Considering you have knowledge about Bitcoin already since it’s a famous cryptocurrency.
But there’s another world for alternate cryptocurrencies called “Altcoins”. These currencies serve to improve Bitcoin technology or provide a unique purpose within the blockchain ecosystem. If you are looking to expand your investments, simply learn about the crypto markets and their trends Here’s a guide to get started with Altcoins:
What Are Altcoins?
Altcoin is a combination of the terms “alternative” and “coin”. Simply, coins other than Bitcoin can be called Altcoins. As bitcoin remains the leading crypto in market value and adoption, altcoins indicate the growing segments of crypto market, bringing innovative features and applications.
Daily various cryptocurrencies are being listed on exchange platforms, still, altcoins make more than 60% of the total market value.
Why do Altcoins exist?
Bitcoin was introduced as a Decentralized digital currency, but its efficiency in different fields like speed, energy, and functionality leaves room for improvements. Altcoins were brought up to consider these areas and serve entirely new use cases, such as smart contracts, and decentralized finance(DeFi).
Here’s what Altcoins aim to do:
- Expand Blockchain Use Cases: Ethereum set in motion the smart contracts, which smothered exchanges beyond peer-to-peer transactions.
- Improve Transaction speed: there are altcoins that are specifically made to fasten transactions like Litecoin and Solana.
- Enhance privacy: Monero and Zcash are considered to transfer nameless in financial transactions.
- Support eco-friendly Solutions: as there are concerns regarding crypto mining, coins like Cardano and Algorand aim to reduce environmental impact.
Types of Altcoins
Categorizing the cryptocurrencies based on their purpose and technology will make it more helpful to understand:
1. Payment coins:
These coins are designed as an alternative to digital cash, they offer faster and cheaper transactions compared to Bitcoin.
Examples: Ripple(XRP), Litecoin(LTC), Bitcoin Cash(BCH)
2. Stablecoins:
Coins that are pegged as stable assets, these coins barely have any volatility. They are mainly used for trading, remittances, and as a hedge against market swings.
Example: Tether(USDT), USD coin(USDC), DAI
3. Smart contract Platforms:
These blockchains authorize developers to build decentralized applications(dApps) and explore smart contracts without intermediaries.
Examples: Ethereum(ETH), Binance-smart chain(BSC), Cardano(ADA)
4. Defi Tokens:
These tokens provide users with financial use cases like borrowing, lending, or trading without the bank’s involvement.
Examples:Aave(AAVE), Uniswap(UNI), Chainlink(LINK)
5. Privacy coins:
These coins are focused on keeping transactions untraceable and anonymous.
Examples: Monero(XMR), Zcash(ZEC)
6. Utility Tokens:
these are used in specific platforms for accessing services and voting on governance purposes.
Examples: Filecoin(FIL), Basic Attention Token(BAT), VeChain(VET)
7. Meme Coins
Generally created as memes but some acquire significant value due to community support.
Examples: Dogecoin (DOGE), Shiba Inu (SHIB), Pepe (PEPE)
8. Gaming Tokens
These altcoins are generally used for in-game activities like transactions, in-game purchases, or rewards.
Examples: Enjin Coin (ENJ), Chiliz (CHZ), The Sandbox (SAND)
9. Artificial Intelligence (AI) Tokens
These altcoins focus on integrating AI with blockchain technology for various use cases like data sharing, decentralized AI models, and machine learning applications.
Examples: SingularityNET (AGIX), Fetch.ai (FET)
10. Real-World Asset(RWA) Coins
These altcoins are backed by real-world assets like gold, property, or other commodities to provide value and stability in the crypto market.
Examples: Mantra(OM), Ondo(ONDO)
Popular Altcoins to watch out
1. Ethereum(ETH): the pioneer of smart contract
Purpose: A platform for decentralized applications.
Market cap (as of December 2024): $550 billion
Why it’s important: Ethereum introduced smart contracts and revolutionized how agreements are executed online.
2. Solana(SOL): The speedster
Purpose: high-speed blockchain for crypto payments and dApps.
Market cap: $80 billion
Feature: can process up to 65000+ transactions making it likable for developers.
3. Tether (USDT: the stable safe haven
Purpose: A stablecoin pegged to US dollar
Market cap: $80 billion
Why it’s useful: serves stability in a volatile market
4. Cardano(ADA): The Eco-friendly
Purpose: sustainable blockchain that focuses on academic research
Market cap: $35 billion
Why it’s important: uses a proof of stake mechanism to reduce energy consumption
Why people are investing in Altcoins
Diversification: We have been witnessing the bitcoin dominance decline with altcoins leading along various fields and offering lucrative investment opportunities. For example, Ethereum gained over 400% in 2021 alone.
Innovation: Altcoins are brought with various innovative use cases along with tackling real-world problems, from remittances(stellar) to data storage (Filecoin)
Early adoption: investing in potential Altcoins with proper research can yield quite heavy returns, as seen with Solana which grew over 14000% in 2021.
Access to DeFi and NFTs: Altcoins like Ethereum and Polygon are drive-through for DeFi services and cause for booming market.
Risks associated with Altcoins
Despite their outstanding performance, altcoins are also riskier compared to Bitcoin for several reasons:
Volatility: Prices can skyrocket or collapse within hours
Regulatory uncertainty: Governments have classified some altcoins with strict regulations for their security concerns.
Scams: The rise in newly launched altcoins has led to an increase in fraudulent projects
Liquidity Risks: small cap altcoins sometimes lack trading volume, due to which it makes hard to buy or sell large amounts.
How to start investing in Altcoins(Step by Step)
- Research: Before investing in any unknown projects always make sure to do thorough research and analysis. Use trusted sources like CoinMarketCap, CoinGekko, or official project websites.
- Choose a reliable Exchange: Popular exchanges including Coinbase, Binance, and Kraken can be considered.
- Secure your investments: Consider using hardware wallets for more safety, for example: ledger or trezor.
- Start small: Invest only what you can afford to lose. Don’t put all your capital in one coin.
Future of Altcoins
Along with the increase in institutional interests and government scrutiny, the future of altcoins could depend on several factors
- Regulatory clarity: Different government’s clearer regulations may boost confidence among investors
- Technological Advancements: More innovative upgrades on altcoins may attract more users
- Mass adoption: Partnerships with traditional companies and collaborations with personalities could upfront altcoins into mainstream finance.
Conclusive Overview
In this exploding crypto market altcoins are more than just an alternative to Bitcoin-they represent the evolution the ecosystem going through. Altcoins have captured a vast area of fields of networks coping to fill the gaps in the revolution.
For investors, altcoins provide a chance to explore cutting-edge innovation. However, always approach the market with caution and regular analysis along with a risk management strategy.
