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When people hear the word “cryptocurrency,” you can often assume their mind goes directly to the term “Bitcoin.” It’s a safe assumption given that Bitcoin has gained the highest level of popularity over time.
As a trendsetter, it has become the de facto standard for cryptocurrencies, inspiring an ever-growing legion of followers and spinoffs. Altcoins, the Bitcoin “alternatives,” have ushered in a new wave of crypto investments and coin features.
Altcoins distinguish themselves from Bitcoin by extending their capabilities and bridging the gap of Bitcoin’s perceived shortcomings. That said, altcoins still use Bitcoin as a benchmark since it remains the dominant coin in the market.
According to Statista, there are nearly 6,000 altcoins as of last year. This is an extreme increase from the handful of altcoins in 2013. In 2021, cryptocurrency dominated the headlines and gained popularity among the people. CoinMarketCap data reveals the performances of the top 300 cryptocurrencies by market cap and 85% of top altcoins DOUBLED in value.
If you’re new to the cryptocurrency industry, here are the key points and terms to know for this article. You also may want to read “The Altcoin Beginner’s Guide” HERE.
Altcoin refers to cryptocurrencies other than Bitcoin. Their primary purpose is to improve the “limitations” of Bitcoin and offer more functionality.
The basic framework for Bitcoin and Altcoins are similar but have several differences. And these differences have created a whole other market.
Typically, the Altcoin market is driven by speculation. Cryptocurrency markets are not yet mature. Despite several attempts, there are no defined investment criteria or metrics to evaluate cryptocurrencies.
There are multiple types of altcoins, such as mining-based crypto, stablecoins, tokens, forks, and native cryptocurrencies, which all vary in definition, origin, and function.
Not all altcoins are valued the same– some cost pennies while others are hundreds of dollars.
Some altcoins use a different consensus mechanism to produce blocks or validate transactions. Some distinguish themselves from Bitcoin by providing new or additional capabilities, such as smart contracts or low price volatility.
Altcoins plug some of the shortcomings of Bitcoin, offering more functionality and some with lowered volatility.
Altcoins, like stablecoins, have the potential to fulfill Bitcoins original promise of medium for daily transactions
Certain altcoins, such as Ether, have gained traction among mainstream institutions and investors.
Investors have a wide range of altcoins to choose from that perform different crypto-economy functions.
Altcoins have a smaller investment market in comparison to Bitcoin.
Bitcoin still has around 42% of the market share.
The absence of regulation and criteria for investments due to fewer investors and thin liquidity makes the prices more volatile compared to Bitcoin.
Several “dead” altcoins can sink investors’ dollars.
Distinguishing the difference between altcoins and their uses can confuse investors.
Since this list is impossible to be entirely comprehensive due to the vast amount of existing cryptocurrencies, we will examine some of the most notable altcoins of 2021 in no order.
Launched in July 2015, Ethereum is the largest and most well-established Altcoin. Ethereum enables the deployment of smart contracts and decentralized applications to be built and run without downtime, fraud, control, or interference from a third party. Popular uses include the creation of fungible and non-fungible tokens (NFTs).
Ethereum is also popular in “Play To Earn” games, sports betting, gambling, prediction markets, and decentralized exchanges. The goal behind Ethereum is to create accessible financial products that anyone in the world can obtain regardless of gender, ethnicity, class, etc.
ETH Starting Price: $0.30
ETH Price at the End of 2021: $3,082.90
Litecoin is a cryptocurrency that was launched in 2011 to complete transactions quickly and affordably on a decentralized level. It was developed using a copy of Bitcoin’s source code as one of the first altcoins. Litecoin miners use computer power to solve complex mathematical problems and earn the right to verify transactions on the blockchain.
Although Litecoin is not necessarily the fast among other currencies, it remains an excellent option for those looking to transfer significant sums of money. Litecoin is cheaper than top-performing cryptocurrencies like Bitcoin due to the limited number of investors. Bitcoin has a much more substantial influx of capital, which drives growth and increases its value.
LTC Starting Price: $0.30
LTC Price at the End of 2021: $148.04
Bitcoin Cash (BCH)
Bitcoin cash holds an essential place in Altcoins since it’s one of the original Bitcoin’s earliest and most successful forks. In a crypto blockchain, groups of recorded transactions are organized into blocks. Each block is connected to the next. For a new partnership to be appended into the chain, all previous transitions in the block must be verified with a consensus that everything is “right” within the chain. If the agreement decides to change the rules, it validates a split in the chain.
This split is known as a fork. Forks happen over and over again, creating new protocols and evolving cryptocurrencies all the while. An example of a fork would be Bitcoin Cash. Bitcoin Cash originated from the original Bitcoin blockchain. BCH began its life in August 2017 as a result of one of these splits. Bitcoin Cash is designed to function as an electronic cash payment system.
BCH Starting Price: $578.58
BCH Price at the End of 2021: $474.99
Also known as a “meme coin,” Dogecoin caused a stir in 2021 due to the price volatility and many notable crypto influencers taking an interest. Dogecoin was created by two software engineers, Billy Markus and Jackson Palmer, in 2013. Markus and Palmer reportedly created the coin as a joke, commenting on the wild speculation of the cryptocurrency market. Dogecoin is primarily used for tipping users on Reddit and Twitter. However, it is also accepted as a method of payment by some merchants, like the Dallas Mavericks.
DOGE Starting Price: $0.00026
DOGE Highest Price in 2021: $0.68
DOGE Price at the End of 2021: $0.17
This stablecoin was one of the first and most famous of the group. The primary use for a stablecoin is facilitating trades on exchange platforms. So, instead of buying Bitcoin directly with fiat (like the U.S. dollar), traders exchange fiat for a stablecoin and then use that for another cryptocurrency like Bitcoin. Stablecoins were developed to offer the advantages of blockchain technology without price volatility. Tether, the largest stablecoin by market capitalization, is tied to the U.S. dollar, so its value will always equal one $1. Tether is used by investors who would like to avoid extreme volatility while keeping weight in the market.
Predictions from CoinMarketCap suggest keeping an eye out for Binance Coin, Tether, Solana, Cardano, Terra Luna, Polkadot, Polygon, Avalanche, and Etherum to exceed. They also mention, “The crypto space has moved fast. The year 2020 was that of base-layer protocols. The year 2021 was that of protocols building atop these base-layer protocols. And the year 2022 is going to be about all of these protocols building on top of each other and having interoperability. As the industry has matured, several of its cracks and faults have come out. As it matures further, we can see some incredible developments that will help shape the future of Defi itself.”
Just like any other aspect of investing, take the time to read through what the organization is trying to accomplish through this Altcoin. Here are some questions you can ask yourself.
Does the Altcoin seem like a promising way to improve Bitcoin?
If it’s a token, can you apply it to the real world?
If it is a stable coin, how will you use it?
Are you in a stable financial situation to invest right now?