What is an altcoin?
In short, altcoins are alternative cryptocurrencies to Bitcoin. The world of crypto assets is continuously growing, and there are many coins and tokens that have specific use cases beyond a medium of exchange, meaning they aren't competitors to BTC. Despite this evolution, and short of a better word, any crypto asset other than Bitcoin is still called an altcoin.
Bitcoin (BTC) is usually the first digital currency to come to mind, as it is the first and largest cryptocurrency in the world, with the highest market cap. Altcoins were created to improve upon Bitcoin's limitations, such as transaction speed, cost and smart contract functionality. With altcoins offering unique solutions and use cases to the ecosystem, the crypto market is becoming more diverse.
Examples of popular altcoins include Ethereum, XRP, Litecoin, Tezos, Tether, Dogecoin, Binance Coin, Solana, Stacks and many more.
The Stacks blockchain leverages the Bitcoin blockchain, like a layer 2 would, but is distinct from Bitcoin. It is maintained by and for Stacks nodes and has its own cryptocurrency (STX), rules and consensus mechanism. Stacks blocks are recorded on the Bitcoin base-layer blockchain and STX token holders can stack (not stake) their tokens to earn Bitcoin as a reward.
The Ethereum blockchain has its own cryptocurrency, Ether (ETH). It is the second-largest cryptocurrency by market cap after Bitcoin, and it has emerged as a leading player in the crypto market. Mid March 2023, Ethereum's market cap was around $200 billion USD.
Ethereum's blockchain technology enables the creation of decentralized applications (dApps), DeFi apps, smart contracts and NFTs, making it one of the most versatile digital currencies.
Binance coin (BNB) is a utility token. It can be used to get discounted trades and pay trading fees on the Binance crypto exchange. BNB can also be used outside the exchange for payment processing. Some think that BNB isn't as decentralized as other altcoins, and there are concerns about whether Binance should have registered BNB as a security with the SEC during the ICO.
XRP is a digital currency used for cross-border payments. This altcoin has very low transaction fees. While Ripple says XRP is a currency, at the time of writing, the SEC alleges that it is a security and should have been registered as such.
Cardano uses the Proof of Stake consensus mechanism, which allows for faster transaction time by replacing miners with validators. The ADA blockchain promises low fees with high levels of security.
Polygon is an Ethereum-based scaling platform. It allows people to process transactions on top of the ETH network, increasing efficiency and reducing transaction fees, and build dApps.
Solana is designed to be a faster and more efficient alternative to Ethereum, with a focus on scalability. It is built on a hybrid of Proof of Stake and Proof of History consensus mechanisms to process transactions securely, and help develop DeFi and dApps, digital assets, as well as smart contracts. Compared to Ethereum, Solana has very few validating nodes, so it is subject to criticism for being too centralized, despite the fact it is one of the fastest blockchains.
Litecoin is one of the original altcoins. It was designed to be a "lite" version of Bitcoin and improve some of its limitations such as slow transaction speeds and mining monopolies. Bitcoin has evolved into more of a "store of value" cryptocurrency, whereas LTC is was built to be used in everyday transactions. Bitcoin is capped at a maximum supply of 21 million coins, and Litecoin is capped at 84 million.
Other popular altcoins include Dogecoin (Doge), which started as a meme but has gained significant attention due to its volatility and social media hype. Shiba Inu (SHIB) is also a meme coin, dubbed the "Dogecoin killer". It is based on the Ethereum blockchain and there are some SHIB-based NFTs, but it is a volatile crypto asset and doesn't have the most use cases. Monero (XMR), EOS, Zcash, Polkadot (DOT) and others as well as derivatives have been trending, and aim to improve upon the shortcomings of earlier cryptocurrencies.
Types of altcoins include utility tokens and stablecoins. Utility tokens are cryptocurrencies that are designed to be used for specific purposes within a particular ecosystem. Many cryptocurrencies have various use cases, including decentralized finance (DeFi), gaming, NFTs and social media. Defi refers to a financial ecosystem built on top of blockchain technology, allowing for peer-to-peer transactions without intermediaries. NFTs, on the other hand, are unique digital assets that represent ownership of a particular item, such as art or music amongst many other use cases.
Stablecoins are designed to address cryptocurrency volatility and maintain a stable value against a specific asset or currency, such as the U.S. dollar. This makes them less volatile than other cryptocurrencies like Bitcoin, which can fluctuate in value quite rapidly. Stablecoins like Tether (USDT) and USD Coin (USDC) are pegged to the U.S. dollar, meaning their value remains stable. Stablecoins marketcaps are generally lower than other cryptocurrencies.
Where to purchase altcoins
Crypto exchanges allow users to trade digital currencies, including Bitcoin, Ethereum, and other altcoins.
Cryptocurrency exchanges like Coinbase are making it easier than ever to buy and sell digital currencies, with the crypto market capitalization continuously growing. As the popularity of altcoins continues to increase, many are becoming more mainstream, with merchants and retailers accepting digital currencies as payment. Coinbase offers a user-friendly interface and supports several digital currencies, including Ethereum, Bitcoin Cash, Litecoin, and many others.
For more information on cryptocurrency marketcaps, visit coinmarketcap.com.