Cryptocurrencies have revolutionized the global financial system, opening new possibilities for digital transactions, cross-border transfers, investments, and much more. Bitcoin, created in 2009, was the first cryptocurrency and remains the most valuable digital currency to this day. Since then, the market has grown rapidly, leading to the emergence of thousands of altcoins, also known as “alts,” which serve different functions and explore this sector’s technology in diverse ways.
What are altcoins?
The term “altcoin” is short for “alternative coin” and is used to describe any cryptocurrency other than Bitcoin. The numbers are impressive. For instance, on CoinGecko, nearly 15,000 cryptocurrencies are listed, with a total market capitalization of nearly $2.5 trillion (data recorded on October 19, 2024). Data also shows Bitcoin dominance at 55.14% of the total, with a market cap of $1.34 trillion. In other words, altcoins represent nearly half of the total cryptocurrency market on the reported date, though this percentage varies over time.
It’s clear that most of these coins have little impact or long-term success. However, some altcoins have stood out and gained traction among industry enthusiasts. Each aims at different purposes, functions, and technological innovations. Some altcoins try to improve on Bitcoin’s technical aspects, such as transaction speed and costs, while others focus on entirely new functionalities.
Types of altcoins
There are various types of altcoins. One of the most popular is stablecoins, whose value is tied to a stable asset and has been discussed in an article here on StarsPay. In October 2023, a report by the Brazilian IRS recorded the growth of “stablecoin” use in Brazil. With the largest market capitalization among stablecoins, Tether had over R$271 billion traded in the country since 2019, compared to R$151 billion for Bitcoin.
Another type of altcoin includes mining-based currencies, such as Bitcoin. Participants, known as miners, validate blockchain transactions and receive coins in return, with Litecoin being a well-known example. Tokens have also become popular, both utility and governance tokens. In the case of utility tokens, the Ethereum network is a prime example, as tokens can be used across various decentralized applications, known as “dApps,” that may include games, financial platforms, and more. Governance tokens, meanwhile, allow holders to vote on project decisions, with decentralization as one of their key advantages.
Perhaps the most well-known example of altcoins among the general public is meme coins. As the name suggests, these coins are inspired by internet memes or jokes, gaining support through viral campaigns and promotion by celebrities and influencers. The leading example by far is Dogecoin, known by its ticker DOGE. According to CoinMarketCap data on October 24, 2024, DOGE ranks as the eighth-largest cryptocurrency, with a market capitalization of over $20.5 billion.
Advantages and Disadvantages of Altcoins
As we’ve seen, altcoins are highly diverse, ranging from serious projects that have gained traction in the global financial market to digital currencies created as a joke with little relevance. Among the advantages of alternative coins are technological innovations that aim to make processes faster, easier, and cheaper. In the case of Ethereum and its smart contracts, for example, the creation of decentralized applications has opened up a new and promising area of digital exploration. According to data from Reports and Insights, the dApps sector reached $31.2 billion in 2023 and is expected to grow at 22.2% annually through 2032, reaching $139.6 billion.
On the other hand, it is essential to be cautious when dealing with altcoins. Smaller projects tend to be even more volatile, with sharp value swings in short periods. As such, the promise of large profits overnight can quickly turn into significant losses. Another downside is security; as many projects are relatively new and less tested, some altcoins may have security flaws or become hacker targets. According to blockchain analytics company Chainalysis, over $1.7 billion in cryptocurrencies were stolen in 2023.
