What Is an Altcoin?

An altcoin is any cryptocurrency other than Bitcoin. The word is short for “alternative coin.” Ethereum (ETH), Solana (SOL), XRP and Dogecoin (DOGE) are among the best known, and thousands more trade on exchanges.

The term exists because of Bitcoin’s dominance: as the first and largest cryptocurrency, everything else was framed as an alternative to it. But altcoins aren’t a single asset class. A smart contract platform and a joke token both count as altcoins, yet they do very different things and carry very different risks.

What was the first altcoin?

Namecoin, launched in 2011, is generally considered the first altcoin. Litecoin, created by Charlie Lee the same year, forked Bitcoin’s code and shortened the block time. Dogecoin followed in 2013 as a joke, and Ethereum arrived in 2015 with smart contracts. The 2017 ICO boom then sent the number of altcoins soaring.

What are the main types of altcoins?

• Smart contract platforms: native coins of networks that run applications, such as ETH, SOL, ADA and AVAX.
• Payment coins: networks built for fast, cheap transfers, such as LTC, XRP and XLM.
• Stablecoins: tokens pegged to the dollar, such as USDT and USDC. Some sources count stablecoins as altcoins; others treat them as a separate category.
• DeFi and governance tokens: tokens that give holders a vote in a protocol, such as UNI and AAVE.
• Exchange tokens: used for fee discounts and payments within an exchange’s ecosystem, such as BNB.
• Privacy coins: networks focused on hiding transaction details, such as XMR and ZEC.
• Memecoins: tokens whose value rests largely on community attention and internet culture, such as DOGE.

Technically, altcoins split into coins with their own blockchain and tokens issued on someone else’s. Our coin vs token guide explains the difference.

How are altcoins different from Bitcoin?

Bitcoin has one job: to be peer-to-peer digital money and a store of value. Its rules change slowly and conservatively, its supply is capped at 21 million, and no company or founding team runs it. Most altcoins are built to solve a different problem: Ethereum is an application platform, XRP targets institutional payments, Monero focuses on privacy.

That shows up in the risk profile. In many altcoins a large share of supply sits with the founding team, early investors or a foundation, and a smaller group makes protocol decisions. That can speed up development, but it also adds centralization and selling pressure. A useful starting question for any altcoin is: what does it do better than Bitcoin, and what does it give up to do so?

What is altcoin season?

Altcoin season is a stretch of time when most altcoins outperform Bitcoin. There’s no official definition; some indexes check whether a majority of the largest altcoins have beaten Bitcoin over a set period. Late 2017 and early 2021 are often cited as broad altcoin rallies.

A common gauge is Bitcoin dominance, Bitcoin’s share of total crypto market cap. Falling dominance is read as money rotating into altcoins, but it doesn’t mean every altcoin is rising, and growth in stablecoin supply also pushes the ratio down.

How to read an altcoin’s market cap and supply

A low price doesn’t make a token cheap. A $0.001 token isn’t automatically better value than a $100 coin, because the number of units can differ enormously. Compare market cap and FDV instead.

Say a token has 100 million units circulating and 900 million locked. At $1, its market cap is $100 million but its fully diluted valuation (FDV) is $1 billion. As locked tokens are released, existing holders’ share shrinks, so it pays to check the vesting schedule for team and investor allocations.

Apply the same arithmetic to “if it hits a dollar, I’m rich.” For a token with trillions of units, $1 would imply a market cap bigger than the world’s largest companies.

What to check before buying an altcoin

1. Purpose: what does the project do, and does the token play a necessary role in it? Heavy use of an app doesn’t always translate into demand for its token.
2. Supply and unlocks: what are the circulating and maximum supply, and are large unlocks coming up?
3. Liquidity: is there real order-book depth? In thin markets, big sell orders move the price sharply.
4. Admin powers: who can mint new tokens, pause transfers or upgrade the contract?
5. Team and product: is there a working product or just a roadmap? Is the code open and independently audited?
6. Contract address: copycat tokens with the same name and ticker are common, so verify the address on the project’s official site.

What are the risks of altcoins?

Altcoins are usually more volatile than Bitcoin and tend to fall harder in downturns. Many altcoins that were popular in past bull markets later lost most of their volume and community. Small-cap tokens see more price manipulation, scams such as rug pulls, and liquidity that can vanish overnight.

Memecoin prices often hinge on social media buzz, and a spike driven by a celebrity post isn’t the same as lasting demand. Tokens that show up in your wallet unannounced, carrying a familiar name, are frequently bait that leads to a phishing site.

Sources

• Ethereum: Token standards
• CoinMarketCap: Supply types
• Ethereum: Token and application security