What Are Altcoins? Complete Guide to Bitcoin Alternatives

If you think Bitcoin is the only player in the cryptocurrency game, think again.

Altcoins are making waves and challenging the status quo, making them attractive and appealing to those looking for cryptocurrencies beyond the well-known Bitcoin. 

Like Bitcoin, individual investors, traders, and entities across industries use cryptocurrency exchange platforms to invest in altcoins. These platforms enable transaction execution, market trend analysis, and digital asset management functionality. 

If you're exploring investment options, consider the full range of cryptocurrency options, including altcoins. 

Where did altcoins come from? 

To understand the history of altcoins and where they came from, we must first revisit the creation of Bitcoin in 2009. Bitcoin was the first cryptocurrency available, designed to enable peer-to-peer transactions without intermediaries like banks or payment processors.

Altcoins made their debut in 2011, riding on Bitcoin’s success. While Bitcoin accomplished decentralization using blockchain technology, altcoins sought to build upon it, addressing different use cases and complementing Bitcoin’s overall functionality. Altcoins provided an opportunity to improve Bitcoin’s shortcomings and explore new possibilities in the cryptocurrency realm.

In April 2011 the first altcoin, Namecoin, was launched to decentralize Domain Name System (DNS) registrations. Namecoin uses Bitcoin’s source code and is sometimes referred to as a “fork” of Bitcoin. 

How do altcoins differ from Bitcoin? 

In most cases, altcoins operate similarly to Bitcoin in the sense that investors trade them, and all transactions are recorded via blockchain in a distributed ledger. Investors and traders can use both bitcoin and altcoins to purchase goods and services via digital transactions. 

However, there are a few noteworthy differences between the types of cryptocurrencies. For starters, Bitcoin, the most widely known digital asset with the longest history, has earned a high level of trust over time. Altcoins, which entered the market later in 2011, are sometimes viewed skeptically, perceiving them as less trustworthy due to their shorter history. 

Another considerable distinction is volatility. According to Fidelity Digital Assets, Bitcoin exhibits lower volatility than altcoin and other digital assets due to its market liquidity. Generally, altcoins are viewed as more volatile due to sharper price swings, which can lead to a high risk for no reward. 

What are the types of altcoins? 

Since 2011, different types of altcoins have emerged, each with its own unique purpose. Below are the main kinds of altcoins available in the market today. 

Mining-based coins 

Similar to Bitcoin, some mining-based altcoins are introduced into circulation by solving complex mathematical problems using extensive energy. This concept is known as proof of work (PoW) and is popular in cryptocurrency. One example of a mining-based altcoin is Litecoin. 

Stablecoins 

Stablecoins attempt to remain stable by pegging the coin’s value to another fiat currency, such as the U.S. dollar or Euro. They serve as a form of medium exchange within the digital asset ecosystem. Some stablecoins are backed by traditional assets like cash and bank deposits, while others don’t have any collateral backing them. 

Theoretically, stablecoins should be less volatile than other cryptocurrencies, though this is not always true. The collapse of Terra (UST) is one of the most well-known stablecoin collapses to date. 

Security tokens 

Security tokens represent fractional ownership of or interest in an asset on a blockchain. For example, a company could represent its ownership using security tokens, with each token holder claiming a small piece of ownership. In other words, security tokens are digital representations of rights or ownership of an asset tokenized and stored. People use them similarly to stocks, bonds, certificates, and other investment assets.

Memecoins 

Even if you aren’t a cryptocurrency trader, if you spend time online, you’ve probably heard of various memecoins. As the name suggests, memecoins are inspired by memes, hot takes, and other broader societal jokes. These types of altcoins receive a lot of public attention through social media and investment by prominent investors, celebrities, and other influences. Dogecoin, originally created as a joke, is arguably the most popular memecoin today.

Utility coins 

People use utility coins to access services, products, and rewards within a specific blockchain ecosystem. For instance, they can be used to participate in a fundraising campaign, where contributors receive tokens as support. Utility tokens often allow holders to influence the development and direction of a project, such as voting on critical decisions or proposing changes. You can also use them to gain access to exclusive products or features that are otherwise unavailable to those without the utility tokens. 

Ten top altcoins to consider 

Altcoins, or all cryptocurrencies besides Bitcoin, offer a broad range of investment options. Whether you're looking for alternative features, different use cases, or just diversifying your crypto portfolio, there are many to choose from. We’ve compiled our top ten to consider based on recommendations from Atomic Wallet’s recommendations and Forbes Advisor’s August 2024 list. 

1. Ethereum (ETH)

Launched in 2015, Ethereum is the largest altcoin by market cap. It offers users a platform for hosting smart contracts, which allows participants to transact with each other without a central governing authority facilitating the conversation. Additionally, users can use the blockchain to run decentralized applications (dApps), making it a versatile platform beyond simple transactions. 

2. Binance Coin (BNB)

Binance Coin is an altcoin that’s been around since 2017. The Binance blockchain uses Ethereum, and its native token is BNB. It was initially created as a utility token for trading fees but has grown and expanded across applications on various platforms. Binance Coin holders can also use coins to make payments, book travel, pay for entertainment, and conduct financial transactions such as taking out a loan. These use cases are limited to vendors and services in the Binance Marketplace. 

One interesting development about Binance is that its founder, Changpeng Zhao, was sentenced to four months in prison in April 2024 for allowing criminals to use the exchange to launder money.

3. Solana (SOL)

Like Ethereum, Solana is a blockchain that hosts decentralized applications and facilitates smart contracts. If you’re torn in choosing between Ethereum and Solana, take a look at their differences. In comparing the two technologies, Bitstamp noted that the platforms offer similar functionality but differ in speed and cost. 

“Solana is faster and cheaper, thanks to the underlying technology. Solana can process speeds of up to 29,000 transactions per second, while Ethereum can still only manage a maximum of around 45 transactions per second, even following several key upgrades,” Bitstamp wrote. 

4. XRP (XRP)

XRP, created in 2012, was built to enhance the effectiveness of Bitcoin, to be faster, cheaper, more scalable, and more sustainable. Individual consumers use XRP to move currencies globally, while financial institutions similarly use it to facilitate affordable payments worldwide. 

Unlike many cryptocurrencies, XRP does not use a traditional blockchain but relies on a consensus protocol among trusted nodes to validate transactions. This unique approach allows XRP to process transactions in seconds and with minimal fees. 

An influential note is that XRP has a capped supply - no more than 100 billion will ever be created. 

5. Toncoin (TON)

A newer altcoin, Toncoin operates on a proof of stake (PoS) network and decentralizes financial activities. Toncoin’s use cases include peer-to-peer payments, support of decentralized applications, decentralized financial services, and facilitating trading and NFT management. 

On October 31, 2023, Toncoin set a world record for the most transactions per second and posted on X that it was the world’s fastest blockchain (although this assertion was contested by many). 

6. Dogecoin (DOGE)

You might recognize Dogecoin from its logo, which features a Shiba Inu dog from the "Doge" meme. Despite its satirical origin, Dogecoin, launched in 2013, has evolved into a prominent cryptocurrency with a large user community. The Dogecoin blockchain uses the PoW mechanism, and coin holders can use Dogecoin for payments and purchases. Compared to Bitcoin, it’s easier and quicker for miners to solve mathematical problems, so processing payments is fast.

7. Avalanche (AVAX)

Launched in 2020, Avalanche is a PoS blockchain that supports smart contract functionality and dApps. Its consensus protocol facilitates rapid transaction processing because it includes high throughput, parallelizability, and efficient blockchain pruning. 

Insurance company Lemonade partnered with Avalanche, Chainlink, and DAOstack to support The Lemonade Crypto Climate Coalition, which is designed to tackle farming insurance challenges in Africa with blockchain technology.   

8. Cardano (ADA)

Cardano supports smart contracts and decentralized applications (dApps) while emphasizing peer-reviewed research. Its strong academic foundation and commitment to a decentralized governance model make it a compelling option for investors looking for long-term growth and a project grounded in theoretical foundations. The native token of Cardano, Ada, is named after the 19th-century mathematician Ada Lovelace. Companies like Blink Labs, DripDropz, and Strica are building on Cardano.

9. Shiba Inu (SHIB)

Shiba Inu is an Ethereum-based, decentralized token created in 2020 as an experimental rival to Dogecoin. An anonymous individual or group known as Ryoshi launched Shiba Inu and watched it quickly garner attention due to its playful branding and massive supply of one quadrillion tokens. While investing in Shiba Inu involves significant risk due to its volatile nature and speculative status, its large community and ongoing development efforts offer the potential for high rewards.

10. Tron (TRX)

Justin Sun founded Tron in 2017 to decentralize the internet and enable a more efficient digital content-sharing ecosystem. Tron aims to improve content sharing and digital entertainment on a global scale. It’s known for its high throughput and low transaction fees. One of its key milestones is the acquisition of BitTorrent in 2018 to offer enhanced file distribution and decentralized storage solutions.

Go beyond Bitcoin and expand your crypto wallet with altcoins 

Altcoins represent a vital and innovative branch of the cryptocurrency ecosystem. By addressing Bitcoin's various limitations and introducing new technologies, they offer diverse opportunities for technological advancement and digital investments.

As cryptocurrencies continue to evolve, there will likely be more altcoins to explore. Before deciding which ones you want to invest in, be sure to do your research!

Did you know? Cryptocurrency mining can be a team sport. Learn all about mining pools and how they work.

Edited by Monishka Agrawal