The term "altcoins" comes from "alternative coin", referring to cryptocurrencies other than Bitcoin. The concept of altcoins was first introduced by users on BitcoinTalk, one of the most popular cryptocurrency forums. After Stephanie Yang’s article was published in The Wall Street Journal, the term gained widespread recognition and became an integral part of the crypto community.
Every day, hundreds or even thousands of new altcoins pop up in the cryptocurrency market. Some of them evolve into major projects with billion-dollar market caps, generating massive profits for their investors. Meanwhile, most alternative cryptocurrencies remain in the shadows, unnoticed by the broader market.
This article will explore what altcoins are, their origins, different types, investment strategies, and their future potential.
We will also discuss how to evaluate an altcoin before purchasing it, where to buy and store them, and when might be the right time to invest.
What are alternative cryptocurrencies?
For newcomers, the crypto space can feel overwhelming with new terminology. One frequently encountered term is "altcoin".
Although the word resembles "Bitcoin", which is known as the first and largest cryptocurrency, altcoins are not directly linked to Bitcoin.
Let’s start by understanding what "altcoins" actually mean. The term "altcoins" comes from the English phrase "alternative coin", meaning "alternative currency". Essentially, altcoins include all cryptocurrencies except Bitcoin. Bitcoin was the first cryptocurrency, and everything that came after it is considered an alternative.
Some argue that Ethereum should not be classified as an altcoin due to its huge influence on the crypto industry, making it the second most important crypto asset. However, in general, any cryptocurrency other than Bitcoin is considered an altcoin.
Types and functions of altcoins
Altcoins serve various purposes and belong to different projects. Some projects rely on a single altcoin, while others have multiple tokens, each playing a unique role within its ecosystem.
Before Ethereum, altcoins were mainly developed as Bitcoin forks or standalone projects. However, Ethereum revolutionized the industry, making it significantly easier to create new cryptocurrencies, leading to a rapid increase in their numbers.
Today, launching a new cryptocurrency is much simpler, and some projects even allow users to mine altcoins effortlessly.
Mining refers to the process where users provide computing power to maintain the blockchain network, earning digital assets as a reward.
Mining was initially introduced with Bitcoin, but many other crypto projects later adopted this system. However, altcoin mining has become more expensive and is less profitable than in the early days.
Currently, staking is becoming more popular—a process where tokens are locked in smart contracts in exchange for rewards.
Why were altcoins created?
Discussions about creating alternative cryptocurrencies started gaining traction in late 2010 on the BitcoinTalk forum. Key figures involved in these discussions included Bitcoin’s creator, Satoshi Nakamoto, and lead developer Gavin Andersen.
The first major step in the evolution of altcoins happened in 2011 with the launch of NameCoin (NMC). This project aimed to create a decentralized domain registration system in the ".bit" domain zone, reflecting its purpose in its name. NameCoin was essentially a Bitcoin fork, as it used the same blockchain structure.
Litecoin (LTC) is the first major altcoin. One of the first successful altcoins that truly stood out was Litecoin (LTC). Created by Charlie Lee, a former Google employee, Litecoin was launched in October 2011. Designed as "digital silver", Litecoin was meant for everyday transactions with low fees.
How Litecoin differed from Bitcoin:
* Faster transaction times
* Lower fees
* Different hashing algorithm
Litecoin was the first major altcoin to successfully challenge Bitcoin while introducing new improvements.
Today, altcoins continue to evolve, with thousands of projects competing for dominance in the crypto ecosystem.
| Mining algorithm | Block generation time |
| Litecoin uses the Scrypt algorithm, while Bitcoin operates on SHA256. | In the Litecoin network, block generation takes 2.5 minutes, whereas in Bitcoin, it takes 10 minutes. |
The invenion of altcoins was driven by the need to enhance Bitcoin’s functionality and expand its capabilities. Alternative cryptocurrencies aimed to solve several key issues:
1. Faster transactions
To process transactions more quickly, new algorithms and larger block sizes were introduced. Bitcoin faced scalability issues, which slowed down the network as the number of users increased.
2. Stricter anonymity
While Bitcoin offers a basic level of privacy, many altcoins implemented more advanced encryption methods to ensure greater anonymity.
3. Easier & cheaper mining
As Bitcoin's network difficulty increased, mining costs soared, making it less profitable. Altcoins introduced alternative mining algorithms, allowing for more cost-effective and efficient mining.
4. Expanded blockchain functionality
Bitcoin was initially designed for financial transactions, whereas many altcoins introduced smart contracts and other advanced features.
5. Portfolio diversification
The rise of various altcoins gave investors more options for allocating funds and reducing risks associated with cryptocurrency investments.
Types of altcoins
Over the past 14 years, the crypto world has witnessed the creation of over 23,000 altcoins. The actual number may be slightly higher, but today, it is estimated that 23,000 active crypto projects exist in the market. The rest either failed to gain popularity or were abandoned.
Currently, altcoins can be classified into several major categories:
Utility tokens
Utility tokens are digital assets designed to serve specific functions within a particular network. They are often used for paying for services, such as storage rentals, and may offer transaction discounts or voting rights in project development decisions.
Security tokens
Security tokens are tokenized assets that convert traditional investments into crypto-based forms. These tokens digitally represent traditional financial assets, previously traded in stock markets. Almost any valuable asset can be tokenized, but to function properly, these tokens must be backed by a trustworthy intermediary.
Governance tokens
Governance tokens grant holders the right to participate in project management. These tokens emerged as part of the effort to further decentralize decision-making. In governance-based projects, there is no central authority—all decisions are made by community members who own these tokens. Token holders vote on proposals, and developers implement decisions based on the voting results.
Meme coins
Meme coins are a unique category of altcoins that began with Dogecoin (DOGE) in 2013. Initially, Dogecoin was created as a joke, with no serious purpose and a short-term lifespan. However, Dogecoin not only survived but gained massive popularity, crossing the 10-year milestone.
Inspired by Dogecoin's success, many other meme coins were created. Meme coins often gain value through social media hype, rather than real-world utility. While these tokens can be used for transactions, their actual adoption remains limited.
Privacy coins
Privacy coins were once one of the most popular categories of altcoins, offering users high levels of confidentiality in transactions. The core principles of cryptocurrency are decentralization and transparency, meaning that all transactions are publicly visible and cannot be hidden. However, privacy coins challenged this principle by allowing users to conceal transaction details, which eventually led to their ban on most crypto exchanges. Regulators argue that privacy coins could be used for illicit activities, forcing licensed exchanges to delist them.
Stablecoins
Stablecoins are a type of altcoin whose value is pegged to specific assets to maintain price stability. The most common stablecoins are backed by fiat currencies, such as the U.S. dollar, ensuring a fixed value of $1 or the equivalent of another fiat currency. Stability can also be maintained using algorithmic models or collateralized by other cryptocurrencies instead of fiat.
Investment strategies for altcoins
There are several simple investment strategies for altcoins, each with its own characteristics.
One approach is to focus entirely on a single cryptocurrency. In this strategy, you identify a promising token or coin, invest all your funds, and hold onto the asset until its price increases. While this method can be effective for Bitcoin, it doesn’t always work well for altcoins.
A more balanced approach is portfolio diversification—investing in multiple different altcoins that you believe have strong potential. It’s always best to choose coins with solid prospects, clear goals, or growing popularity. Try to spread your investments across such projects.
When it comes to crypto trading, it follows a fundamentally different approach. Unlike long-term investing, trading involves active participation—buying and selling assets within days, weeks, or even hours to profit from price fluctuations. This strategy requires quick decision-making and constant market monitoring.
Key tips for successful altcoin investing
| Always research the project | Before investing, make sure you fully understand what you're putting your money into. |
| Always analyze the market | Keep an eye on how global events affect the crypto market. |
| Bear volatility in mind | The cryptocurrency market is highly volatile and prone to sharp price swings. |
| Choose a secure wallet | Store your assets in private wallets, not exchange wallets, for added security. |
| Control your emotions | Avoid making investment decisions based on fear or greed. |
| Start small | Get familiar with trading and investing gradually, beginning with small amounts. |
| Consider taxation | Be aware that crypto profits may be subject to taxation in many jurisdictions. |
| Avoid suspicious ICOs | Don’t invest in projects that seem questionable or lack transparency. |
| Manage risks | Learn how to minimize potential losses and set stop-loss orders. |
| Think long-term | Approach your investments with a long-term perspective. |
| Invest only what you can afford to lose | Never invest money that you cannot afford to lose. |
Following these guidelines will help you navigate the world of altcoins and effectively manage your investments.
Future of altcoins
In the past, many investors predicted that most altcoins would fail to compete and eventually disappear.
At the time, altcoins were seen as nothing more than a temporary phenomenon. However, with the emergence of innovations like Web3, this pessimistic scenario now seems less likely.
It is highly probable that many altcoins (or at least some of them) will survive and even carve out their own niches in the market. The biggest challenge is identifying which ones have the long-term potential to succeed.
However, accurately predicting this is nearly impossible, as the altcoin market remains highly volatile and susceptible to manipulation. Its development is slow and filled with challenges.
Given this instability, the best approach is thorough research and analysis before making any investment decisions.
How to evaluate altcoin before buying
We have already discussed how altcoins are closely tied to Bitcoin, which remains the foundation of the cryptocurrency world.
For over 10 years, the crypto market has repeatedly demonstrated that altcoin prices tend to mirror Bitcoin’s movements, both positive and negative.
However, some experts argue that altcoins’ dependence on Bitcoin is weakening due to Bitcoin’s growing dominance in the market. Many major crypto investors also claim that Bitcoin is far more reliable than most altcoins.
So, is now a good time to invest in altcoins? And which ones have the greatest potential?
Determining which altcoins are "promising" is no easy task, as the term itself is subjective. Sometimes, lesser-known altcoins suddenly experience explosive growth in value and market capitalization.
However, such cases are more of an exception than a rule. In most cases, the most promising altcoins are those that remain in the spotlight and consistently rank in the top 100 by market capitalization.
Key factors to consider when evaluating altcoin:
- Total market capitalization
- Circulating supply and emission volume
- Number and quality of exchanges listing the coin
- Price history and past market performance
- Practical use case, unique features, and innovation
- Adoption scale, application areas, and target audience
- Developer and community activity, as well as marketing & PR efforts
- Project’s roadmap and completion of planned development stages
Where to buy altcoins?
Just like Bitcoin, altcoins can be purchased on various platforms, including:
- Centralized cryptocurrency exchanges (CEX) such as Binance, Bybit, KuCoin, etc. They offer a wide selection of altcoins, but require registration and identity verification.
- Decentralized exchanges (DEX) like Uniswap, PancakeSwap, dYdX, etc. They enable peer-to-peer transactions without intermediaries, providing greater privacy but often lower liquidity.
- Peer-to-peer (P2P) platforms: OKX, Gate.io, and Paxful. They allow users to buy and sell directly, but require careful selection of trading partners.
- Crypto exchangers and bots: Prostocash, 60cek, and 24PayBank offer fast cryptocurrency conversions, but may have unfavorable rates or volume limitations.
- Payment platforms & financial systems: AdvCash, Skrill, and Payoneer provide options for buying altcoins using traditional payment methods, though availability depends on region and currency.
- Banks & financial institutions, for example, Revolut and Xapo. Some banks allow cryptocurrency purchases, but with restricted functionality and jurisdictional limitations.
Altcoins with largest market capitalization
1. Ethereum (ETH)
lt is the most significant altcoin, second only to Bitcoin in market cap. It was launched via an ICO in 2014. Its price in October 2015 was $0.42. Since then, Ethereum's price has skyrocketed by 736,038%, now trading at $2,592.
2. Binance Coin (BNB)
It is the native token of Binance, the world's largest crypto exchange. BNB is used for trading fee discounts and on Launchpad & Launchpool. In August 2017, its price was $0.096. Since then, BNB has gained 545,437%, now valued at $535.
3. Solana (SOL)
It greatly strengthened its position in 2024 due to the rise of meme tokens on its blockchain. At one point, Solana’s network even surpassed Ethereum in activity. In May 2020, Solana was $0.50, and it has since surged by 28,481%.
4. XRP (XRP)
It is the native token of Ripple Labs. XRP was at the center of a legal battle with the SEC but successfully defended its case. From its historic low of $0.0028, XRP has rallied by 15,578%.
5. Toncoin (TON)
It was developed by Telegram’s creators, but the project faced legal issues with the SEC. Despite initial headwinds, TON was listed on exchanges and now holds a top market cap ranking. In September 2021, Toncoin was $0.39, and it has since grown by 1,792%.
6. Dogecoin (DOGE)
It is one of the oldest meme coins, launched as a joke in 2014. Its popularity skyrocketed thanks to Elon Musk's endorsement. In May 2015, Dogecoin was $0.000085, rising by 127,277%.
Where to store altcoins?
The best storage solution depends on your intentions. If you plan to trade actively, a software wallet is the best option. If you want long-term storage, a hardware wallet offers better security.
Popular software wallets:
- Trust Wallet
- Metamask
- Exodus
- Atomic Wallet
Hardware wallets (for maximum security):
- Ledger
- Trezor
Keeping assets on centralized exchanges is risky, as funds could be frozen or hacked.
What is Altseason and when will it happen?
Altseason (Altcoin Season) refers to a period when altcoins significantly outperform Bitcoin in both price growth and market capitalization. A key indicator of altseason is a sustained decline in Bitcoin dominance. Altseason usually begins under the following conditions.
| Bitcoin stabilizes, reducing volatility | A decrease in Bitcoin volatility may encourage investors to seek more profitable opportunities among altcoins. |
| Investor sentiment improves | Reduced concerns about increased Bitcoin supply from factors such as the German government and Mt. Gox. |
| Innovative altcoins | Coins with strong fundamentals and unique solutions may attract more investor attention. |
| The US dollar index falls | Expectations of a Fed rate cut in September could influence this process. |
| Stock market rallies | Rising stock market indices may indirectly support the growth of altcoins. |
| Ethereum spot ETFs launch | If the US Seceurities and Exchange Commission approves such funds, it could contribute to the price increase of Ethereum. |
An Altseason could begin, for example, when the SEC finally approves an Ethereum-based ETF. This would likely trigger massive ETH purchases, leading to a supply shortage in the market.
A similar effect could be observed if an ETF for Solana is approved. If this happens, the altcoin market will continue to grow, potentially formally triggering an Altseason.
The highest profits during an Altseason could come from projects within the top 50 by market capitalization. Notable examples include Toncoin, TRON, Matic, Stellar, and others. The redistribution of capital from Bitcoin into these projects could have the strongest impact on their prices.
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