Altcoins: What are they and what categories are they divided into?

The world of cryptocurrencies has come a long way since the launch of Bitcoin in 2009. While BTC and ETH take up the top spots amongst cryptocurrencies, there are hundreds of thousands of cryptocurrency tokens known as altcoins. Every day you will come across altcoin news about some token or the other being launched. 

The opportunities for investors and traders are limited in BTC and ETH as they have become safe blue-chip investments. But you can still make life-changing money through altcoins, as they can make gains worth 10000x or more. 

Today, in this article, we bring you everything you need to know about altcoins: what they are, what categories they are divided into and the latest crypto altcoin news. 

What are altcoins?

Originally there was only one cryptocurrency, i.e., Bitcoin (BTC). It remained the only cryptocurrency token in circulation until 2011. In 2011, the first cryptocurrency, Namecoin, was launched and became the first alternative crypto to BTC. But the most popular alternative crypto to BTC is Litecoin which was created through a fork on the Bitcoin blockchain. Since then, thousands of crypto tokens have come into existence. 

Hence, altcoins are any cryptocurrency tokens other than Bitcoin. Some of the most popular altcoins in circulation are ETH, DOGE, SOL, XRP, USDT, BNB, etc. With the widespread use and importance that ETH has garnered over the years, some people consider altcoins as any cryptocurrency other than BTC and ETH. 

Types of altcoins

Altcoins have different use cases, consensus mechanisms, etc., and can be of multiple types. While most of the altcoins in existence have been formed through forks on the Bitcoin or the Ethereum blockchain, they serve various purposes. 

The idea behind a lot of altcoins is to overcome the shortcomings that BTC or ETH face such as low transaction throughput, slow transactions, high gas fees, etc. Not all crypto coins have an utility and can be simply meme coins, such as Dogecoin (DOGE), Shiba Inu (SHIB), etc., while others are purely shitcoins that have no use cases and can also be scams. Some of the most popular categories of altcoins are as follows:

Stablecoins

A stablecoin is an altcoin that has its value anchored to a real-world asset, such as commodities like gold, silver, etc., or a fiat currency like the US Dollar. One of the world’s first stablecoin is Tether (USDT) and it is pegged to the price of the US Dollar. It has become one of the most popular cryptocurrencies in the world, as it can be used to make transactions in USD across blockchain networks. 

Other popular stablecoins are USDC, DAI, BUSD, etc. They can be used to make payments, trade cryptocurrencies, earn rewards on various protocols, etc. 

Utility tokens

Cryptocurrencies have evolved a lot more than just being a tradable asset. Blockchain technology has a lot of untapped potential, and developers have yet to  the surface of what it can be used for. A lot of experts believe that blockchain can be used to build a new decentralized internet known as web 3.0. 

The transactions, data, information, etc., on web 3.0 are tokenized and known as utility tokens. These tokens serve several purposes on a blockchain, such as payment of gas fees, earning rewards, interests, etc. ETH, XRP, BNB, APE, CRV, YFI, etc. are some of the most popular utility tokens. 

Security tokens

Financial securities have been in circulation in traditional markets for a long time. The holders of these securities have ownership over real-world assets. Similarly, blockchain security tokens represent a digital liquid contract. They have small fractions of assets, like real estate, art, etc. attached to them. 

Since the information stored on the blockchains is immutable and verified, holding security tokens represents actual ownership or stake in a real or digital asset. 

Governance tokens

The decentralized protocols and DeFi applications are not governed by any single entity, group or individual. Rather, the governance of a majority of decentralized protocols is in the hands of its users and token holders. These tokens that give governance rights to their holders are known as governance tokens. 

The holders of governance tokens can participate in the decision-making process of the protocols through voting rights, recommend changes or future paths. Governance tokens democratize the blockchain ecosystem and give an added incentive to the people to hold the tokens. 

Forks

When a blockchain developer makes changes to the blockchain, it is considered a fork. Some forks in the blockchains are “soft forks,” while others are “hard forks.” Soft forks make only small changes in the blockchain and its native cryptocurrency. But hard forks can create a separate blockchain originating from the parent blockchain. This gives rise to an alternate cryptocurrency known as forks. 

Litecoin (LTC) and Bitcoin Cash (BCH) are two of the biggest examples of forks resulting in different cryptocurrencies on the Bitcoin blockchain. Bitcoin Cash was developed to make day-to-day transactions possible using cryptocurrencies. 

Memecoins

Memes are an integral part of the crypto community and have evolved to become their own language. This is because the meme culture and the growth of cryptocurrencies occurred simultaneously. As a result, memes have become a part of every crypto discourse. 

A large number of cryptocurrency tokens are also developed based on memes. For example, Dogecoin, one of the largest cryptocurrencies in terms of market cap, was developed as a meme based on the Shiba Inu dog meme. Some meme coins, like DOGE, SHIB, FLOKI, etc. have gained mainstream acceptance and have been the reason for many new users entering the crypto industry. 

Conclusion

Altcoins news these days has become as relevant today as any news regarding Bitcoin. While BTC has become an asset that users invest in and save their earnings with, it is the altcoins that bring real-world utility to blockchain technology. And as a result, the future of blockchain lies in altcoins. 

The number of altcoins in the market is increasing with each passing day. While a lot of those protocols and tokens may not survive in the long term, they can be used to make profits in the short term.