Understanding Altcoin: Definition, Types, Where to Buy

Roland Säde


Roland Säde

Roland Säde
Updated on
June 7, 2023
8 min read

An altcoin, short for "alternative coin," is any cryptocurrency other than Bitcoin. They operate on a blockchain network for decentralized transactions. Examples include Ethereum, Litecoin, and Ripple. Each altcoin has unique features and uses, such as smart contracts or faster transaction times.

What is an Altcoin?

Once you've discovered the crypto world, a market with a total market capitalization of over 1T+, then you've definitely heard about Bitcoin, the first cryptocurrency, but there are other coins as well that people call altcoins. They are alternative cryptocurrencies that come with unique features that Bitcoin does not have. For example, smart contracts & decentralized applications (Ethereum - the second largest cryptocurrency), privacy protection (Monero), or even energy-efficient transaction processing (Cardano). Unlike Bitcoin, many altcoins offer lower transaction fees and can manage more transactions per second (TPS).

The beauty of altcoins is in their potential. You can think of them as startups in the crypto world. Sure, not all of them will hit it big. Bitcoin was once a newcomer as well, but those who invested early reaped the benefits. The crypto market is a rapidly evolving industry and it is important to understand other crypto assets too. According to CoinMarketcap, there are currently over 22,000 altcoins.

Namecoin, a groundbreaking pioneer as the first offshoot of Bitcoin and one of the initial alternative cryptocurrencies, brought forth a slew of seminal innovations to the burgeoning crypto market. Defying the norms of the majority of altcoins that function exclusively as currencies, Namecoin fulfills dual roles - as an efficient cryptocurrency and a fully decentralized DNS. This distinctive DNS feature enables users to effortlessly register .bit domain names, which exhibit a commendable resistance to any form of censorship and seizure. This impressive feat is accomplished by securely storing data within Namecoin's own meticulously managed blockchain transaction database, thereby guaranteeing an enhanced level of security and privacy.

What is a Token?

Imagine stepping into the vast universe of cryptocurrencies, where you'll encounter something known as a 'token'. These aren't lone rangers with their own individual blockchains. Instead, they're digital assets living on already established blockchains, serving various roles within their respective ecosystems and representing a broad array of assets and utilities.

How do these tokens come to life? Well, it's through a process we call Initial Coin Offering or ICO, which is essentially crowdfunding in the crypto world. These tokens are pretty versatile. They can stand for anything that's tradeable and interchangeable, from everyday commodities and loyalty points to other cryptocurrencies.

Now, what makes tokens stand out is their reliance on other blockchain platforms, like Ethereum or Binance Smart Chain. They don't march to the beat of their own drum; instead, they lean on the technology of the network they're part of to confirm transactions and secure the network. You might have heard of ERC-20 tokens, for instance – they're happily living on the Ethereum blockchain.

To put it simply, if cryptocurrencies are like digital cash, tokens take it a step further. They can be a symbol of various digital resources, rights, access points, and more. This adaptability has sparked a surge of token projects in the crypto sphere, each boasting unique features, functions, and ecosystems. Quite a dynamic bunch, aren't they?

Types of Altcoins

Each altcoin type brings unique value to the crypto market, showing the multifaceted ways blockchain technology can be utilized. Whether it's democratizing financial services, enabling community governance, or simply spreading joy through memes, altcoins are a testament to the creative potential of the crypto world. Let's dive into the main types:


The realm of cryptocurrency trading and utilization has been consistently characterized by its dynamic nature and stark volatility since its inception. Stablecoins emerge as a strategic solution, specifically designed to mitigate this pronounced volatility. They achieve this by skillfully anchoring their value to a carefully chosen basket of diverse assets, which could encompass fiat currencies, esteemed precious metals, or even other potent cryptocurrencies. This basket is intended to function as a robust reserve, standing ready to indemnify holders should the cryptocurrency encounter a setback or falter.

The narrow price oscillations for stablecoins are meticulously calibrated so as not to surpass a specified range, ensuring their stability. Among the pantheon of noteworthy stablecoins, USDT, DAI, and the USDC hold significant sway.

Payment Tokens

Think of these as digital money designed for the internet age. They're here to make payments swift, cheap, and super efficient. You've probably heard of Bitcoin, right? It's the big name in this category, but others like Litecoin and Bitcoin Cash are also part of the club. These tokens are all about making money transfers on the internet easy and decentralized.

Security Tokens

These are unique because they're kind of like your digital ticket to owning a piece of something real, like a company or a piece of property. This means you can own a fraction of assets that would typically be quite expensive. And here's the kicker - they're subject to regulations, which means they come with an extra layer of security. Ever heard of Polymath? It's a major name in the world of security tokens.

Utility Tokens

Imagine tokens that do more than just act as a form of currency. That's what utility tokens are. They give you access to specific services on a platform. Take Binance Coin (BNB), for example - you can use it to get a discount on transaction fees on Binance. Neat, right?

Meme Coins

So, these coins started as a bit of a joke but have become big deals in the world of crypto. Take Dogecoin - it was inspired by a meme featuring a Shiba Inu dog, and now it's a major player in the market! It goes to show that in the crypto world, a strong community can make all the difference.

Governance Tokens

These tokens are like your voting card in the world of crypto. Owning these tokens gives you a say in how a platform evolves. If you've heard of Uniswap's UNI token, that's a governance token - owners can vote on the platform's future.

Staking Coins

These coins are tied to networks that use a system called Proof-of-Stake (or PoS) to operate. If you own these coins, you can 'stake' them to help the network run smoothly and earn yourself some rewards in the process. Ethereum blockchain moved to this system in 2022, and coins like Tezos and Cosmos are already there.

Mining Coins

If you've ever heard of Bitcoin mining, you're already familiar with mining coins. These coins are part of networks that use a system called Proof-of-Work (PoW). Miners do some tough math problems to keep the network secure, and they get rewarded with coins for their effort. Examples of mining coins include Litecoin, which uses a hash function called Scrypt, Bitcoin Cash, Dogecoin, and other altcoins.

What is the Future of Altcoins?

Given the rapidly evolving nature of this digital realm, any prediction should be taken with a pinch of salt. However, there are a few trends that might give us a glimpse into what's ahead.

Firstly, there's a growing recognition of the unique capabilities that different altcoins bring to the table, from smart contract functionality to enhanced privacy. This suggests that altcoins that offer innovative solutions to real-world problems may continue to gain traction.

Secondly, institutional adoption of cryptocurrencies is on the rise, and while Bitcoin is the main focus, altcoins are not far behind. For instance, Ethereum is already seeing considerable institutional interest due to its expansive use cases.

Lastly, regulatory clarity is another key factor that will shape the future of altcoins. As governments worldwide start to understand and regulate cryptocurrencies, the legitimacy of altcoins will likely increase, encouraging more widespread use.

What Is the Best Altcoin to Invest in?

The "best" altcoin cryptocurrency investment will depend on a variety of factors, including the individual's risk tolerance, knowledge of the cryptocurrency market, particular interest in a crypto asset, the team behind the project, the market cap of a project, circulating supply, maximum supply, consensus mechanism, and much more. Top altcoins try to bring something valuable to the market.

Where to buy Altcoins?

Different platforms vary in their levels of security, reliability, and liquidity, with some being user-friendly and others requiring a bit more technical know-how to navigate effectively. Most altcoins can be bought and securely stored by installing Atomic Wallet.

When is Altcoin Season?

"Altcoin Season," often referred to as "Alt Season," is a term used within the cryptocurrency community to describe a period in the markets when altcoins experience significant price increases, often outperforming Bitcoin in terms of percentage gains.

Timing the start or end of an altcoin season can be challenging as it's not a predictable, scheduled event. It tends to occur in cycles and often follows a period of strong performance by Bitcoin.

When Bitcoin's price stabilizes after a rally, investors may start looking for higher returns elsewhere, causing money to flow into altcoins and driving their prices up. This shift in investment is often what triggers an altcoin season.

Several factors can influence the altcoin season, including market sentiment, technological developments, regulatory news, and overall risk appetite in the crypto market.

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