What Are Altcoins And Where Are They Used?

Jump to page contents

What Are Altcoins And Where Are They Used?

Altcoins are all cryptocurrencies which were created after Bitcoin. They often present themselves as offering benefits which are superior or different to the world’s first crypto coin and have been increasing their market share over the past few years.

The year 2009 was to mark the beginning of a currency revolution which few in the world could have predicted. In this year, Bitcoin was invented as an alternative payment medium. This cryptocurrency took a while before it gained notoriety, but when it did, it led to the development of thousands of similar digital currencies, known as Altcoins. In this guide, you will learn what are Altcoins and how you can buy and use them effectively.

What Are Altcoins?

The cryptocurrency sector is full of complex jargon, but fortunately, Altcoins are a simple term to understand. The word is split between the terms “Alt” and “Coin”, and basically means any cryptocurrency which is not Bitcoin. They exist primarily as a way to improve on the concept of Bitcoin, and although there are thousands in circulation today, only a few have really succeeded on this mission.

Altcoins share a number of similarities, and many are built upon the basic framework, or Blockchain, used by Bitcoin.

How Many Altcoins Are There?

Altcoins are continually being created and released so it is difficult to provide an accurate number. Latest industry estimates put the likely figure above 5,000. This is quite remarkable considering that cryptocurrencies are only about 12 years old.

Although the primary purpose of most Altcoins is to deliver a superior solution to Bitcoin, many have become the target of market traders. These alternative coins remain cheaper than Bitcoin, but are just as or even more volatile. In a single trading day, Altcoins gain and lose value at a staggering rate, but this is just the kind of market sought by day traders.

Currently, the Altcoin market cap is estimated to be around $460 billion. Bitcoin’s market cap is valued at $729 billion, maintaining the coin at the top of the value ranking. At the time of writing this guide, the five largest Altcoins by their market cap were:

  1. Ethereum (ETH) – $186 billion
  2. Tether (USDT) – $28 billion
  3. Cardano (ADA) – $21 billion
  4. Ripple (XRP) – $19 billion
  5. Polkadot (DOT) – $18 billion

Most of these rankings change continually, although Ethereum, Ethereum-based, or Bitcoin-based currencies commonly feature in the top 3 rankings. Other significant Altcoins include Litecoin (LTC), Bitcoin Gold (BTG), and Stellar (XLM).

This ad promotes cryptocurrency within the EU (by eToro Europe Ltd. and eToro UK Ltd.) & USA (by eToro USA LLC); which is highly volatile, unregulated in some EU countries and the UK., no EU consumer protection. Investments are subject to market risk, including the loss of principal.
This ad promotes cryptocurrency within the EU (by eToro Europe Ltd. and eToro UK Ltd.) & USA (by eToro USA LLC); which is highly volatile, unregulated in some EU countries and the UK., no EU consumer protection. Investments are subject to market risk, including the loss of principal.
This ad promotes cryptocurrency within the EU (by eToro Europe Ltd. and eToro UK Ltd.) & USA (by eToro USA LLC); which is highly volatile, unregulated in some EU countries and the UK., no EU consumer protection. Investments are subject to market risk, including the loss of principal.

Types of Altcoins

With so many Altcoins in circulation, it is not surprising to learn that there are different types. In fact, an important part of learning what are Altcoins is to learn the categories of main uses. One Altcoin can fall into multiple of these categories.

Mining-based

Whilst you can normally buy Altcoins with GBP or other fiat currencies, several give you the option of creating your own through mining. Although there are different ways to mine different coins, the process normally consists of solving challenging problems to verify the next block. You can read more on mining cryptocurrency, including cloud-mining, here.

Stablecoins

Stablecoins are Altcoins designed to minimise price volatility in order to be effectively used in purchases. Very often, these coins are tied to an underlying asset, such as gold or USD. Tether (USDT) is one of the world’s most popular stablecoins and you can normally buy with USD for a conversion ratio close to 1:1.

Security & Utility Tokens

These are Altcoins which are linked to a tech startup and often form part of an Initial Coin Offering (ICO). Security tokens share many similarities with traditional stocks and sometimes even pay holders dividends or other payouts. Utility tokens are also normally part of an ICO, but these are primarily used in exchange for a product or service. Security tokens are generally more regulated than utility tokens but normally provide businesses with higher funding volumes.

What Are Altcoins Used For?

A good way to understand what are Altcoins is to review their primary purpose. This varies significantly across the thousands of coins and tokens in the world. Here are the main uses of some Altcoins.

Ethereum (ETH)

Ethereum is a significant different cryptocurrency to Bitcoin as it was created to run smart contracts and Decentralised Applications (DApps) rather than be used for payments. The world’s No.2 cryptocurrency supports a decentralised range of financial solutions that are available to a wider audience.

Litecoin (LTC)

Litecoin is one of Bitcoin’s closest alternative. Like Bitcoin, its primary use is for online payments. LTC is faster than Bitcoin and normally features lower transaction fees. You can pay with Litecoin in thousands of stores worldwide, and the number continues to grow every day.

This ad promotes cryptocurrency within the EU (by eToro Europe Ltd. and eToro UK Ltd.) & USA (by eToro USA LLC); which is highly volatile, unregulated in some EU countries and the UK., no EU consumer protection. Investments are subject to market risk, including the loss of principal.

Genesis Vision Token (GVT)

Some Altcoins may not make the headline news but still provide a useful utility and have the potential to become superstars in the future. One such example is Genesis Vision which aims to create a decentralised and transparent asset management platform. This platform will bring together exchanges, traders, brokers, and investors, facilitating trading and transactions with the use of smart contracts.

Status (SNT)

Describing itself as the Google Play for DApps, Status is hoping to democratise app dissemination through a peer-to-peer solution. In addition, users will be able to send messages to each other as well as process payments.

How Much Do Altcoins Cost?

Altcoin Cost
Image source: CoinMarketCap

Altcoins, like Bitcoin, are most decentralised. This means that no central authority manages their value and you can find them trading at different prices on different exchanges. As yet, no Altcoin has come close to Bitcoin’s record-breaking value of $40,367 in January 2021. As we were writing is what are Altcoins guide, the average price index of the top five Altcoins was:

  • Ethereum (ETH) – $1,639
  • Tether (USDT) – $0.9999
  • Cardano (ADA) – $0.6626
  • Ripple (XRP) – $0.4262
  • Polkadot (DOT) – $20.13

Where To Buy Altcoins

You can buy Altcoins from a variety of channels, both online and offline. There are several Altcoin ATMs around the world that convert fiat currency to a supported cryptocurrency. Alternatively, you can find sellers who accept cash, cheque or PayPal on online forums or peer-to-peer networks. However, the most convenient way to buy Altcoins is through an altcoin exchange.

Before you start buying Altcoins you should have a look at the services and benefits offered by different exchanges. It is often a good idea to open accounts with several platforms in order to benefit from price differences, special offers, and access to a greater number of coins.

Which Altcoins Should You Buy?

In order to choose which Altcoins you should buy you need to think about what you plan to do with them. If your goal is to use them as a currency you should first check which coins are accepted by your intended retailer or online casino. Litecoin, DASH, and Tether are commonly accepted cryptocurrencies.

Certain platforms, especially ones designed with their own native token will require you to spend their coin exclusively. In such a case, you should certainly buy these specific Altcoins.

If you’re looking to trade Altcoins then it’s a good strategy to buy a variety of very popular and less known coins. In the short history of Altcoins, there have been several instances where a coin’s value shot up following a mention by a celebrity or sufficient fanfare. Fortunately, most Altcoins cost less than $1 each.

Trading Altcoins

Without a doubt, the simplest and most convenient option is to use a reliable exchange. There are thousands of cryptocurrency exchanges on the web, and just like Altcoins, they are designed to offer different features, benefits, and uses.

Trading Altcoins For Beginners

Some cryptocurrency exchanges are specially designed to cater for beginners by offering a simple and user-friendly interface and minimising the need for technical knowledge on behalf of the user. Coinbase and eToro are examples of such exchanges. Both are regulated and offer a good number of Altcoins in addition to Bitcoin. Moreover, they support payments in fiat currencies using several methods including cards and bank transfers.

Trading Altcoins for Proficient Users

If you’re looking to trade a higher volume or variety of Altcoins, then Binance or Kraken should provide you with what you are looking for. Binance offers over 1,000 markets and is known for charging some of the lowest trading fees in the industry. Kraken also charges low fees and a good range of Altcoins, and some users prefer its interface to that of Binance.

Trading Altcoins Frequently

High-frequency traders who are looking for scalping opportunities using Altcoins should consider Contracts for Difference (CFDs). These alternative financial instruments provide a low cost and convenient option which does not require you to store your Altcoins until you sell them. Altcoin CFDs are just as volatile as their underlying assets and can be traded on top platforms, such as Plus500.

Storing Altcoins Safely

Before you buy Altcoins you need to prepare an Altcoin-friendly wallet where you will store them. Cryptocurrency wallets come in various forms but can be generally divided between hot and cold. Hot wallets are ones which are constantly connected to the Internet and vulnerable to a cyberattack, whereas cold wallets are only connected for the duration of a transaction.

Most hot wallets, also known as digital wallets, are free to download and use. On the other hand, cold, or hardware wallets, can cost anywhere between $40 – $200. Some wallets only accept Bitcoin or just a handful of Altcoins, so it is important to ensure that the option you choose supports the coins you intend to store there.

Best Digital Wallets For Altcoins

There are hundreds of software wallets around, so choosing the best one for you can be difficult. Beginners prefer simple wallets, such as Exodus, as it offers a user-friendly interface and is accessible on both mobile and desktop. On the other hand, Electrum is a favourite amongst proficient users since it provides several advanced trading tools and features. Mycelium is another top-rated wallet and best-suited for anyone looking for a free mobile wallet.

Best Hardware Wallets for Altcoins

Storing Altcoins
Image source: Ledger

Hardware wallets are known for being robust and extremely safe, however, they can be inconvenient since they require a separate connection to the Internet. The Ledger Nano S and X, as well as Trezor, make connection easy and convenient, leveraging the speed of their mobile apps with the security features of a safe. In addition, all these devices support over 1,000 different Altcoins.

Altcoin Volatility

The constant and sometimes drastic price changes experienced by numerous Altcoins is a common feature of cryptocurrencies in general. Bitcoin is well-known for being volatile, but so are several Altcoins, including TRON, Litecoin, and Ethereum. Several market forces can influence an Altcoin’s trading price, including supply and demand, celebrity endorsement, regulation, and milestone achievement. It is common that when an Altcoin’s price changes significantly, related Altcoins, such as other Ethereum-based ones, are affected in some way.

Mining Altcoins

Now that you have a good understanding of what are Altcoins we will briefly mention how you can create your own. Like Bitcoin, numerous Altcoins can be mined using computers. Some coins maintain Bitcoin’s original mining algorithm, known as Proof-of-Work (PoW), whilst others support the alternative, Proof-of-Stake (PoS). Mining is an essential part of a cryptocurrency’s existence but can prove to be very costly as more and more computing power is required to solve ever-greater computations.

Ethereum, Monero, Litecoin, and Zcash frequently top the list of best Altcoins to mine. This is mainly due to the fact that they provide a decent return on investment and do not require an immense initial investment.

Which Altcoins Will Survive?

Although there are currently over 5,000 Altcoins available, it is likely that the vast majority will not be around in the years to come. As we mentioned in the first part of this what are Altcoins guide, most of these coins were created with a purpose, and if they do not succeed to reach it they will likely fold.

The best Altcoins to invest in include:

  • ETH – This is one of the longest surviving Altcoin, offering an entire ecosystem of DApps which continue to grow and prosper.
  • TRON & EOS – Both of these Altcoins have proven themselves to be powerful allies of Ethereum, supporting Dapps and smart contract functionality.
  • XRP – This Altcoin is doing what few others thought possible. Ripple is actually working with banks and financial institutions to integrate Blockchain technology into their processes.
  • XMR – Championed as the Altcoin for anonymous users, Monero continues to grow in popularity and is accepted in a high number of online stores.
  • BNB – Binance Coin has the advantage of being backed by the world’s largest exchange, so it is likely to survive as long as Binance survives.

Whilst in the past many Altcoins were launched as a joke or test, such as Dogecoin, the majority of the ones launched nowadays are created with a clear purpose. An example of this is 888Tron which is an Altcoin created by the casino, 888Starz, and pays dividends to all coin owners who went through the casino’s registration process. Such Altcoins are worth investing in or, at the very least, worth being watches closely.

Ready to join our tribe?

We respect your email privacy

Subscribe now to recieve exclusive updates and offers!

Recently Similar Guides

Latest Guides

Cryptocurrency

How Does Crypto Lending Work? Full Updated Guide

Since its inception, the crypto market has been growing in leaps and bounds. With hundreds of features, thousands of tokens, millions of investors, and billions of dollars, it is clear that the problems of decentralization, anonymity and cross-border payment it solves are seen as valuable. These questions have quickly arised: what is crypto lending, and […]

13 October, 2021
Cryptocurrency,DogeCoin

How Many Dogecoins Are There?

Dogecoin is a digital currency that started as a form of satire of the cryptocurrency market. It was created by Billy Markus, an IBM software engineer, and Jackson Palmer, an Adobe software engineer. The aim was to create a digital currency with peer-to-peer features that could reach a wider demographic than Bitcoin, which is the […]

8 October, 2021
Coinbase,Crypto Wallets,Cryptocurrency,Exchange Platforms

BlockFi vs Coinbase: What’s the Final Verdict?

The advent of cryptocurrency has brought about quite a number of financial and technological innovations that are shaping the financial investment sector. One of those innovations is cryptocurrency exchange platforms. Crypto exchange platforms combine both financial and technological features to enable you to trade and invest in any digital currency of your choice. These crypto […]

30 September, 2021
Cryptocurrency

Best Crypto Credit Cards List

What Are Crypto Credit Cards? Cryptocurrency has taken the world by storm and it has revolutionalized the financial sector and further laid an argument for cryptocurrency as the future global currency. There are now several things you can do with cryptocurrencies. You can trade, invest and exchange for goods and services. Another innovation that cryptocurrency […]

24 September, 2021
Altcoins,Litecoin

All you need to know about Litecoin ATMs

Litecoin has the reputation for being the second cryptocurrency that was created after Bitcoin, so it makes sense that Litecoin ATMs are on the rise. It can be used as a medium for payment anywhere around the world without any interference from a third party. Litecoin has $11 billion and a maximum supply of 84 […]

1 September, 2021
eToro

Comprehensive Guide For eToro UK Users

eToro is a fintech start-up and is considered among the first pioneers of social trading. It was founded in 2007 in Tel Aviv, Israel. It is headquartered in Greater London, United Kingdom, with offices in Limassol, Cyprus, Sydney, and New Jersey in the US. The fact that it’s headquartered in London makes it appealing to […]

26 August, 2021
Crypto Mining,Cryptocurrency

Make your Own Cryptocurrency

Cryptocurrency is a decentralized digital currency that is not issued by a central financial authority. Cryptocurrencies are also used as a form of exchange for products, services, and also fiat currencies. The majority of these cryptocurrencies are created by tech and financial companies to serve specific purposes. For example, the Ethereum technology is used for […]

19 August, 2021
Bitcoin,token

Crypto Coin Vs Token — Which One To Choose In 2021?

There are so many things to learn about cryptocurrency, the learning never stops. When it comes to Crypto coin Vs Token, there are a few things you need to know to be able to differentiate between these two digital assets. Some of the things you need to know about these crypto-assets include their definitions, functionalities, […]

11 August, 2021