Altcoins, or “alternative coins” refer to cryptocurrencies other than Bitcoin. These coins were developed to overcome the limitations of Bitcoin and also to develop an ecosystem to build apps on the blockchain network. In 2011, Litecoin was the first ever altcoin developed based on Bitcoin’s source code. Since then several new projects like Ethereum, Solana, Avalanche, etc have been developed with their cryptocurrencies and other utilities as well.

Types of Altcoins

Altcoins can be categorised into different types based on their underlying technologies, purpose, and use cases. Let’s understand these categories with popular examples:

Payment Tokens

As the name suggests, these tokens are designed primarily to facilitate transactions. Some examples include Litecoin (LTC), which improves upon the transaction time of Bitcoin, and Ripple (XRP), a digital payment platform that acts as a bridge between different currencies, facilitating cross-border transactions with ease.

Utility Tokens

These tokens serve a purpose such as access to a platform’s services and functionalities. Ethereum (ETH) and Solana (SOL) are prime examples of utility tokens that enable users to create and execute smart contracts and decentralised apps.

Security tokens

Security tokens are investment contracts offering holders a share of the underlying asset such as stocks, bonds, real estate, etc. Since these tokens represent tangible assets, they are regulated by the government and are less prone to fraud.

Examples include FOBXX, a fund by Franklin Templeton that invests in US government securities and cash, and Estate Protocol, a platform that allows investments in tokenised real estate.

Stablecoins

Most of the cryptocurrencies are highly volatile and their value can fluctuate dramatically within days. Stablecoins overcome this issue since they are pegged to more stable assets such as the US dollar, EUR or gold. The goal of a stablecoin is to combine the power and speed of cryptocurrencies with the stability of fiat currencies. Examples of stablecoins include USDC and Tether, which are pegged to the US dollar and PAXG, which is pegged to gold.

Privacy Tokens

As the name suggests, privacy tokens are designed to prioritise the anonymity and privacy of the user. Even though most cryptocurrency transactions contain no personal information or IP addresses, the information regarding the sender or recipient can be inferred by analysing the transaction data. These tokens increase privacy with features like ring, signature, stealth & confidential transactions etc. Monero, Zcash and Dash are some of the examples of privacy tokens.

Defi Tokens

DeFi tokens are an integral part of the decentralised financial systems and enable activities like lending, borrowing, and trading on the blockchain. For example, Uniswap (UNI) and Aave (AAVE), facilitate trading, and lending and borrowing, respectively.

Memecoins

Memecoins are tokens that originate from popular memes, jokes and other viral ideas. While other cryptocurrencies have some underlying asset or value, memecoins don’t back any asset and lack any distinct purpose. Popular examples include DOGE, SHIBA INU, PEPE, BOME, etc.

What are the popular Altcoins?

Ethereum (ETH)

Ethereum is not only a cryptocurrency but also a blockchain-based platform to build and execute smart contracts and decentralised applications (dApps). It works on a consensus mechanism called Proof of Stake (PoS) which consumes less energy compared to Bitcoin. Many popular apps such as Metamask, OpenSea, and Brave are built on Ethereum.

Solana (SOL)

Solana is also a platform for creating and deploying decentralised apps and smart contracts. Solana distinguishes itself from Ethereum with features like high transaction rates and low transaction costs. Proof of History (PoH) is the consensus mechanism on Solana which organises the transactions with the help of their timestamps. DApps like Jupiter Exchange, OKX DEX and Magic Eden are built on Solana.

Polygon (MATIC)

Polygon (formerly known as Matic) is a blockchain platform built to scale and develop the infrastructure on Ethereum. It focuses on addressing some of Ethereum’s major limitations, including high fees, low transaction speed, and poor scalability. It uses the technology called “sidechains” to fulfil this purpose. Some popular apps on Polygon are Decentraland, a web3 play-to-earn game and Fitmint, a move-to-earn game that pays users to walk and run promoting a fit lifestyle.

Ripple (XRP)

Ripple is a digital payment platform and XRP is the cryptocurrency of this platform. The primary function of this platform is to facilitate fast and inexpensive international transactions including real-time gross settlement system (RTGS), currency exchange and remittance network.

Polkadot (DOT)

Polkadot is a protocol and it can be described as a “blockchain of blockchains” since it allows interoperability between different blockchains. This innovative approach solves the scalability, interoperability and security issues faced by older blockchain networks.

Binance Coin (BNB)

Binance is one of the world’s leading cryptocurrency exchanges and it has its own currency called Binance Coin. BNB can be used for buying and selling various tokens and paying for goods and services such as travel bookings and financial services.

Chainlink (LINK)

Chainlink is a decentralised oracle network that bridges blockchains and real-world data such as weather information, stock prices, sports scores, and more.

How to buy a Cryptocurrency

Here’s a step-by-step process to buy cryptocurrencies:

Choose a cryptocurrency exchange

You can use a cryptocurrency exchange platform to buy, sell, and trade cryptocurrencies. These exchanges can be centralised or decentralised.

Centralised exchanges are managed by a centralised authority whereas decentralised exchanges rely on peer-to-peer trading without intermediaries. You need to create an account on your chosen exchange. This process requires you to provide your email address and verify your identity.

Examples of centralised changes include Coinbase, Binance, and Kraken whereas examples of decentralised exchanges include Uniswap, Pancakeswap, Balancer, etc.

Depositing Funds

Most exchanges support bank transfers, credit/debit cards or other popular methods that may be available in your country. The fees and processing time can be different for each method.

Storing cryptocurrency

To store these cryptocurrencies, you need a wallet which can be an exchange wallet, software wallet or hardware wallet.

Exchange wallets are automatically created when you create an account on an Exchange platform. Whereas, software wallets allow you to store your crypto separately while also keeping it accessible for transactions. Hardware wallets are physical wallets that can be used to store large amounts of cryptocurrency offline.

Conclusion

While Bitcoin initiated the world of cryptocurrencies, it’s the altcoins that have transformed the landscape of web3 by providing unique and innovative solutions to many real-world problems. Altcoins offer a great opportunity for learning and investment in cryptocurrencies. However, it is crucial to keep in mind that altcoins are a part of web3 which is highly volatile. Therefore, proper research is required before you decide to invest in any cryptocurrency.