Highly-anticipated year after year, Altcoin season delights both beginner and veteran crypto traders. But what are altcoins, and why are they interesting? With 18,000 plus coins to choose from, let’s narrow down the list. In this article, we’ll discuss some of the most intriguing in the crypto market.
What Are Altcoins?
Altcoins — alternative coins — are cryptocurrencies other than Bitcoin (BTC). While they share some characteristics with Bitcoin, altcoins may differ in their consensus mechanism to produce blocks or validate transactions.
Many new altcoins provide new capabilities or additional features (such as smart contracts or low price volatility) that continue to revolutionize the crypto world.
Types of Altcoins
Altcoins differ by their primary purpose and how they work. Altcoin tTypes include stablecoins, governance tokens, and coins for mining or staking. Here are some details on the differences.
Stablecoins are cryptocurrencies that maintain the same value. Unlike Bitcoin or Ethereum, they don’t suffer volatility or drastic price swings.
Due to the lack of volatility, stablecoins don’t see all-time highs. There might be some price fluctuations — due to the volatility of the crypto market, but at the end of the day, the purpose of stablecoins is to maintain a stable price.
Rather than being held for increasing value, stablecoins are usually used for the utility of sending money, as savings, or earning interest by lending them on public platforms.
The utility of governance coins (or tokens) is providing voting rights for holders, and is used to shape decisions about proposed changes in operation and technical implementation. Rather than having decisions made by a central authority, such as the founding engineers, governance tokens result in decentralized project decisions like determining which assets to list, setting interest rates, and/or trading fees.
A meme coin is a cryptocurrency that originated from an Internet meme. Meme coins have surged in popularity since Elon Musk endorsed the use of Dogecoin, one of the first meme coins. The most popular meme coins currently are Dogecoin (DOGE), Shiba Inu (SHIB), and Dogelon Mars (ELON).
Utility tokens give users a real-world ability to solve problems. This functionality is known as “utility,” and it separates useful tokens from memecoins (which trade on their Internet popularity). Very useful tokens rise in price because of the great demand for their computational solutions. Additionally, utility tokens give certain rights (like discounts, voting) within a project or community. Three of the most popular utility tokens are Polygon (MATIC), Chainlink (LINK), and Uniswap (UNI).
Altcoins To Watch
The following coins merit attention, some because of their project vision and others for their environmental goals.
The Terra project, a decentralized finance (DeFi) ecosystem — for lending and borrowing — creates “a suite of algorithmic decentralized stablecoins.” Their LUNA coin is the engine for the second-largest DeFi protocol behind Ethereum.
Terra operates on a proof-of-stake model — where validators verify transactions according to how many coins they hold — which uses less energy than proof-of-work models, having less environmental impact. (Here’s their PDF technical white paper.) LUNA holders have governance rights and voting power for the protocol. Polkadot DOT
Created by Ethereum co-founder Gavin Wood, DOT is the key mechanism for this alternative, novel blockchain structure. DOT allows developers to exchange information and perform transactions without trusted third-party authorities.
Created with the goal of being “the silver to Bitcoin’s gold,” Litecoin (LTC) provides an alternative to Bitcoin. It’s available to a larger worldwide community that doesn’t have access to computation on expensive graphics processing units (GPUs).
Former Google engineer Charlie Lee created LTC, which features faster transaction times (something that has always plagued Bitcoin users), and includes security features like a hashing algorithm designed to be more secure against hardware brute-force attacks.
LTC’s recent Mimblewimble upgrade — a name derived from a tongue-tying spell in the Harry Potter series — facilitates privacy-oriented everyday transactions like paying salaries.
Stellar Lumens XLM
Stellar Lumens is an open-source, decentralized protocol for cross-border, low-cost transfers between digital currencies and fiat money.
Created by Jed McCaleb, founder of Mt. Gox and co-founder of Ripple, XLM processes transactions worldwide. Its innovative uses include cell phone talk time as currency (South Africa), banking microfinance institutions (Nigeria), and cross-border payments and remittances (Philippines, India, Africa, France, and the South Pacific).
At the beginning of 2021, the Ministry of Digital Transformation of Ukraine announced a partnership with Stellar in developing Ukraine’s digital infrastructure.
Bitcoin Cash BCH
Bitcoin Cash was “hard-forked” — broken out into a separate project — to favor perceived currency transaction needs over Bitcoin’s store-of-value model. This meant turning away from advancements like SegWit (to reduce Bitcoin transaction fees) and second-layer blockchain add-ons (like the Lightning Network).
Technically like Bitcoin in other aspects, BitPay, Coinify, GoCoin, and other service providers accept BCH payments.
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- Abra Earn — Placing crypto into the Abra Earn programs results in CPRX awards. For example, the current rate for TUSD is 7.5%; holders of TUSD earn that interest in TUSD plus up to an additional 5% in CPRX for a total payout of up to 12.5% interest.
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AAVE is a decentralized non-custodial liquidity market protocol, and participants can act as depositors (to earn a passive income) or borrowers. Its innovation opens up access to the liquidity available in cryptocurrency to companies outside of the governance community.
Utilizing smart contracts on the Ethereum network, AAVE provides access by tokenizing real-world assets (like freight invoices, bridge loans, and trade receivables) and then using those tokens as collateral.
Characteristics of specific fungible classes — like fiat or cryptocurrencies, concert tickets, gaming cards, company shares — are implemented as smart contracts within ERC-20 tokens and traded on the Uniswap decentralized exchange, which runs on the Ethereum blockchain. Innovations include using an automated market maker smart contract to connect buyers and sellers.
The UNI coin is the governance mechanism of Uniswap. Interestingly, a perpetual 2% annual inflation rate will be applied to UNI starting in 2024. The purpose is to reward ongoing liquidity providers at the expense of passive UNI holders.
Investing in Altcoins
Now that you know about the different Altcoins, you’re in an excellent position to add some of the above mentioned coins to your watchlist. Each altcoin’s story, governance, and benefits are a fascinating reason to read, research, and participate!
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