Bitcoin may dominate the market, but it’s not the only cryptocurrency. What are altcoins? Simply put, they are any digital assets that aren’t Bitcoin.
Altcoins offer unique features, from smart contracts to faster transactions. In this article, you’ll learn what altcoins are, the different types available, and how to assess their market value. Whether you’re investing or just exploring the crypto space, understanding altcoins is essential.
What Are Altcoins?
An altcoin is any cryptocurrency that isn’t Bitcoin. Some argue that Ethereum, due to its institutional adoption, no longer qualifies as an altcoin. However, this remains a debate.
The term “altcoin” stands for “alternative coin.” Many altcoins were created as direct alternatives to Bitcoin. Some, like Bitcoin Cash, emerged from Bitcoin’s blockchain through hard forks. Others introduced new features, consensus mechanisms, or other applications beyond simple peer-to-peer transactions.
Why Do Altcoins Exist?
Altcoins exist to improve upon Bitcoin’s design. Developers saw limitations in Bitcoin’s speed, scalability, and functionality. Some altcoins aimed to fix these issues, while others introduced entirely new models of decentralized finance, smart contracts, and governance.
Each altcoin serves a purpose. Some focus on privacy, like Monero. Others, like Ethereum, enable smart contracts and decentralized applications (dApps). Stablecoins like USDT or USDC provide price stability, making crypto more accessible for everyday transactions.
How Many Altcoins are There?
The number of altcoins is constantly growing. New cryptocurrencies launch every day, making it impossible to pinpoint an exact number.
The first altcoins appeared in 2011. Early projects focused on improving Bitcoin’s speed, security, or energy efficiency. Today, there are thousands of altcoins, each serving different purposes—from smart contracts to stablecoins and decentralized finance (DeFi).
How Altcoins Differ from Bitcoin
Bitcoin was the first cryptocurrency. It introduced the world to digital assets powered by blockchain technology. As the word altcoin suggests, these assets are alternatives to Bitcoin.
Some altcoins solve real-world problems, like slow cross-border payments. Ethereum, for example, lets developers build apps and smart contracts, while stablecoins are designed to keep a steady price. Many altcoins use different systems to process transactions faster and with lower fees. They also have different rules for how new coins are created and how many can exist. Others, like memecoins, serve no real purpose beyond speculation.
While Bitcoin is seen as digital gold, altcoins offer new ideas and solutions, making the crypto world more diverse and innovative. Another major difference between them is price. Bitcoin recently crossed the $100,000 mark, and no other cryptocurrency comes close to this cost. Volatility is another key difference. Bitcoin’s price swings follow a market cycle, but altcoins’ volatility tends to be even more extreme. Their value can skyrocket or crash within hours, making them riskier investments.
Read also: Bitcoin vs Altcoin: What Are The Differences?
Why Are Altcoins Important for the Industry?
Altcoins bring innovation to the crypto market. Some share similarities with Bitcoin, but many introduce entirely new technologies, consensus mechanisms, or use cases.
Altcoins matter because they expand crypto’s possibilities:
Stablecoins make it easier for investors to access the DeFi market without volatility.
Governance tokens let investors influence the direction of projects they support.
Play-to-earn tokens create new ways for communities to engage and earn within the crypto ecosystem.
The diverse uses for altcoins, less abstract than Bitcoin and Ethereum, help make crypto more accessible for the general public.
Types of Altcoins on Crypto Market
The altcoin market is vast. There are thousands of alternative cryptocurrencies, each designed for a specific purpose. Here are the most common types of altcoins:
Stablecoins
As the name suggests, stablecoins aim to maintain price stability. Their value is usually pegged to a stable asset like the US dollar or gold.
This design helps reduce price volatility. For example, USD Coin (USDC) is pegged to the US dollar, meaning 1 USDC should always be equal to $1.
Most stablecoins are backed by reserves, like USDC and Tether (USDT), which hold fiat currency or cash equivalents. Algorithmic stablecoins, on the other hand, use smart contracts to control supply and maintain their peg. However, algorithmic stablecoins have struggled to gain trust after the collapse of Terra Luna.
In practice, stablecoins function like digital cash. Traders use them to move funds quickly within the crypto market, park assets during volatility, or access decentralized finance (DeFi).
Want to learn more? Read this dedicated article on stablecoins.
Utility Tokens
Utility tokens provide access to services within a blockchain network. They facilitate transactions, reward users, and support network functions.
XRP is designed to streamline cross-border payments.
Theta Fuel (TFuel) powers Theta’s decentralized video streaming service.
MATIC secures the Polygon network through staking and serves as a gas token for transaction fees.
Investors buy utility tokens because they believe in a project’s potential. Their value is often linked to the adoption and success of an underlying blockchain ecosystem.
Security Tokens
Security tokens function like digital stocks. Investors who hold these tokens may receive dividends, revenue shares, or voting rights, depending on the project.
Because they offer profit-generating benefits, security tokens are subject to strict regulations. The U.S. Securities and Exchange Commission (SEC) closely monitors them, with lawsuits filed against certain crypto projects.
Examples include:
GMX – a decentralized trading platform that shares trading fees with token holders.
Synthetix (SNX) – a protocol for creating synthetic assets that distributes rewards to stakers.
Security tokens blend traditional finance with blockchain technology, but regulatory challenges remain a hurdle for wider adoption.
Governance Tokens
Governance tokens give holders voting power over blockchain projects. Instead of a centralized team making decisions, the community collectively decides on upgrades, policies, and changes.
These tokens are the backbone of Decentralized Autonomous Organizations (DAOs). DAOs operate without a central authority, with smart contracts enforcing rules.
The more governance tokens you hold, the greater your influence. Maker (MKR) is a well-known example, allowing holders to vote on MakerDAO’s development and policies.
Meme Coins
Meme coins are cryptocurrencies inspired by internet culture. They often start as jokes but can gain massive followings and market caps.
The best-known meme coins include:
Dogecoin (DOGE) – originally created as a parody, now widely accepted for payments.
Shiba Inu (SHIB) – launched as a “Doge killer,” now a full-fledged ecosystem.
Pepe (PEPE) & Peanut the Squirrel (PNUT) – newer meme coins that surged in 2024.
Meme coins are rather easy to create, and anyone with technical skills can launch one. While most have no real utility, strong communities and viral marketing drive their value. Their massive supply and low price per unit make them attractive to speculative investors.
Privacy Coins
Certain altcoins prioritize anonymity, a key principle in crypto. Unlike Bitcoin, which has a public ledger, privacy coins obscure transaction details.
Monero (XMR) is the best-known privacy coin. It uses ring signatures, stealth addresses, and RingCT technology to hide the sender, receiver, and transaction amounts.
Monero remains a go-to choice for those who value financial privacy. Its active development community continues to enhance security and anonymity features.
DeFi
Decentralized finance (DeFi) tokens power blockchain-based financial services. These tokens enable lending, borrowing, trading, and staking without intermediaries.
Ethereum (ETH) pioneered DeFi with smart contracts. It supports thousands of decentralized apps (dApps), handling millions of transactions daily.
Solana (SOL) offers high-speed transactions at low costs. Its proof-of-history consensus makes it ideal for DeFi, NFT marketplaces, and blockchain gaming.
DeFi tokens encourage innovation in financial services, providing alternatives to traditional banking.
How Altcoins Work
Each decentralized digital currency operates differently, depending on its design, purpose, and underlying technology. While all altcoins use blockchain, their specific mechanics vary.
Blockchain and Consensus Mechanisms
Altcoins rely on blockchain technology to function. A blockchain is a decentralized ledger that records transactions securely and transparently. However, how these transactions are verified depends on the consensus mechanism.
The two most common are:
Proof of Work (PoW) – Miners solve complex puzzles to validate transactions. Bitcoin and early altcoins like Litecoin (LTC) use this method.
Proof of Stake (PoS) – Validators stake coins to confirm transactions, reducing energy use. Many modern altcoins, including Solana (SOL) and Cardano (ADA), use PoS.
Ethereum initially used PoW but switched to PoS in 2022, improving scalability and efficiency. Some altcoins also use hybrid models like Delegated Proof of Stake (DPoS) or Proof of Authority (PoA).
Smart Contracts and Decentralised Applications (dApps)
The Ethereum blockchain introduced smart contracts—self-executing agreements coded onto the blockchain. Unlike Bitcoin, which mainly handles transactions, Ethereum enables complex applications without intermediaries.
Smart contracts power decentralized applications (dApps) in sectors like:
Finance (DeFi) – Platforms like Uniswap and Aave enable decentralized trading and lending.
Gaming – Play-to-earn games like Axie Infinity reward players with cryptocurrency.
NFTs & Digital Ownership – Marketplaces like OpenSea and Rarible allow users to trade unique digital assets.
Other blockchains, like Binance Smart Chain (BSC) and Avalanche (AVAX), also support smart contracts with lower fees and faster transactions. By removing middlemen, smart contracts make transactions trustless, secure, and efficient, increasing blockchain adoption.
Altcoin Mining vs. Staking
As mentioned before, cryptocurrencies use mining (Proof of Work) or staking (Proof of Stake) to validate transactions and secure their networks.
Mining (Proof of Work)
Mining involves solving complex cryptographic puzzles with powerful hardware (ASICs or GPUs). The first miner to solve the puzzle adds a block to the blockchain and earns rewards. Bitcoin, Litecoin, and Monero use mining to maintain security.
However, mining has drawbacks:
High energy consumption – Bitcoin mining alone uses more electricity than some small countries.
Expensive hardware – Miners need specialized, costly devices.
Centralization risks – Large mining farms dominate, making it harder for individuals to compete.
Despite this, mining is battle-tested and highly secure.
Staking (Proof of Stake)
Staking allows you to lock up coins to help validate transactions. Instead of competing with computing power, validators are chosen based on their stake. In return, they earn rewards. Ethereum, Cardano, and Solana use staking.
Advantages of staking:
Energy efficiency – No need for power-hungry mining rigs.
Accessibility – You can stake coins through wallets or exchanges.
Passive rewards – Stakers earn predictable returns without expensive equipment.
Ethereum’s switch to staking in 2022 cut energy use by 99.95%, proving PoS as a viable alternative to PoW. As a result, most new blockchains now favor staking over mining.
Both methods have trade-offs. Mining offers better security but is costly and energy-intensive. Staking is more efficient and accessible but can centralize power among large holders. As the crypto space evolves, hybrid models and regulatory oversight will shape the future of both systems.
Popular Altcoins and Their Use Cases
A strong development team and an active community are just as important as the altcoin itself. The best altcoins are backed by experienced developers who continuously improve the network. Here are some of the most notable altcoins and what they bring to the crypto space.
Ethereum (ETH) – Smart Contracts & dApps
Ethereum is the second-largest cryptocurrency by market cap. It introduced programmable blockchain technology, allowing developers to build decentralized applications (dApps). Smart contracts on Ethereum enable everything from DeFi platforms to NFT marketplaces. Its transition to Proof-of-Stake made it more energy-efficient, solidifying its dominance in blockchain innovation.
Read also: Bitcoin vs. Ethereum
Binance Coin (BNB) – Exchange & Ecosystem Token
BNB is one of the top altcoins by market cap and belongs to Binance, the world’s largest crypto exchange. Initially launched as a utility token for trading fee discounts, BNB now powers the Binance ecosystem, including Binance Smart Chain (BSC), where developers create dApps and smart contracts. Its utility extends beyond Binance, making it a key player in the altcoin market.
Cardano (ADA) – Proof-of-Stake Innovation
Cardano is a highly secure and scalable blockchain platform built on rigorous academic research. It introduced the Ouroboros Proof-of-Stake consensus, designed for energy efficiency and decentralization. With ongoing upgrades, Cardano aims to support a wide range of dApps and financial applications while maintaining a strong commitment to sustainability.
Solana (SOL) – High-Speed Transactions
Solana is one of the most popular altcoins in the crypto community, known for its faster transaction speeds and low fees. Its hybrid Proof-of-Stake and Proof-of-History consensus enables high-speed processing, making it ideal for DeFi, NFTs, and gaming platforms. However, its network has suffered multiple outages, raising concerns about long-term reliability.
XRP (XRP) – Cross-Border Payments
XRP is the native token of the XRP Ledger, designed for institutional cross-border transactions. It provides fast, low-cost international payments, making it a preferred choice for banks and financial institutions. However, regulatory challenges, particularly with the SEC, have impacted its adoption in certain markets.
Dogecoin (DOGE) – Meme Coin & Community Adoption
Dogecoin started as a joke but became one of the most recognized cryptocurrencies. Its strong community-driven culture and endorsements from high-profile figures keep it relevant today. DOGE is frequently used for tipping, donations, and even payments. While its long-term value is uncertain, its popularity and meme status continue to drive adoption.
Investing in Altcoins: Opportunities and Risks
Altcoin investing comes with both potential rewards and significant risks. To minimize exposure, spread your investments across multiple projects. A diversified portfolio increases your chances of holding a successful altcoin while reducing losses from weaker ones.
Why Invest in Altcoins?
Altcoins are generally more affordable than Bitcoin. With Bitcoin reaching highs of $100,000, many investors find the entry point too steep. Altcoins offer a lower barrier to entry, making them an attractive alternative.
The crypto market is unpredictable, and altcoins present an opportunity for massive gains. Unlike the traditional market, where stocks and commodities see gradual growth, altcoins can experience exponential price surges in short periods. Some early investors in Ethereum, Solana, or Dogecoin saw life-changing profits. However, high reward comes with high risk—altcoins are also prone to extreme volatility.
Types of Scams in Altcoins
The cryptocurrency space is filled with scams, and altcoins are especially risky. Many smaller altcoins turn out to be fraudulent schemes or poorly designed projects that collapse.
Common scams include:
Rug pulls – Developers hype a project, attract investors, then disappear with the funds.
Pump and dumps – Manipulators artificially inflate a token’s price before dumping it on unsuspecting buyers.
Fake projects – Some altcoins launch with impressive promises but never deliver anything real.
To avoid scams, research every project carefully. Look at the team, technology, and real-world use case before committing to altcoin investment.
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Where Can I Buy Altcoins?
You can purchase 1,000+ altcoins on Changelly – click here to start.
Some exchanges let you store funds in your account balance—these are called custodial exchanges. However, for better security, it’s recommended to store your altcoins in a separate wallet. More on that below.
You can buy altcoins on crypto exchanges, OTC (over-the-counter) shops, and ATMs.
Online exchanges are the most popular option, offering access to thousands of altcoins. OTC services cater to large trades, while crypto ATMs allow quick purchases with cash.
How Do I Store Altcoins Safely?
Like the first cryptocurrency, altcoins are stored in crypto wallets. You can choose between hot wallets (connected to the internet) or cold wallets (offline storage).
For added security, consider using separate wallets for different altcoins. This helps manage risk and prevents a single point of failure.
What’s Next for Altcoins?
While altcoins have repeatedly surged in popularity, their long-term future remains uncertain.
Altcoin season refers to periods when altcoins outperform Bitcoin in market dominance. These phases are fueled by speculation, innovation, and shifting investor sentiment.
In the long term, regulation is expected to play a major role. Governments and financial authorities are setting clearer rules for cryptocurrency markets. Stricter laws could push weak projects out, and legitimate altcoins may benefit from regulatory clarity.
Institutional adoption is another key factor. Businesses and financial institutions are exploring blockchain-based solutions. Altcoins with real-world utility—like Ethereum for smart contracts or XRP for global payments—could gain mainstream traction.
Technology will keep evolving. Improved scalability, interoperability, and energy efficiency will determine which altcoins succeed. Trends like AI integration, tokenized assets, and decentralized finance will drive innovation.
Not all altcoins will survive. Many will disappear, but the strongest projects will continue shaping the cryptocurrency market. The next cycle will reveal which ones can stand the test of time.
Will Altcoins Replace Bitcoin Later in the Future?
Probably not.
Bitcoin introduced blockchain technology, and most early altcoins tried to compete with BTC. None have surpassed it in terms of adoption and security.
Still, innovation continues. While Bitcoin remains dominant, the cryptocurrency landscape may one day see an altcoin rise to challenge its position.
FAQ
How Can I Tell If an Altcoin Is a Good Investment?
Start with the whitepaper—it should clearly outline the project’s purpose, technology, and roadmap. A strong team with experienced developers adds credibility.
Utility matters. The best altcoins solve real problems, not just ride hype. Community support can promote adoption, but marketing alone isn’t enough.
Finally, check partnerships, market demand, and security. A solid altcoin has a clear use case, active development, and long-term potential.
What Are the Safest Ways to Store Altcoins?
The safest way to store altcoins is in a crypto wallet. You can choose between hot wallets (online, convenient but riskier) and cold wallets (offline, secure for long-term storage).
For better safety, avoid storing large amounts on exchanges. Use two-factor authentication (2FA) and back up recovery phrases. If security is a priority, a cold wallet is the best choice for protecting your altcoins.
How Do Altcoins Get Their Value?
Altcoin value depends on utility, adoption, and community support. If an altcoin powers a blockchain solution, like Layer 2 networks, it holds real value in the ecosystem.
Adoption plays a crucial role. The more developers, businesses, and users integrate an altcoin, the stronger its market position becomes. Ethereum’s growth is a prime example of utility increasing value.
Community influence can also impact price, often leading to hype-driven surges. However, a strong community alone doesn’t add fundamental value—only short-term price fluctuations.
Ultimately, long-term value comes from real-world use cases, innovation, and continuous development. Coins that solve problems tend to hold value beyond speculation.
Are All Altcoins Decentralised?
Not all altcoins are fully decentralized. Bitcoin operates without central control, but many altcoins rely on founder teams, companies, or governance councils.
Some projects have pre-mined tokens, centralized decision-making, or controlled development. Stablecoins, for example, depend on central entities to manage reserves.
However, certain altcoins operate through Decentralized Autonomous Organizations (DAOs), where token holders vote on changes. Ethereum and Monero are examples of altcoins with decentralized governance.
Before investing, check how an altcoin is controlled. If a small group makes all the decisions, it’s not as decentralized as it claims to be.
Can I Use Altcoins for Everyday Transactions?
Yes, but adoption varies. Some altcoins, like Litecoin, XRP, and Dash, are designed for fast, low-cost payments, making them suitable for transactions.
Stablecoins like USDT and USDC are widely used for payments since they maintain a stable value. Many crypto debit cards allow users to spend altcoins like regular currency.
However, most stores don’t accept altcoins directly. While crypto adoption is growing, traditional payment systems are still dominant. For now, altcoin payments remain limited to select businesses, online platforms, and peer-to-peer transfers.
Disclaimer: Please note that the contents of this article are not financial or investing advice. The information provided in this article is the author’s opinion only and should not be considered as offering trading or investing recommendations. We do not make any warranties about the completeness, reliability and accuracy of this information. The cryptocurrency market suffers from high volatility and occasional arbitrary movements. Any investor, trader, or regular crypto users should research multiple viewpoints and be familiar with all local regulations before committing to an investment.
