What are Altcoins? Types, Advantages, and Disadvantages

Altcoins are all kinds of cryptocurrencies except Bitcoin (BTC). These cryptocurrencies are launched after the success of Bitcoin (BTC). Some experts say that Altcoins do not include Bitcoin and Ethereum (ETH) as other cryptocurrencies are developed from these 2 coins.

Most altcoins developed help to cover the drawbacks of Bitcoin and give various benefits in the latest version. This article will guide you in knowing the meaning of Altcoin, its kinds, benefits, and drawbacks.

What is Altcoins?

Before discussing the types of Altcoins, we will know the meaning of the term Altcoin. The word Altcoin includes 2 terms Alt and coin in which alt is alternative and coin is cryptocurrency. Altcoin is a category of cryptocurrency and an alternative to the digital Bitcoin. After the success of Bitcoin, many digital currencies are introduced into the cryptocurrency market.

Most altcoins are developed with the help of the basic structure of Bitcoin. They need a mining process in which users solve complex problems by cracking blocks. Besides, altcoins also offer safe ways of carrying out web transactions. Altcoins differ from one another in terms of overlapping features.

Types of Altcoins

Altcoins are available in different categories and types. Let us have a look at the various types of Altcoins in this section with their uses:

• Payment Tokens

  Payment tokens are used as a medium of exchange between various parties. One of the best examples of payment tokens is Bitcoin. It can be used in many transactions as a medium of exchange between different parties.

• Security Token

  A security token is a kind of tokenized asset provided on stock markets. Tokenization is the transfer of value from assets to tokens which is available to the investors. Any asset can be easily tokenized like stocks, real estate, or vehicles. You must hold the assets to tokenize the assets. Without holding the assets, it is not possible to tokenize the assets as they will not represent anything.

  Security tokens are managed by the Securities and Exchange Commission as they act as securities.

• Stablecoins

  The trading and use of cryptocurrency are dependent on volatility. Stablecoins help to decrease the overall volatility by adjusting the value of the coins to a basket of goods like fiat currencies and precious metals. This basket acts like a reserve to redeem holders when the cryptocurrency fails or faces some problems. Price fluctuations for a stablecoin do not exceed a narrow range.

  Some of the most popular stablecoins are Tether’s USDT, USD Coin, and MakerDAO’s DAI. In the year 2021, Viusa Inc. (V) said that it start settling certain transactions on its network in USDC on the Ethereum blockchain to roll out further settlement solutions.

• Utility Tokens

  Utility tokens are used for payment of services within a network. One can use utility tokens to purchase certain services, redeem rewards, and pay for network fees. Filecoin is used to purchase storage space on the network and secure the data. It is one of the best examples of a utility token.

  Ether or ETH is a utility token and is developed to be used in the Ethereum blockchain and virtual machine to pay for transactions. Stablecoin USTerra uses utility tokens to peg its value to the dollar by burning 2 utility tokens to create pressure on the rate. You can purchase utility tokens on exchanges. Moreover, the utility tokens are used in the blockchain network to keep it working.

• Meme Coins

  Meme coins are inspired by a joke or a silly take on other popular cryptocurrencies. Meme coins become popular quickly and are hyped online by well-known influencers or investors who try to attempt short-term gains.

• Governance Tokens

  The last altcoin on the list is the governance token. These tokens provide some rights to the holders within a blockchain like the right to vote for changes to the protocol. Governance tokens are native to the private blockchain and widely used for blockchain purposes.

Benefits of Altcoins

After discussing the different types of Altcoins, we will further discuss the different benefits of altcoins in this section:

• Multiple Options

  One of the biggest advantages of Altcoins is its various options. You can get different options in altcoins such as Litecoin, Dogecoin, and so on. Bitcoin and Ethereum (ETH) are different from altcoins and work differently. Some altcoins offer higher returns on investment than other options.

• Stable Coins

  Bitcoin faces a high rate of fluctuations every year. On the other hand, the price of altcoins does not change often. The low rate of fluctuations is one of the major benefits of investing in altcoins. It is a more stable option than Bitcoin and Ethereum. Moreover, the altcoins have low volatility.

• Higher Returns On Investment

  As altcoins are very stable, the miners will gain higher returns on investment. Whether it is a beginner or an experienced miner, it is affordable to invest your funds in altcoins. They also give high ROI.

• Better Option Than Bitcoin

  Altcoins are better than Bitcoins in many ways. They are developed with a more advanced technology than Bitcoin. Apart from that, the altcoins also have higher speed than Bitcoin. These factors make Altcoins a top choice for the year 2024.

Disadvantages of Altcoins

Now, we will discuss the various Disadvantages of altcoins in this section:

• Altcoins are still not accepted in some markets as people in many countries are not aware of these coins.
• It is difficult to construct altcoins.
• Investing in altcoins might include certain risks are they vulnerable to mistakes and errors.
• Altcoins have lower market capitalization than Bitcoin. This is the reason why some investors do not choose Altcoins for long-term investment.

Final Words

If you want a safe option of investment after bitcoin, Altcoins are a good option. They have many benefits with a few drawbacks. From the current scenario, it seems that the popularity of altcoins will still rise in the future as they are easily available on the market for purchase.