Altcoins are generally all cryptocurrencies except Bitcoin. Any non-Bitcoin crypto coin or token, such as Cardano, Solana, Polkadot, Uniswap, etc., can be considered an altcoin.
Bitcoin is considered the most popular and established cryptocurrency globally, so some consider Bitcoin to be the “mainstream” cryptocurrency. Bitcoin has the largest market cap, or the total value of issued cryptocurrencies, compared to any other cryptocurrency.
But there are thousands of unique cryptocurrencies, each with a different monetary value and use case. Read on to learn how to buy altcoins and whether any altcoins make sense for your cryptocurrency portfolio.
Altcoin Definition and Example
The strictest definition of an altcoin, abbreviated as an altcoin, is any cryptocurrency other than the market leader Bitcoin. However, along with Bitcoin, cryptocurrencies such as Ethereum, Litecoin, and Dogecoin are excluded from the definition of altcoins. Cryptocurrency tracking site CoinMarketCap lists thousands of cryptocurrencies, all but a few of which are considered altcoins.
Each altcoin has a unique history and community. Some will prove to be both functional and valuable and will experience significant price appreciation over time. Others may turn out to be useless or even scams.
How Altcoins Work
Like Bitcoin, altcoins operate using blockchain technology. A blockchain is a digital, distributed database maintained simultaneously by many, sometimes hundreds or even thousands of computers around the world. New transactions are confirmed and recorded as blocks of transactions on the blockchain. Once a transaction is transmitted to the blockchain, it cannot be reversed.
Many altcoin creators offer unique features that differentiate their tokens from Bitcoin and other cryptocurrencies. For example, the Stellar blockchain aims to be faster, cheaper and more energy efficient than its larger competitors. Dogecoin was founded as a joke in 2013 and gained notoriety after receiving support from the likes of Elon Musk.
Do I Need Altcoins?
No, you don’t need altcoins. You can use altcoins to make purchases, although only certain merchants accept any type of cryptocurrency. If you own an altcoin that you want to spend, you’ll need to find a merchant that will accept that coin.
You can also choose to invest in altcoins, but like all cryptocurrencies, altcoins are a very risky investment. Their prices can be quite volatile. Altcoins may skyrocket in value but may drop to zero.
Investing in altcoins can be fun and very profitable, but it’s best not to overdo your investment in altcoins to the point of losing them. The global regulatory environment for cryptocurrencies is rapidly evolving, and unexpected government action can devastate cryptocurrency prices.
Pros and Cons of Altcoins
|Participation in a new technology||Market volatility|
|Crypto-specific uses||It May be complex to use|
Participation in a new technology: The blockchain technology that powers all altcoins is evolving. Early adopters of the technology will enjoy learning about blockchain technology, especially as new developments and applications continue to emerge.
Crypto-specific uses: Altcoins support more complex functions than traditional currencies. For example, owning an altcoin allows token holders to contribute to the management decisions of the cryptocurrency.
Market Volatility: Cryptocurrency prices, including altcoins, are quite volatile. Cryptocurrency as an asset class is still emerging and the market is still determining the true value of cryptocurrencies. Cryptocurrencies can see large gains and losses in very short periods of time, sometimes for reasons that are only tangentially relevant.
For example, on December 14, 2021, Tesla founder Elon Musk tweeted that Tesla might make some of its products available for purchase with Dogecoin.9 On that day, the price of the crypto rose by more than 20 percent. However, the price dropped again the next day.
It May be complex to use: Buying and storing your own cryptocurrency often requires above-average computer skills, but most cryptocurrency exchanges and brokers are user-friendly.
Are Altcoins a Good Investment?
Whether an altcoin is a good investment for you depends on your understanding of cryptocurrency and your investment goals. Altcoins can carry significant risk, and less established altcoins are generally the riskiest. Before investing in any altcoin, be sure to do your research as an investor as you would with traditional securities.
How To Buy Altcoins?
You can buy cryptocurrencies, including altcoins, from exchanges like Coinbase, Gemini, and BlockFi. Several traditional stock brokers, such as Robinhood and SoFi, support Bitcoin and altcoins.
Advanced cryptocurrency users can use supported cryptocurrency wallets to buy altcoins directly, bypassing the need for any crypto exchange.
To buy altcoins using a crypto exchange, you need to enter your personal information and attach a payment method such as a bank account or debit card. After creating an account, you can start investing in altcoins.