An Altcoin is typically defined as:
Any cryptocurrency other than Bitcoin (BTC).
'Altcoin' is short for 'Alternative Coin' referring to all alternatives to Bitcoin.
In the beginning, there was only one cryptocurrency - Bitcoin. Soon after more cryptocurrencies entered the market and today it is estimated there are over 10,000 different active cryptocurrencies.
Different Types of Altcoins
Over the last decade, the cryptocurrency market has evolved and grown into the world's fastest-growing financial space offering a wide spectrum of different cryptocurrencies catering to many different aspects of the market.
Stablecoins are cryptocurrencies that are pegged to a known fiat currency (such as the US Dollar). Since cryptocurrencies are highly volatile by nature, Stablecoins offer the market a 'safe harbor' from the fluctuations in the market. There are predominantly two mechanisms used by Stablecoins to offer this stability, algorithmically backed stable coins (backed by cryptocurrencies) and those backed by real-world assets including fiat currency.
Meme Coins, a relatively new introduction to the cryptocurrency space (as the name suggests), are cryptocurrencies that are inspired by a joke, humorous idea, or cultural practice. These types of coins have often created a joke and while they may gain popularity very quickly as well as an increase in value by enormous percentage gains they tend to have a very short-lived life. While some meme coins have gained Many Meme coins.
DeFi (Decentralized Finance)
Decentralized finance, often referred to as DeFi leverages cryptocurrency and blockchain technology to manage various types of financial transactions. These transactions can include an array of financial transactions such as lending, borrowing, everyday banking, complicated contractual relationships, and asset trading.
Privacy coins are a class of cryptocurrencies focused on private and anonymous transactions. This is accomplished through the use of obfuscating the transaction value, the transaction origin, and the transaction destination.
The most well-known privacy coins are Monero, Dash, ZCash & Decred.
Layer 1 Coins
A Layer 1 coin is a blockchain and core architecture upon which other cryptocurrencies and solutions can be built it. The most popular Layer 1 blockchains include:
- Binance Smart Chain
Layer 1 (Blockchain) due to its ability to have other solutions and cryptocurrencies built upon the architecture has experienced tremendous growth, such as Ethereum which has experienced massive increases in market value.
Storage coins are cryptocurrency projects whose main offering is file storage. This is particularly important for Web3.0 applications and is another large growth area within the cryptocurrency space.
The better well-known storage coins include FileCoin, Arweave, Storj and Aleph.im
A metaverse is a virtual reality game and incorporates many of the same aspects as Play-to-Earn games, allowing gamers to participate in the game and earn cryptocurrency from their game time.
Another important aspect of Metaverse projects is they allow players to own assets, such as land within the metaverse and this land can be bought, sold, renovated, and even turned into a virtual online business generating passive revenue for the player.
Gaming (Play-to-Earn Games)
A market well suited for cryptocurrency is online games. Historically, games awarded players with points and bragging rights on a scoreboard. Today with Play-to-Earn gaming, gamers are able to earn while they play. This has become a massive growth industry within the cryptocurrency space.
Move to Earn (M2E)
Move-to-Earn uses a similar approach as seen in Play-to-Earn Games where participants are able to earn cryptocurrency for exercising.
Move-to-Earn was made popular by STEPN and many other projects have since joined such as Genopets, MoveZ, dotmoovs and DOSE.
Are 'Bitcoins' or 'Altcoins' a Better Investment?
The answer to this question depends on your risk profile and the current market cycle. The cryptocurrency market is highly cyclical and typically the price of Bitcoin increases before the price of Altcoins, especially during the beginning of a bull market.
Altcoins have the potential to increase much faster than Bitcoin and in a full-on bull market, this is often the case. It's during the bull market many Altcoins have seen multiple 1,000x returns within short periods of time.