These are alternative cryptocurrencies to bitcoin. Bitcoin is considered the first cryptocurrency in the crypto community, therefore those developed later are considered alternative coins – or altcoins. The emergence of altcoins began around 2011, when the first generation was created using the same blockchain mechanism as bitcoin.
The very first altcoin was namecoin, which was based on the bitcoin code and released in April 2011. Namecoin is an integral part of the history of altcoins, as it showed that there is enough room for more than one type of coin in the crypto markets.
Many altcoins are used within their own blockchains, e.g., ETH is used for transaction fees on Ethereum blockchain.
Some developers have created bitcoin forks to compete with its payment method (e.g., BitcoinCash – BCH), but without success. Other altcoins are given away and promoted to raise funds for specific projects.
Each altcoin has a unique story and community. Some may prove to be functional and valuable and could see significant price appreciation over time. Others will be useless or even fraudulent.
Type of Altcoins
Tokenized assets offered on stock markets. Tokenization is the value transfer from an asset to a token, which is then made available to investors. Any asset can be tokenized, such as real estate or shares. For this to work, the asset has to be backed and held. Otherwise, the tokens are worthless as they would have no basis. Security tokens are regulated by the Securities and Exchange Commission because they are supposed to function like securities.
Cryptocurrencies have been characterised by high volatility since their launch. Stablecoins aim to reduce volatility by tying their value to a basket of selected assets (e.g., fiat currencies, precious metals, or other cryptocurrencies). The basket is meant to serve as a reserve to pay out holders if the stablecoin fails or faces problems. The stablecoin price should not fluctuate against the underlying asset, typically the USD.
This gives holders certain rights within the blockchain, such as voting on protocol changes or being able to influence DAO decisions.
Used to provide services within the network, such as purchasing services, paying network fees, or redeeming rewards.
Inspired by humor. These usually gain popularity in a short period. On the Internet, meme tokens are praised by influencers who receive part of the reward in the token itself, which they sell after the price increases. The main purpose of meme tokens is price speculation
- Investors can choose from a wide range of altcoins that serve different functions in the crypto economy
- Altcoins with more usage have a better survival chance
- Altcoins, unlike fiat currencies, can support more complex features
- Great potential appreciation
- Most altcoins follow the price of BTC (when BTC goes down, altcoins follow)
- For some, buying and holding an altcoin is more complicated
- After a major price drop, there may not be enough liquidity to restore
- Quick death
Where to buy Altcoins
The easiest way to buy an altcoin is through a centralized exchange CEX (Centralized Exchange). Their systems are adapted for the easiest and fastest possible purchase. However, you will not find all existing altcoins represented on any CEX. For listing, exchanges choose only popular ones with a large community that will trade with altcoins. KYC is usually required for CEX trading. Once verified, just add a payment method to your account and you will be set and ready to buy altcoins.
Another way is to buy them via decentralized exchange DEX (Decentralized Exchange). This is a more advanced way of buying altcoins without the need to register. Just connect your crypto wallet to your chosen DEX and start buying altcoins. There is no need for KYC verification, and thanks to decentralization, you can find a large selection of altcoins on DEX.
Altcoins have come a long way since 2011 and continue to prove themselves as more than just a “bitcoin alternative”. The crypto world is developing rapidly and is becoming more and more popular among investors. Thanks to the innovation and integration of cryptocurrencies into the mainstream world, people can safely and legally buy altcoins on their phones or computers.
The increasingly easy access to the crypto markets does not mean that there is no risk. Before investing in an altcoin, ask yourself a few questions: Have I considered all possible risks? Would I be able to explain to my family or friends what this is all about? Whether you want to trade altcoins on CEX, DEX, or just "hodl" your bitcoins, the choice is yours. The key to responsible investing is a thorough DYOR (Do Your Own Research – risk assessment and evaluation of financial possibilities).
Thanks to altcoins, the DeFi world opens to new possibilities and development opportunities. They have been with us for a long time and their numbers are constantly changing. New ones are created every minute and disappear. It is a big risk to invest in an altcoin without thoroughly researching its purpose and the project it serves. The only exceptions are meme tokens, which I don't think have any use. These mainly serve to transfer money from late investors to early ones.