What Are Altcoins? A Complete Guide

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Key Takeaways:

• Altcoins are all cryptocurrencies other than Bitcoin.
• They include Ethereum, Solana, BNB, XRP, Cardano, and thousands more.
• Categories include Smart contract platforms (e.g., Ethereum, Solana), Stablecoins (e.g., USDT, USDC), Privacy coins (e.g., Monero), Utility tokens, DeFi tokens, and meme coins. 
• Altcoins aim to improve on Bitcoin’s limitations or serve different use cases.
• Higher risk/reward: Altcoins can be more volatile but offer greater upside.
• Due diligence is crucial, as many altcoins fail or are speculative.

What Are Altcoins?

Altcoins (short for “alternative coins”) are digital currencies that operate on blockchain technology, just like Bitcoin. However, they often serve different purposes or introduce technological innovations that distinguish them from Bitcoin’s original design. 

Since Bitcoin’s launch in 2009, thousands of altcoins have been developed. They provide unique features and improvements, such as:

• Faster transactions
• Enhanced privacy
• Smart contract functionality

While Bitcoin was created primarily as a decentralised alternative to traditional currency, many altcoins aim to optimise specific aspects of blockchain technology.

Why Altcoins Exist

Altcoins exist to address Bitcoin’s shortcomings, such as scalability, energy consumption, and limited use cases. They have varying use cases, technologies, and value propositions. Most importantly, they introduce innovations that enable features like decentralised finance (DeFi), gaming economies, and asset tokenisation.

Types of Altcoins and Their Use Cases

Understanding altcoins is crucial for any crypto enthusiast, whether you’re exploring the stability of stablecoins, the community-driven appeal of meme coins, or the real-world applications of utility tokens. 

Altcoins can be classified into various categories based on their functionality and purpose. Understanding the types of altcoins helps identify their use cases and growth potential. 

Here’s a breakdown of the primary categories:

Stablecoins  

Stablecoins are designed to maintain a stable value by pegging their worth to a reserve of assets, usually fiat currencies like the US Dollar (USD) or commodities like gold. Their primary purpose is to reduce the notorious volatility commonly seen in cryptocurrencies. 

Popular examples include Tether (USDT), USD Coin (USDC), and Binance USD (BUSD), which was launched by Binance in partnership with Paxos and is regulated and fully backed by US Dollars.

Meme Coins  

Meme coins are cryptocurrencies originating from internet jokes or memes, but have grown into massive communities and significant market caps. While most meme coins lack substantial utility, they thrive on community support and speculative trading. 

Popular examples include Dogecoin (DOGE), which was created as a joke in 2013. Dogecoin gained massive popularity through social media and celebrity endorsements like Elon Musk. Shiba Inu (SHIB), dubbed the “Dogecoin killer,” is another example. This coin has a strong community and even launched its decentralised exchange, ShibaSwap.

Utility Tokens 

Utility tokens are designed to provide access to a product or service within a blockchain ecosystem. Unlike traditional cryptocurrencies, their primary role is not as a store of value but as a functional part of a decentralised application (DApp).

Examples of utility tokens include the following: 

• Chainlink (LINK): Enables smart contracts on Ethereum to securely connect to real-world data, APIs, and payment systems.
• Uniswap (UNI): This is a governance token for the Uniswap decentralised exchange, allowing holders to vote on protocol changes.
• Filecoin (FIL): Provides decentralised storage solutions, allowing users to rent out unused digital storage space.

Play-to-Earn Tokens 

Play-to-earn (P2E) tokens are digital assets earned through participation in blockchain-based games or metaverse platforms. They often have real-world value and can be traded on exchanges.

Some examples include Axie Infinity (AXS), a P2E game in which players collect, breed, and battle virtual creatures called Axies; The Sandbox (SAND), which allows users to create, own, and monetise virtual experiences within a metaverse environment; and Decentraland (MANA), a decentralised virtual world in which users can buy, develop, and trade virtual land.

Governance Tokens 

Governance tokens give holders voting power over project decisions like protocol upgrades or treasury management. These tokens enable decentralised decision-making, empowering the community to influence the project’s direction.

Popular examples of Governance tokens include:

• Uniswap (UNI): Holders vote on changes to the decentralised exchange’s protocol and liquidity incentives.
• Maker (MKR): MKR holders govern the MakerDAO protocol, influencing changes to its stablecoin, DAI.
• Compound (COMP): Grants governance rights over the Compound Finance protocol, including adjustments to interest rates and asset support.

Security Tokens  

Security tokens represent ownership or investment in a real-world asset on a blockchain, such as stocks, bonds, or real estate. They are fully regulated and must comply with securities laws. 

The main advantage of security tokens is that they increase asset liquidity, enabling the tradability of real-world investments. They also allow for fractional ownership, which means investors can purchase portions of assets, such as real estate, that might be out of reach otherwise. 

RealT (REAL), tZERO (TZROP), and Securitise (SEZ) are popular examples of security tokens. 

Top Alt Coins List by Market Cap 

As of early 2025, the total altcoin market capitalisation is around $1.3 trillion, with over 12,000 cryptocurrencies. This reflects significant growth and investor interest outside of Bitcoin. 

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Some altcoins have risen to the top based on their market capitalisation, which is calculated by multiplying the coin’s current price by its circulating supply. 

Popular altcoins like Ethereum (ETH), Tether (USDT), and Solana (SOL) have established themselves as key players in the cryptocurrency ecosystem.

Here’s a breakdown of the top altcoins by market cap and why they are dominant.

Ethereum (ETH)  

Ethereum is the leading altcoin and the second-largest cryptocurrency after Bitcoin. Launched in 2015 by Vitalik Buterin, Ethereum introduced the concept of smart contracts, allowing decentralised applications (DApps) to operate on its blockchain.

Market Cap and Popularity:

• Ethereum’s market cap often exceeds $200 billion, solidifying its position as the largest altcoin.
• It is the backbone for most DeFi (Decentralised Finance) projects and NFT (Non-Fungible Token) platforms.

Tether (USDT) 

Tether is the largest stablecoin by market cap and is pegged to the US Dollar at a 1:1 ratio. Its primary use is to facilitate trading on crypto exchanges without the volatility of traditional cryptocurrencies.

Market Cap and Popularity:

• Tether consistently ranks in the top three cryptocurrencies by market cap, often hovering around $83 billion.
• It is a vital liquidity bridge on major exchanges like Binance, Kraken, and Coinbase.

Solana (SOL)

Solana is a high-performance blockchain designed to support decentralised applications and crypto projects with high throughput and low fees. Its unique Proof of History (PoH) consensus mechanism allows it to process transactions faster than most blockchains.

Market Cap and Popularity:

• Solana’s market cap fluctuates around $10 billion, making it a top altcoin contender.
• Known for processing 65,000 transactions per second (TPS), significantly outpacing Ethereum’s current capacity.

BNB (BNB) 

BNB, initially known as Binance Coin, is the native cryptocurrency of the Binance Exchange, the largest crypto exchange by trading volume. Originally an ERC-20 token on Ethereum, it later migrated to its blockchain, Binance Smart Chain (BSC).

Market Cap and Popularity:

• BNB has a market cap of approximately $45 billion and is consistently among the top five cryptocurrencies.
• It is widely used for trading fee discounts on Binance and participating in Initial Coin Offerings (ICOs) on Binance Launchpad.

XRP (XRP)  

XRP is the native cryptocurrency of the Ripple Network, designed to facilitate fast, low-cost international transactions. Unlike traditional banking systems, XRP transactions settle in 3–5 seconds.

Market Cap and Popularity:

• XRP’s market cap is approximately $20 billion, firmly in the top ten cryptocurrencies.
• It is widely adopted by financial institutions for cross-border payments due to its low fees and high speed.

Dogecoin (DOGE) 

Dogecoin began as a parody cryptocurrency but gained a massive following, largely driven by social media and endorsements from figures like Elon Musk. It is known for its fast transaction times and low fees.

Market Cap and Popularity:

• Dogecoin’s market cap hovers around $10 billion, often influenced by community-driven hype.
• It remains among the most traded coins due to its accessibility and active community.

Cardano (ADA)  

Cardano is a blockchain platform focused on sustainability, scalability, and transparency. Founded by Charles Hoskinson, one of Ethereum’s co-founders, Cardano emphasises peer-reviewed research and evidence-based development.

Market Cap and Popularity:

• Cardano has a market cap of around $15 billion, making it one of the top altcoins.
• It is highly regarded for its layered architecture, which separates computation from settlements.

Avalanche (AVAX)  

Avalanche is a decentralised platform known for its high throughput, low latency, and interoperability. Its primary goal is to provide a scalable solution for decentralised applications (DApps) and custom blockchain networks. Avalanche uses three interoperable blockchains (X-Chain, C-Chain, and P-Chain) to optimise speed and decentralisation.

Market Cap and Popularity:

• Avalanche maintains a market cap of approximately $8 billion, ranking it among the top altcoins.
• It is particularly well-regarded for its sub-second transaction finality, making it one of the fastest platforms in the blockchain ecosystem.

Chainlink (LINK)  

Chainlink is a decentralised oracle network that connects smart contracts with real-world data, APIs, and traditional banking systems. Its primary function is to bridge blockchain applications with off-chain information, making it essential for DeFi and complex smart contracts.

Market Cap and Popularity:

• Chainlink’s market cap is around $7 billion, securing its place as the leading oracle service in blockchain technology.
• It is integrated with major DeFi platforms, such as Aave, Synthetix, and Uniswap.

Polkadot (DOT) 

Polkadot is a multi-chain blockchain platform designed to facilitate the interoperability of various blockchains, known as parachains. Its architecture allows for the seamless transfer of data and assets across different blockchain networks.

Market Cap and Popularity:

• Polkadot consistently holds a market cap of around $8 billion, positioning it as a leading project in cross-chain technology.
• It is designed by Gavin Wood, one of the co-founders of Ethereum, and operates under a unique governance model.

How to Decide Which Altcoins to Invest In  

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Investing in altcoins requires careful consideration of various factors to mitigate risks and maximise returns. Unlike Bitcoin, which is well-established, altcoins can be highly volatile and speculative. Here’s what to evaluate before investing in any altcoin:

What Problem Is the Project Solving? 

Before investing, it’s crucial to understand the real-world problem the altcoin aims to address. Does it solve a tangible finance, technology, or data security issue? 

Examples of Project Solving:

• Chainlink (LINK) solves the problem of real-world data integration with blockchain applications.
• Filecoin (FIL) addresses the need for decentralised, secure data storage.
• XRP (XRP) optimises cross-border payments with minimal fees and near-instant transfers.

Ask yourself the following questions to get a clearer picture of the coin’s market demand, target industry, and competitive edge: Is there a clear need for the project’s solution? Does it disrupt or innovate within its sector? How does it compare to existing solutions?

Does the Project Have Real Utility? 

The value of an altcoin often depends on its utility within its ecosystem. Coins that power decentralised applications (DApps), provide liquidity for decentralised exchanges (DEXs), or enable platform-specific features, often accessed through wallets like MetaMask, tend to hold value better over time.

Examples of Utility:

• Ethereum (ETH): Required to pay gas fees for transactions and smart contracts.
• Uniswap (UNI): Powers governance decisions on the Uniswap DEX.
• Binance Coin (BNB): Reduces trading fees on the Binance Exchange and is used for token launches.

Consider whether the token can be staked for passive income. Is the coin actively used within its platform? Will its utility remain relevant in 5–10 years?

Does the Team and Community Support It? 

A strong development team and a dedicated community are critical for long-term project success. Transparent leadership and regular project updates reflect commitment and credibility.

Key Indicators:

1. Team Background: Check the experience of the founders and developers. Are they public and transparent?
2. Active Development: Look for consistent updates on GitHub and social channels.
3. Community Engagement: Platforms like Reddit, Twitter, and Discord are good indicators of community strength.

Read the Project White Paper 

The white paper is the foundational document for any cryptocurrency project. It outlines the project’s vision, technology, use cases, and tokenomics. Reviewing the white paper allows investors to understand the project’s objectives, the problems it aims to solve, and the strategy for achieving its goals.

Focus on the project’s vision and purpose, as well as its technology overview. How are the tokens distributed? Do they have mechanisms in place to control inflation? Are there clear milestones and timelines on its development plan? And how does the project handle security and decision-making? 

Reading the white paper provides the insight needed to make informed decisions and avoid investing in projects with weak foundations.

Check Price History and Volatility 

Understanding an altcoin’s price history is essential for evaluating its stability and growth potential. Historical performance can highlight patterns of volatility, responses to market events, and resilience during downturns. Understanding these trends also helps investors more effectively time their entry and exit points.

Use tools like CoinMarketCap, TradingView, and Glassnode to analyse the following factors: 

1. All-Time High (ATH) and Lows: Identifying the peaks and troughs can reveal how reactive the coin is to market cycles.
2. Price Stability: Coins with wild price swings are riskier but may offer higher returns for experienced traders.
3. Market Reactions: How the coin responds to market crashes or bullish runs can indicate its strength.
4. Trading Volume Trends: Sudden spikes or drops in volume can suggest market manipulation or loss of interest.

Liquidity and Trading Volume  

Liquidity refers to how easily an altcoin can be bought or sold without affecting its market price. High liquidity is a crucial indicator of market interest and stability, making it easier for investors to enter and exit positions.

Trading volume represents the total number of coins traded during a specific period. High volume generally indicates strong market interest and better price discovery.

Here are the Key Metrics to Check:

• 24-hour Trading Volume: Indicates current interest in the coin.
• Order Book Depth: Reflects the number of buy and sell orders on major exchanges.
• Exchange Listings: More listings across major exchanges generally imply greater liquidity.

Bitcoin vs. Altcoins: Can Altcoins be Better?  

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The cryptocurrency landscape is often divided into two major categories: Bitcoin and Altcoins. While Bitcoin remains the most well-known and widely adopted cryptocurrency, many altcoins have emerged with unique features that address Bitcoin’s limitations. In fact, some have even outperformed Bitcoin in what is known as “altcoin seasons”. 

An altcoin season is a period when most altcoins outperform Bitcoin. This is typically identified when at least 75% of the top 50 coins by market cap outperform Bitcoin over a 90-day period.

With that said, here are some key differences between Bitcoin and altcoins to help you understand whether or not Altcoins can be better.  

Key Differences:

Can Altcoins Be Better Investments?

In specific scenarios, altcoins offer better investment opportunities. In May 2025, Bitcoin’s dominance in the crypto market reached approximately 65%, but analysts suggest that a drop in Bitcoin dominance to the 50–54% range has historically preceded major altcoin rallies. That may be a good enough reason to jump on the trend. 

Here are a few other reasons why you might choose altcoins over Bitcoin: 

1. Higher Growth Potential: Emerging projects like Avalanche (AVAX) and Polkadot (DOT) have grown substantially as they tackle specific industry challenges.
2. DeFi and Smart Contracts: Altcoins such as Ethereum (ETH) dominate the DeFi sector, offering more diverse applications than Bitcoin.
3. Lower Entry Price: Many altcoins are more affordable than Bitcoin, making them accessible to new investors.

That said, it’s crucial to note that the volatility and risk associated with altcoins are generally higher. Bitcoin is often seen as a safer, long-term store of value, while altcoins can be more speculative but also more rewarding in shorter timeframes.

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