Why Altcoins Are Vital for the Cryptocurrency Ecosystem: Unveiling the Reasons

The digital currencies that appeared after Bitcoin are named altcoins or alternatives because the first pioneer dominated the sector for a very long time. The name remains until nowadays, even if some of the digital currencies that appeared after begin to be more and more considered by investors.

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What are altcoins?

Altcoins are all the other cryptocurrencies that appeared after Bitcoin. A very important altcoin is Ethereum, which is as popular as Bitcoin. Ethereum price shows that it is a great alternative to add to an investment portfolio. Today, most of the crypto sector is made of altcoins, as the number has greatly grown in the last few years.

But because nowadays, you find plenty of options for digital assets, not everything you will find on the market will be useful to users. This is why some of the altcoins have a massive number of active users and become more popular day by day, while others disappear from the market even a few months after their launch.

The term altcoin is made by combining the words alternative with coins, and as mentioned above, refers to all the other online currencies that appeared after Bitcoin. Altcoins are launched for plenty of reasons, but in the majority, they were created to overcome the shortcomings of the cryptocurrencies already on the market.

Why are altcoins important for the crypto sector?

Satoshi Nakamoto created Bitcoin as a decentralized, trustless, peer-to-peer network that relies on blockchain technology. Even now, numerous years after its creation, it remains one of the most important digital coins in the industry.

However, over the years, people have highlighted that numerous utilities are missing from the pioneer of the other cryptocurrencies. Because of that, it was needed to create additional options that brought more innovations than Bitcoin.

One of the most important altcoins is Ethereum, developed to use blockchain technology for financial transactions and other essential purposes. For instance, Ethereum implemented for the first time smart contracts, which are computer programs that manage agreements automatically when the needed conditions are met. Ethereum is an ever-growing ecosystem with innovations like dApps and non-fungible tokens (NFTs). Because it has diverse applications, Ethereum allows users to expand its use to various sectors and industries, such as transportation, healthcare and supply chain management. Its real-world utility gives Ethereum a benefit over the other digital assets.

What types of altcoins can you find on the market?

Because there are plenty of digital currencies available on the network, it is good to classify the assets, as it is easier to trade them in this way. Altcoins have different features and use cases, and this is why it is important to know their characteristics before purchasing them.

Here are some of the most essential types of altcoins.

Stablecoins

Stablecoins are different from the other alternatives on the market as they have a constant value, and because of that, they provide safe options from the volatile nature of digital currencies. Their value is usually pegged to the fiat money, like EUR, USD, and GBP, which benefits many investors.

Some of the stablecoins available on the market rely on algorithms that adjust their prices with the changes in the supply chains and the market demand. They were created to reduce the high volatility of the other digital currencies, which is why their values are pegged to fiat money.

They are different from the other altcoins as they are more predictable, and their value swings within a limited range. The most famous stablecoins are Tether, Dai and USDC Coins.

Utility tokens

Utility tokens provide access to specific network services and facilitate particular functions. They are also used to earn rewards, purchase services or pay fees. Some of the most popular utility tokens are developed on the Ethereum network, like Basic Attention Token or FunFair.

Security tokens

Security tokens, or digital securities or tokenized assets, give the possibility to holders to own real-world assets, like real estate, stocks, commodities, or bonds. They are based on blockchain technology, offering fractional ownership, increased liquidity and worldwide trading opportunities. They are very similar to traditional stocks and greatly benefit investors as they can have divided ownership or payouts. Crypto users can access security tokens using Security Token Offerings or Initial Exchange Offerings.

Meme coins

Meme coins appeared as a response to the online meme culture. They are a playful alternative to traditional digital assets and want to become as viral as the meme they took their inspiration from. Usually, they have an unlimited supply, and some of the most popular options are Shiba Inu, Dogecoin and Baby Dogecoin.

AI coins

The AI sector is in full expansion at the moment, and it is no surprise that they have also appeared in the crypto industry. AI tokens have been created to provide access to AI projects, which are becoming increasingly popular lately. Some famous AI coins are Fetch, Ocean Protocol, and The Graph.

Final words

Altcoins are an important asset of the crypto sector, as they brought many innovations from which the crypto users can now benefit. Although Bitcoin was the only alternative crypto enthusiasts found on the market for many years, that is not the case anymore. Altcoins were launched for diverse reasons: to improve some of the features of the other digital options or to serve particular functions. Also, altcoins want to overcome the limited capabilities of Bitcoin and provide more sustainable and scalable solutions.