Altcoins Explained: Pros and Cons, Types, and Future

If you are involved in crypto, then you should know Bitcoins. Also, with a high chance probability, you must’ve come across altcoins. Personally, when I first came across the term altcoin in my quest in the crypto sphere I became so inquisitive. So you see it’s normal to ask these questions as it enables you to learn more. Thus, on this page, we’ve carefully explained altcoins also elaborated on the different types of altcoins.

Furthermore, we also described some of the pros and cons of altcoins and what differentiates altcoins from Bitcoins.

Altcoins-Explained

However, you can describe altcoins as any other coin, but some people exclude Ethereum as one of them. To learn more about Altcoins fully explained, read further.

What Are Altcoins?

We simply define altcoins as any form of cryptocurrency that is not Bitcoin. Hence, where it collected the name “alt” and “coin” meaning Alternative Coin. As Bitcoin including the oldest surviving cryptocurrency, thus the most dominating cryptocurrency, we tend to refer to any other coin as altcoins.

Some instances of altcoins include crypto assets like Ethereum, Ripple, and Dash. As earlier noted, some people prefer not to consider Ethereum as an altcoin however it belongs to the category of altcoins.

Additionally, altcoins provide growth upon Bitcoin development. As many of them become built under the BTC blockchain.

Why Do Altcoins Exist? 

Maybe, the first type of cyprocurrency you ever heard of is Bitcoin. More so, probably even first heard of the term ‘Bitcoin’ before knowing what cryptocurrency entails. So, you may wonder why since we already have Bitcoin, a cryptocurrency so useful and so widely used, why need altcoins. 

You will also love to see  Cryptocurrency Regulations Around the World

Hence, altcoins have to exist because Bitcoin, unfortunately, has its flaws. But, as Bitcoin remains the oldest surviving cryptocurrency, it has more popularity and gained so much publicity. However, the creation of all other coins started as a bid to make better versions of Bitcoin. Thus, the existing different altcoins strive to make trading faster, smarter, or even more anonymous. Exactly a good reason why all altcoins had a unique feature differentiating them from Bitcoin.

Meanwhile, many of the latest existing altcoins in creation serve the different needs of traders rather than just trying to become a better version of Bitcoin. Nevertheless, if you want to learn how to buy altcoins, you’d have to learn how to buy the specific type of altcoin you want to buy. Because some are quite difficult to come by. 

Additionally, even though some altcoins have better features than Bitcoin, it can be difficult to convince investors to stay away from Bitcoin. This is because they already have more familiarity with Bitcoin. 

Types Of Altcoins

Ever since Bitcoin was launched in 2008, following 2011 the release of the first altcoin, thousands of altcoins have been created. Hence, below we’ve categorized them into six common types;

#1. Stablecoins

One similar problem of most cryptocurrencies includes that they tend to become very volatile. Even Bitcoin too. This volatility happens because the everyday buy and sell orders deeply affect the crypto market.

However, developers also made good attempts to create a cryptocurrency sparingly volatile. We refer to these cryptocurrencies as stablecoins. Stablecoins tend to imitate normal fiat currencies thereby making them stable. For instance, USDT has its value pegged to $1. Thus stable coin values are pegged to fiat currencies.

#2. Security Tokens

Another set of altcoins includes Security tokens. We use these tokens to represent tradable financial assets, like shares or bonds from a company. They are meant to represent a form of investment and usually produce interest in a way that promises future profit. 

You will also love to see  Gas (Ethereum): How Gas Fees Work On The Ethereum Blockchain

#3. Utility Tokens

Another category of altcoins is utility tokens. Contrary to security tokens, they don’t wholly promise profit, rather, they promise a product or service. A typical example of a utility token is Filecoin. We use it to buy storage space on a network and protect the data. 

#4. Meme Coins

You’ve possibly already heard about at least one meme coin in the likes of Doge, Shiba Inu, etc. They consist of altcoins created as a joke or as a caricature of a popular cryptocurrency. Meanwhile, these meme coins usually explode in popularity briefly. However, when the hype dies down, they suddenly crash.

#5. Payment Token

As the name implies, we use payment tokens to make payments more like those used as currencies. They can also serve as means to exchange value between parties. Bitcoin and Ether are prime examples of payment tokens.

#6. Governance Tokens

Governance tokens give holders certain rights within a blockchain. Examples of such rights include voting for modifications to protocols or having a say in the judgments of a decentralized autonomous organization (DAO). Governance tokens are generally native to a private blockchain and used for blockchain purposes. You can also refer to them as utility tokens but they’ve also come to be accepted as a separate type because of their purpose.

Pros and Cons of Altcoins

Pros:

  • Altcoins modify certain characteristics of Bitcoin and thus seen as improved versions of Bitcoin. 
  • There are many altcoins to select from, all with their respective benefits and purpose. 
  • Some altcoins may eventually have a better future than Bitcoin because of their vast uses.

Cons:

  • Some people use altcoins to scam, OR for many other reasons, many altcoins also lag traction in the market. 
  • Some altcoins may also be difficult to find.
  • Momentarily, altcoins comparatively have less popularity than Bitcoin. Hence, fewer investors and less activity results to less liquidity. 

The Future of Altcoins

Are you planning to invest in cryptocurrency for the long term? Then, diversifying your investments across a few other good altcoins apart from bitcoin investments is a good idea. Thus, if you are serious about crypto investment, take your time to research the different altcoins out there. 

You will also love to see  Litecoin vs Ethereum: Which One Should You Buy?

While we can never predict the future of any coin with 100% certainty, we can foresee some percentage that altcoins will always have a place in the crypto world. There exist too many of them for them not to survive. However, still yet many altcoins may likely fail on the market.

Hence, now many of you will ask then “What are the best altcoins to invest in?” Well, the altcoins that will stand the market fall will possibly fall among those that have strong utility, stable blockchain purpose, and use cases.

Frequently Asked Questions About Altcoins Explained

What does Altcoin mean in crypto?

Altcoin simply means any other crypto on the market not Bitcoin.

What is the purpose of Altcoins?

Altcoins have different purposes depending on the developer’s motive and plans. However, you can use them for transactions, trade of securities, and storing of data.

How many Altcoins exist?

There exist many altcoins today. Its current number ranges between 5,000 and 12,000.

Why is Bitcoin not an Altcoin?

Bitcoin is one of the oldest surviving cryptocurrencies created. While, altcoins exist as alternative coins to Bitcoins, as the name implies?

What is the difference between Altcoins and cryptocurrency?

There exist no difference. Altcoins refers to any other cryptocurrency that is not Bitcoin.

Conclusion

Finally, if you have carefully read this page to this point, you should have grabbed full clarity on what altcoin entails. We fully explained altcoins with their pros and cons.

Meanwhile, if you seek to buy any altcoins, we recommend you check other topics regarding them on this site to learn how to buy them.

Editor’s Recommendations

References

Leave a Comment