What is Altcoin?

Altcoin, also known as alternative coin, is a term used to describe digital currencies other than Bitcoin. Every Cryptocurrency that exists besides Bitcoin can be considered an altcoin.

After Bitcoin's success, the first altcoin to enter the market was Namecoin (NMC). Although Bitcoin, being the first cryptocurrency, dominated the majority of the crypto market for a long time, its market share decreased with the rise of altcoins. As of March 2021, there were almost 9,000 cryptocurrencies in the market. Altcoins made up more than 40% of the total cryptocurrency market in March 2021.

Since many are derived from Bitcoin and because Bitcoin is the pioneer cryptocurrency, altcoin price movements tend to mimic Bitcoin's movements. However, analysts say that the maturity of crypto investment ecosystems and the development of new markets for these cryptocurrencies will make altcoin price movements independent from Bitcoin's trading signals.

Why Are They Called Altcoins?

The naming of cryptocurrencies other than Bitcoin as altcoins symbolizes that Bitcoin is the original cryptocurrency and later cryptocurrencies are considered alternatives to Bitcoin. "Altcoin" is a combination of the words "alt" and "coin" and includes all alternatives to Bitcoin. The basic framework for Bitcoin and altcoins is similar. Therefore, they share code and function as P2P (peer to peer) systems or as a giant computer that can process large amounts of data and transactions simultaneously. In some cases, altcoins aim to become the next Bitcoin by becoming a cheaper method for digital transactions. The best-known examples are ERC-20 tokens that sit on top of the Ethereum blockchain.

Since Bitcoin's creation in 2008, most of the 9,000+ alternative cryptocurrencies released to the market were actually designed as modified copies of Bitcoin through a process known as Hard Fork. However, despite all these similarities, each altcoin has functions that make it different from others. Therefore, it cannot be said that altcoins are exact copies of Bitcoin.

Altcoins derived from Bitcoin usually offer a similar mining process based on Bitcoin's "Proof of Work" (PoW) consensus algorithm. However, there are several more cryptocurrencies that experiment with methods of reaching alternative consensus algorithms within different blockchain networks. The Proof of Stake consensus algorithm is the most common alternative to Proof of Work. Other notable examples include Delegated Proof of Stake, Proof of Burn, Proof of Authority, and Delayed Proof of Work consensus algorithms.

While some users find the term "altcoin" derogatory or dismissive, it is generally accepted that the term altcoin is neutral. Therefore, the term altcoin does not express a positive or negative emotion. On the other hand, for example, the term "shitcoin" expresses a negative emotion and is generally considered derogatory.

Why Did Altcoins Emerge?

The reason for the emergence of altcoins is to grow the cryptocurrency world and this sector. Faster transfer operations than Bitcoin were also targeted. Mining operations are easier in altcoins compared to Bitcoin. Thanks to the altcoins created, the market has become more active and cryptocurrencies with faster transfer operations have been created.

What is the Difference Between Bitcoin and Altcoin?

Bitcoin is the first example of a cryptocurrency, and its philosophy and design set the standard for the development of other digital currencies. However, its implementation has some shortcomings. For example, Proof-of-Work (PoW), the consensus mechanism used to create blocks, is energy-intensive and time-consuming. Bitcoin's smart contract capabilities are also limited.

Altcoins improve on Bitcoin's limitations to provide competitive advantage. Several altcoins use the Proof-of-Stake (PoS) consensus method to minimize the time and energy consumption required to create blocks and validate new transactions.

Another example is Ether, the world's second-largest cryptocurrency by market value, which is used as gas (or payment for transaction costs) in smart contracts on Ethereum. Altcoins also address traditional criticisms against Bitcoin. For example, stablecoins don't show Bitcoin's price volatility, making them ideal tools for daily transactions.

By differentiating themselves from Bitcoin in this way, altcoins have created a market for themselves. As a result, this attracted investors who saw their potential as alternatives to Bitcoin. Therefore, investors expect to profit as altcoins gain more interest and users and appreciate in price.

Advantages of Altcoins

• High liquidity
• Higher level of user and transaction privacy
• Affordable mining services are provided
• There are coins with higher transaction speed
• Technical improvements are made to speed up mining
• Provides more investment opportunities
• Strong fluctuations can help significantly increase earnings
• Taking more concrete steps with purpose-specific cryptocurrency
• Enables almost all transactions in central financial systems in the DeFi field

Disadvantages of Altcoins

Just as altcoins have advantages, they also have disadvantages. There are many different altcoins and each has different characteristics.

• Strong fluctuations can cause significant increase in losses.
• It is difficult to trust an altcoin that hasn't made a name for itself yet. A small mistake can cause investors to panic and even the most promising altcoin to lose value.

Altcoin Prices

Altcoin prices show periodic changes. Just like in exchange rates, altcoin prices can increase or decrease depending on various fluctuations. Generally, investor interest determines the price of altcoins.

Altcoins are purchased from cryptocurrency exchanges. You can buy altcoins by creating a membership on a reliable cryptocurrency exchange by sending money from your account or using alternative payment systems allowed by regulations if available. By following the changes in the cryptocurrency exchange, you can make altcoin trading transactions through your account and earn profits.

Since altcoin prices are constantly changing, you can access current data from our Cryptocurrencies page.

Most Traded Altcoins

Among the most traded altcoins are digital coins such as Litecoin, Ethereum, Cardano, Tether, Dash, Ripple. Additionally, altcoins can periodically become more popular and see more demand. Ethereum, Tether, Bitcoin Cash, Ethereum Classic, Litecoin, Ripple, and Dogecoin are the largest altcoins by market value as of March 2021.

Since the most traded altcoins are constantly changing, you can access current data from our Cryptocurrencies page.

Which Are Currently the Most Popular Altcoins?

Globally, in terms of cryptocurrencies with the largest market cap, Ethereum (ETH), Polkadot (DOT), Litecoin, Tether, Ripple and Cardano (ADA) have been trending recently. When it comes to digital currencies with smaller market caps, there has been movement recently in coins like Aave, Chiliz (CHZ), Uniswap (UNI) and 0x (ZRX).

What is Altcoin Season? What Happens During Altcoin Season?

Generally speaking, during Altcoin season, Bitcoin tends to lose some of its dominance in the crypto market to Altcoins. In other words, Bitcoin's market value decreases when compared to the overall market value of other crypto assets in the market. The market value measure is used to show the relative "size" of a crypto asset relatively frequently and is mostly determined by multiplying an asset's price by its circulating supply.

There are some calculations that try to determine the beginning and end of Altcoin season with percentages and figures. However, one needs to be very careful as they lack objective basis and can therefore be very misleading. In general, if altcoins have started to become very trendy, this is an indication that you are in Altcoin season.

Why Does Altcoin Season Happen?

It's almost impossible to say exactly what causes an Altcoin season. However, the generally accepted idea is that following a Bitcoin bull (or at least signs of one), investors tend to sell some of their BTC to realize gains.

Then, with some of these profits, they buy altcoins, which can naturally cause the prices of various altcoins to rise. Since the volume in altcoins is lower than the volume in Bitcoin, price movement (rise and fall) in altcoins can be much faster.

Should You Invest in Altcoins?

Cryptocurrencies undoubtedly have a certain appeal as an investment. Altcoins offer a serious opportunity as they have a much higher advantage in terms of percentage gains, on the other hand, their risks are much higher.

Take Dogecoin for example. The cryptocurrency gained significant value in late January 2021 simply because people started buying it with intense interest and no other reason, causing the altcoin to go viral. Such investments can fall out of favor just as quickly as they become popular.

You need to be more careful when investing in something that suddenly becomes popular than when investing in something you believe in its project for the long term, because you risk losing a lot when there is inevitably a pullback.

Which altcoins should you invest in?

If we could predict price movements, we would be very happy to tell you what will happen. Unfortunately, this is not possible.

On the other hand, while we may not be able to predict the future, if you don't want to miss out on the next big Altcoin gains, you should continue to do constant research.

Types of Altcoins

Some of the main altcoin types include mining-based cryptocurrencies, stablecoins, security tokens, and utility tokens.

Based on their functionality and consensus mechanisms, altcoins are divided into various categories. However, it is possible for an altcoin to fall into multiple categories.

Mining-Based Tokens

As their names suggest, these are mining-based altcoins. Most mining-based altcoins use Proof-of-Work (PoW), a method where systems produce new coins by solving difficult problems to create blocks. Examples of mining-based altcoins include Litecoin, Monero, and Zcash. In early 2020, most of the best altcoins fell into the mining-based category. An alternative to mining-based altcoins is pre-mined coins. Such coins are not produced through an algorithm but are distributed before being listed on cryptocurrency markets. Ripple's XRP is an example of a pre-mined coin.

Stablecoins

Cryptocurrencies have been fluctuating since they first emerged. Stablecoins aim to reduce this general volatility by pegging their values to a basket of products such as fiat currencies, precious metals, or other cryptocurrencies. The basket is intended to serve as a backup to save owners if the cryptocurrency fails or encounters problems. Stablecoins are supported by mechanisms that ensure price fluctuations stay within a narrow range.

Social media giant Facebook's Diem is the most famous example of a stablecoin. It is a dollar-backed coin. Other stablecoin examples include USDC and MakerDAO.

Security Tokens

Security tokens are similar to securities traded on exchanges except that they have a digital origin. Security tokens are similar to traditional stocks and generally promise ownership in the form of shares or dividend payments to owners. The possibility of price appreciation for such tokens makes them attractive, thus investors put money into them. Security tokens are usually offered to investors through initial coin offerings or ICOs.

Utility Tokens

Service Tokens are used to provide service within a network. For example, they can be used to purchase services or use rewards. Unlike security tokens, Utility Tokens don't pay dividends or an ownership stake. Filecoin, which is used to buy storage space in a network, is an example of a Utility Token.