Altcoins – What are them in simple terms?
By In the dynamic landscape of the cryptocurrency market, hundreds and thousands of altcoins emerge each day. Many of these projects boast billion-dollar valuations and offer attractive returns to investors, while the majority of them fly under the radar.
Altcoins in simple terms
Any cryptocurrency created after Bitcoin is referred to as an altcoin. The term «altcoin» originates from the amalgamation of two English words: alternative and coin. Altcoins can serve various purposes (and in some cases, such as shitcoins, they may not have any practical use). For instance, cryptocurrencies like Ethereum, Litecoin, and XRP, despite their differences, are all classified as altcoins due to their shared characteristic of being alternatives to Bitcoin. Additionally, the USDT stablecoin is also considered an altcoin because it functions on a blockchain network other than Bitcoin’s, fulfilling the criteria for altcoin classification.
Categorizing Altcoins
Altcoins can be categorized into cryptocurrencies, tokens, and stablecoins based on their functionalities. Cryptocurrencies must have their blockchain, like Litecoin or Dogecoin, which were created through modifications to existing networks, or Bitcoin Cash, resulting from a hard fork, or Ethereum, BNB, Polkadot, which were built from scratch.
The introduction of Ethereum in 2015 marked a significant milestone by enabling the launch of the initial tokens. Developers can issue digital assets without building a new blockchain thanks to this platform. These assets maintain their existence within the main network, capable of being transferred and bought on exchanges.
As opposed to creating cryptocurrencies with their own blockchains, launching tokens became considerably more accessible thanks to Ethereum. Occasionally, sophisticated programming knowledge is unnecessary; instead, adhering to the rules established by the platform facilitating the emission process suffices.
Over time, the classification of cryptocurrencies has broadened to include not only Bitcoin but also other digital assets and even tokens. Traditionally, altcoins referred to any cryptocurrencies other than Bitcoin, yet the current usage often designates them as tokens. Moreover, assets lacking their blockchain are deemed cryptocurrencies, albeit this rule is frequently disregarded. For instance, expressions like “BNB token on the BNB Chain blockchain” or “VNB token on the BNB blockchain” are commonplace.
Stablecoins present a simpler classification due to their limited scope. They are essentially tokens pegged to the value of an underlying asset. Take USDT issued by Tether, for example, which maintains a steady value equivalent to $1 and is available across various blockchains such as Ethereum, Token, Bitcoin, Tron, TON, among others.
Delving into Tokens
Tokens encompass a diverse range, including security, utility, stablecoins, and NFT categories. Utility and security tokens can be traded on exchanges and experience price fluctuations. Utility tokens function similarly to assets rather than securities, whereas security tokens operate akin to tokenized assets, exemplified by CFA. Security tokens mirror the actions of securities and may offer dividends and other benefits to holders.
Having briefly covered stablecoins, let’s delve deeper into non-fungible tokens (NFTs). NFTs are unique tokens that cannot be replicated, divided, or subtly substituted. Consequently, they enable the verification of ownership over any object, be it a work of art, a video game character, or even real estate.
