What Is an "Altcoin"?

The term “altcoin” is used to describe any cryptocurrency that is not Bitcoin. As Bitcoin was the first cryptocurrency, any cryptocurrency that was created after was treated as an "alternative." Some people, particularly bitcoiners, consider Ethereum to be an altcoin as well. Others now exclude Ethereum from the list of altcoins and consider all cryptocurrencies other than Bitcoin and Ethereum to be altcoins. 

What Is the Difference Between Crypto and Altcoins?

Altcoins are all cryptocurrencies other than Bitcoin and Ethereum. Bitcoiners like to stress that Bitcoin is not a cryptocurrency but its own category. However, there is no difference between crypto and altcoins.

Types of Altcoins

There are several different types of altcoins.

Payment Tokens

Payment tokens focus on payments as their main use case. These tokens are often not considered to be "real" cryptocurrencies since they tend to be more centralized.

Utility Tokens

A utility token is one that can be used for a specific purpose within its ecosystem. For instance, paying for gas can be considered a utility. 

Governance Tokens

Governance tokens are used to vote on a project's governance. For example, governance token holders can influence the level of fees a project can charge on token swaps.

Memecoins

A memecoin is a cryptocurrency that was created as a joke and with no obvious utility. For example, Dogecoin and Shiba Inu are two popular memecoins. 

Stablecoins

Stablecoins are cryptocurrencies that are pegged to currencies like the dollar and are often backed with collateral in fiat currencies. Stablecoins are not "real" altcoins since their value does not oscillate like other cryptocurrencies.

Pros and Cons of Altcoins

Altcoins have several different pros and cons.

Pros

• Variability: There are thousands of altcoins, each with its own unique use case.

• Upside Potential: Altcoins can multiply in value much faster, thanks to their low market capitalization.

• Innovation: Altcoins bring new and innovative solutions to the market.

Cons

• Volatility: Altcoins are much more volatile than Bitcoin or Ethereum.

• Illiquidity: Altcoins are also much more illiquid and can drastically oscillate in value. 

• Vaporware: Many altcoins can be considered vaporware because they have no real use case.