A Beginners' Guide to Altcoins

· 2 min read
A Beginners' Guide to Altcoins
An Altcoin is a term that describes an alternative digital asset or any other cryptocurrency other than Bitcoin.

An Altcoin is a term that describes an alternative digital asset or any other cryptocurrency other than Bitcoin. This terminology stems from the idea that bitcoin is the original cryptocurrency and that all others are considered "alternatives" or "alternative currencies". The most well-known example is the ERC-20 tokens on the Ethereum blockchain.

Since Bitcoin's inception in 2008, thousands of cryptocurrencies have emerged. Many of these altcoins were created as modified copies of Bitcoin.

Alternatives to Bitcoin

Over the last decade, thousands of crypto projects have come to the fore. The fundamentals of each Altcoin may be different. Many of them are built around themes like decentralisation  (e.g. EOS.io or Ethereum), others are built around banking technology (e.g. ripple or stellar), and then there are other altcoins that are purely speculative and don't have any actual use cases. More recently, the market has seen an influx of meme coins like DogeCoin. These are coins based on popular everyday themes and are actively supported by enthusiastic supporters.

Let us learn a little more about some of the most popular altcoins.

Ether (ETH) is, without a doubt, the most popular Altcoin. Some other widely adopted crypto altcoins include Tether (USDT), Binance Coin (BNB), Cardano (ADA), Ripple (XRP), USD Coin (USDC), Dogecoin (DOGE), Polkadot (DOT), Uniswap (UNI), Binance USD (BUSD), Solana (SOL), Chainlink (LINK), Bitcoin Cash (BCH) and Litecoin (LTC).

Benefits of Altcoins

  • Altcoins are "enhanced versions" of existing cryptocurrencies. They got created to fix the perceived shortcomings of Bitcoin and the other primary cryptocurrencies.
  • Altcoins with added utilities have gained wider adoption as they have different functions in the crypto economy.

Disadvantages of Altcoins

  • Altcoins have a smaller investment market compared to Bitcoin. Bitcoin has captured around 40% of the global cryptocurrency market since May 2021.
  • The altcoin market is characterised by fewer investors and less activity, resulting in low liquidity.
  • Several "dead" altcoins end up wiping out investors' funds.

Future of Altcoins

There are thousands of altcoins in the markets today, each purporting to serve a different purpose and need. Unfortunately, most of these Altcoins listed on the crypto exchanges may not survive.

The altcoin market will likely consolidate around a group of "useful" or "utilitarian" altcoins. As a result, cryptocurrencies with high utility, diverse use cases and vital blockchain purposes will contribute towards building the decentralised economic infrastructure of the future.