Ethereum blockchain scalability. MATIC allows participating in proof of stake consensus and paying transaction fees.
10. Polkadot (DOT): is a multi-chain network aiming to address interoperability issues between blockchains. DOT is a governance token that allows users to vote on network representatives and propose changes to network rules.

The Top 5 most promising Altcoins

Alongside the popular major altcoins, there are small altcoins that are equally promising.

1. Arbitrum (ARB): is a layer 2 solution aiming to improve the performance of Ethereum smart contracts through optimistic rollups. ARB tokens are governance tokens acting as a voting right on technical changes, new features, etc.
2. Zcash (ZEC): is a cryptocurrency aiming to provide users with a high level of privacy. ZEC is used to pay transaction fees and reward miners.
3. Axie Infinity (AXS): is a very popular Play-to-Earn blockchain game. AXS are NFTs that grant voting rights on the game’s future development.
4. Pepe (PEPE): is a popular memecoin launched on the Ethereum blockchain. It is created solely for entertainment and speculation purposes.
5. SingularityNet (AGIX): is a decentralized platform aiming to facilitate interoperability in the field of artificial intelligence. The AGIX token serves as a means of payment on its AI marketplace.

Why Invest in Altcoins?

Because of their diversity, altcoins offer a multitude of opportunities, but also present risks. Here’s what you need to know before investing in altcoins.

Advantages of Altcoins

Altcoins have the following advantages:

• High profit potential: some cryptocurrencies perform very well, ensuring profitable investments;
• Diversity of crypto projects: there is a wide choice of cryptocurrencies to invest in. You can invest in blockchain, video games, NFTs, security, according to your desires and objectives;
• Ability to exchange altcoins: some altcoins can be exchanged for other altcoins;
• Streamlining of transactions: many crypto projects aim to facilitate transactions by reducing costs and speeding up processing;
• Accessibility: these types of digital currencies have significantly lower prices than Bitcoin, making them more accessible. You can thus hold a significant amount of coins at a lower price.

Risks associated with Altcoins

However, they present some risks:

• High price volatility: unlike Bitcoin, altcoins generally have a lower market capitalization. This makes their prices very volatile, which can lead to losses in the event of a downward fluctuation.
• Loss of value over time: many altcoins lose value over time and eventually disappear. Altcoins that fail to achieve their purpose usually collapse.
• Increased competition: some crypto projects pursue the same goals, pushing creators to show constant innovation. Revolutionary altcoins overshadow less innovative altcoins.

How to buy Altcoins?

Buying altcoins is very simple. Follow these steps:

1. Go to a cryptocurrency exchange platform;
2. Open an account by providing the required information;
3. Deposit money to fund the account;
4. Search for the altcoin of your choice;
5. Indicate the desired amount and validate the purchase;
6. Store your tokens in a secure wallet.

What Future for Altcoins?

It is difficult to determine the future of altcoins clearly due to market volatility. A popular cryptocurrency today may become nonexistent later due to various factors. Their values depend notably on the evolution of Bitcoin.

However, it should be noted that these digital currencies strongly contribute to the development of the crypto industry. They bring innovations and new use cases.

Could Altcoins make you rich?

Yes, it is possible to become wealthy by investing in altcoins. There are now crypto millionaires, even crypto billionaires who have built their fortune on digital currencies. However, it is important to note that several elements must be taken into consideration to succeed in cryptocurrency investment.

You cannot become rich overnight by investing in altcoins. Their volatility offers opportunities for gain or results in significant losses in case of value decline. If you want to make significant profits, it is recommended to conduct thorough research to find altcoins with high potential.

Conclusion

The term “altcoin” is not the result of mere chance. As an alternative to Bitcoin, altcoins provide solutions that Bitcoin is not able to offer. The most reliable projects have high growth potential, which can multiply your investments. Before investing in altcoins, make sure to choose projects capable of withstanding the long term.

La Rédaction C.

L'équipe éditoriale de Cointribune unit ses voix pour s’exprimer sur des thématiques propres aux cryptomonnaies, à l'investissement, au métaverse et aux NFT, tout en s’efforçant de répondre au mieux à vos interrogations.