Understand altcoins in just 3 minutes

In the cryptocurrency market, there would currently be more than 6000 existing altcoins. Covering very diverse projects, with regard to the world top 10 in terms of market capitalization, the main altcoins are: BNB (binance), XRP (Ripple), ADA (Cardano), SOL (Solana), DOGE (Dogecoin), DOT ( Polkadot).

What are altcoins?

This term corresponds to all cryptocurrencies other than the main one, Bitcoin. In the crypto ecosystem, there are therefore tens of thousands of these “alternative currencies” currently in circulation.

The stablecoins (like Tether’s USDT) are a separate category in the nomenclature of altcoins since they are cryptocurrencies whose only function is to replicate the value of a fiat currency such as the US dollar for example.

How do these altcoins work?

Despite the diversity of these alternative cryptos and the projects built around them, their operation remains relatively similar to that of bitcoin. It is possible for some of the ” staker “, them ” farmer “, speculate on their value, transfer them to “ wallet ” Where ” exchange “.

Furthermore, altcoins are governed by the blockchain which ensures the recording, the transactions so that the exchanges can neither be modified nor refused, even falsified.

The different types of altcoins?

Even if an altcoin can belong to several categories at the same time, it is possible to highlight the following categories:

  • Payment token: serves as currency for exchange and transfer. Bitcoin is the prime example.
  • Governance Token: these altcoins offer their holders certain rights within a blockchain. This is often the right to vote for protocol modifications or to participate in the decisions of a decentralized autonomous organization (DAO).
  • utility token: Aims to provide services within a network in order to pay fees or even redeem rewards. These tokens are used in the blockchain network to make it work. For example, ether (ETH) is notably designed to be used to pay for transactions.
  • Security token: they are regulated by the Securities and Exchange Commission (SEC) because they are designed to act like securities. These altcoins are widely used in Initial Coin Offerings (ICO).
  • Stablecoin: these are cryptocurrencies that are linked to the value of a currency (dollar) or precious metal (gold). They make it possible to avoid market fluctuations.
  • Meme Coin: these are cryptocurrencies inspired by a joke generally without real intrinsic value. The gains and losses can be dazzling on these altcoins. The Doge or shiba are examples.

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What advantages and disadvantages for altcoins?

Just like the reference cryptocurrency, bitcoin, there are many advantages for these alternative currencies:

  • These currencies follow a purpose or serve a well-defined project.
  • These altcoins overcome the weaknesses of bitcoin by making improvements for the crypto ecosystem.
  • Being linked to decentralization and blockchain, altcoins do not depend on a monetary authority or institution.

However, there are a few drawbacks to these altcoins:

  • The thousands of altcoins launched also result in many projects that do not emerge.
  • Alternative currencies traded on unregulated markets. The investor is therefore vulnerable to price manipulation, fraud and scams.
  • Altcoins often have particularly low market capitalizations compared to the ubiquity of bitcoin.

Conclusion: what future for these alternative currencies?

The vast majority of these alternative currencies will disappear in a few years. The best blockchain projects, the strongest communities will ensure the survival of some.

Moreover, the future of altcoins remains dependent on the emergence of international regulation both at the level of states and central banks. All of this will contribute to greater market concentration.

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