Altcoin, short for alternative coins, is a term used to describe any cryptocurrency other than Bitcoin (BTC). Since Bitcoin was the first widely adopted cryptocurrency, all coins and tokens that followed have collectively become known as altcoins. Today, there are thousands of crypto altcoins, each with different use cases, underlying technology, and levels of adoption.
The information presented here does not constitute financial advice but is for educational purposes only. Please do your own thorough research or consult a professional to better assess the risks of investing in cryptocurrencies.
Altcoin refers to any cryptocurrency other than Bitcoin (BTC), the term combines the term alternative and coin
Altcoins serve many different purposes from enabling smart contracts and decentralised applications, to maintaining a stable price pegged to a fiat currency.
The main types of altcoin include stablecoins, utility tokens, governance tokens, and meme coins.
The altcoin market is highly volatile and carries significant risk, so conducting research beforehand is crucial.
The term altcoin combines “alternative” and “coin”. It is used as a broad umbrella term for cryptocurrencies and tokens that were launched as alternatives and successors to the first and oldest cryptocurrency, Bitcoin (BTC). This includes well-known cryptocurrencies such as Ethereum (ETH), Solana (SOL), Cardano (ADA), as well as thousands of smaller, more specialised projects.
However, not all crypto altcoins are the same. Some operate on their own dedicated blockchain networks. Others are built on top of existing blockchains, such as the Ethereum network, using smart contracts. Understanding altcoins and their uses can help investors better navigate the cryptocurrency space.
The term came into common use in the early years of cryptocurrency, as developers began to create alternatives to Bitcoin. Early altcoins often modified Bitcoin's underlying code to experiment with different transaction speeds, supply limits, or consensus mechanisms, such as the proof-of-work mechanism or the proof-of-stake consensus algorithm. Over time, altcoins became increasingly diverse, with many serving purposes far beyond simple peer-to-peer payments.
Bitcoin was designed primarily as a decentralised digital currency, a way to transfer value without relying on a central authority such as a bank. While many altcoins share this goal, they have taken it one step further by expanding different use cases, addressing specific needs, or exploring different technological applications.
Key differences between Bitcoin and many altcoins include:
Purpose: Bitcoin is often described by some as a store of value and medium of exchange, while many altcoins are designed for specific applications, such as powering decentralisedapplications (DApps), or maintaining a stable price.
Transaction speed: Some altcoins are designed to process transactions more quickly than Bitcoin.
Smart contract support: Bitcoin does not natively support smart contracts, self-executing agreements that run on a blockchain, in the same way as some altcoins.
Supply: Bitcoin has a maximum capped supply of 21,000,000 coins, while different altcoins have different supply models, such as a fixed maximum supply or no cap.
Altcoins can be grouped into several broad categories based on their design and purpose. These categories are not always mutually exclusive, and many projects combine features from more than one type. Here are some of the main categories of altcoins:
Stablecoins are cryptocurrencies designed to maintain a stable price, typically by being pegged to a fiat currency, or government-issued currency such as the US dollar. The cryptocurrency USD Coin (USDC) is one example of a US dollar-pegged stablecoin.
Stablecoins are often used in decentralised finance, or DeFi, applications and to move value between different cryptocurrencies without converting back to fiat currency. The aim is to reduce price volatility, however, stablecoins are not without risk. The mechanisms used to maintain a stable price can fail under certain market conditions.
Utility tokens give holders of tokens access to a specific product, service, or network. They are used within a particular platform or application and are not designed primarily as investments.
The cryptocurrency Chainlink (LINK) is an example of a utility token used within the Chainlink network to pay for data services that connect smart contracts with real-world information.
Governance tokens are used for governance within a decentralised project. Holders of governance tokens can participate in decisions about how a protocol is developed or managed, such as proposed changes to its rules or fee structures.
Meme coins are cryptocurrencies that were initially created as internet jokes or community experiments rather than with a specific technical purpose. While they often lack real-world utility and fundamentals, they have become popularised due to internet hype. The cryptocurrency Dogecoin (DOGE) was originally created as a parody of Bitcoin before gaining a significant following and market cap.
These assets are often highly volatile, and their price can be significantly influenced by social media trends and sentiment rather than underlying fundamentals. Like any other cryptocurrency, investors should exercise caution, and do extra research before investing any money.
Here are a few examples of some of the most widely recognised altcoins.
While there are many types of altcoins available, they are high-risk cryptoassets, so it is important to do your own research before making an investment. Past performance is not a reliable indicator of future results. The value of altcoins can go down as well as up, and some investors may lose all the money they invest.
Market cap, short for market capitalisation, refers to the total value of all coins or tokens of a particular cryptocurrency in circulation. It is calculated by multiplying the current price by the circulating supply.
Bitcoin typically holds the largest market cap in the cryptocurrency market. Market caps allow for the comparison between altcoins, and combined data can be used to further indicate the total crypto market cap, as a measure of how the asset class is performing overall.
Market cap is one way to compare the relative size of different cryptocurrencies, but it is not an indicator of quality, safety, or future performance. Lower market cap altcoins can be significantly more volatile and carry higher risk than larger, more established projects.
Cryptocurrency altcoins carry significant risks that any investor should understand before considering exposure to this asset class.
High volatility: Altcoin prices can move dramatically in short periods, meaning that a cryptocurrency that rises significantly in price can also fall by the same amount, or significantly more.
Project failure: Many altcoin projects do not succeed, as projects may run out of funding, fail to achieve increasing adoption, or be abandoned by their developers.
Fraud and scams: Some altcoins may be associated with fraudulent schemes, including projects created specifically to deceive investors, including so-called rug pull scams, so investors may want to proceed with caution.
Liquidity risk: Lesser-known altcoins may have low trading volume, making it difficult to buy or sell at your intended price
Regulatory uncertainty: The regulatory environment for cryptocurrencies continues to evolve, with changes in regulation potentially affecting the value and availability of altcoins.
No FSCS protection or FOS recourse: Cryptoassets are not covered by the Financial Services Compensation Scheme or by the Financial Ombudsman Service, meaning if a platform fails, you may not be able to recover your funds.
Decentralised finance, or DeFi, refers to financial services and applications built on blockchain networks that operate without traditional intermediaries such as banks. Many DeFi applications run on altcoin networks, particularly Ethereum and Solana.
DeFi applications include decentralised exchanges, lending platforms, and liquidity protocols. They typically use smart contracts to automate financial transactions. Many DeFi protocols use utility tokens or governance tokens as part of their design.
DeFi carries additional risks compared to centralised financial services. Smart contract vulnerabilities, protocol failures, and a lack of regulatory oversight mean that users of DeFi applications may have limited recourse if something goes wrong.
If you want to explore buying altcoins in the UK, here is how to get started:
Create a wallet – crypto wallets store your public keys (your address) and private keys (which authorise transactions), but some platforms also manage these keys for traders.
Choose a platform available in the UK, such as Bitpanda
Create and verify your account.
Deposit funds (for example, in GBP).
Browse through the available altcoins and place your purchase.
Decide whether to keep funds on-platform or move to a personal crypto wallet, such as an external hardware wallet.
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We answer commonly asked questions about altcoins.
