What is an Altcoin? What are Altcoins for?

What is an altcoin? Bitcoin (BTC) is the most well-known among the now tens of thousands of cryptos. However, there’s a whole universe of digital currencies beyond , collectively known as altcoins. In this article, we’ll explain what altcoins are, their purpose, and how they differ from Bitcoin.

What is an Altcoin?

The term altcoin is a blend of “alternative” and “coin.” It pretty much means all cryptocurrencies and tokens that are not Bitcoin.

Some people consider to be an OG and not an altcoin. But in this article, we are throwing Ethereum into the altcoins basket.

Altcoins exist on various blockchains, each designed with a different use in mind.

Types of Altcoins

The crypto market now boasts a mind-boggling array of altcoins. Here are some of them.

Meme Coins

Meme coins are often created as a joke or for entertainment. (DOGE), inspired by the popular “Doge” meme, is a prime example. Other examples are and . While these can be started as a joke, they can end up being really valuable and have great communities around them.

Stablecoins

These are cryptocurrencies designed to maintain a consistent value. They do this by being paired with other assets, like US dollars. Take for example, .

USD Coin (USDC) is a cryptocurrency designed to maintain an aligned value (or stable value) to one USDC equal to one U.S. dollar.

The company that runs USD Coin keeps one US dollar for every USD Coin issued, so it is said to be “pegged” to the dollar. Some stablecoins have become “” before, so it’s not a foolproof system all of the time.

USDC became unpegged because 8% of their reserves were held in a bank that collapsed. However it soon resumed its dollar value after initially falling in price.

Utility Tokens

A utility token is a crypto token that allows users to do things in a project’s ecosystem. For example, in crypto gaming, many gaming ecosystems rely on utility tokens to empower their in-game economies and interactions.

Utility tokens are pretty much used as gaming platform currency.

Gamers can use them to buy weapons, or vehicles for their avatars. Some gaming platforms issue utility tokens as rewards for achievements or milestones. Players can then use these tokens to unlock new levels within the game.

Tokens can also grant access to exclusive areas or hidden content within the game world.

Governance Tokens

These tokens grant voting rights within a blockchain network. They influence decisions related to protocol upgrades, funding allocation, and other governance matters. Chainlink (LINK) is an example of a governance token.

Industry-Specific Coins

Some altcoins cater to specific industries or niches. For example, (XRP) aims to revolutionise cross-border payments.

Altcoins vs. Bitcoin

Altcoins attempt to address perceived limitations in Bitcoin (and sometimes, Ethereum).

For example, altcoins often offer more cost effective transaction fees than Bitcoin. Some altcoins process transactions in a more effective manner due to different consensus mechanisms.

For example, Stellar (XLM) is known for its incredibly performing blockchain. Payments are verified and settled within seconds, and the average transaction cost is — around 0.00001 Lumen (Stellar’s token), which translates to approximately $0.0000011 per transaction based on Lumen’s current pricing.

Bitcoin transaction fees , however fees can range from under a dollar to sometimes even US$35.

What is an altcoin: Conclusion

The future of some altcoins looks bright and the cryptocurrency markets remain fascinating to many. As long as their underlying blockchains remain active and continue to evolve, altcoins will persist. Whether they’ll surpass Bitcoin or carve out their own niches is anyone’s guess. However altcoins like XRP are already being used in the banking industry, and there are no signs of uptake slowing down.

While Bitcoin may be the star of the show, altcoins add color and depth to the crypto universe.