An alt coin is any cryptocurrency other than bitcoin. They serve many different purposes and are often classified as either utility tokens or sometimes security tokens. Most alt coins are peer-to-peer which require a process of mining by which the users will solve difficult problems to provide secure and inexpensive ways to carry out different transactions. Some alt coins are built on different networks like Defi, the Ethereum network, the polygon network, the binance smart chain network, etc.
Examples of different alt coins include cardano (ADA), ripple (XRP), solana (SOL), etc.
If we break this down even further there are many specific types of alt coins including stable coins, governance tokens, utility tokens, privacy coins, meme coins, payment coins and security tokens.
- They track an underlying asset which offer investment potential
- People prefer to invest in stable coins because of the less volatility in the markets, its privacy and the fact that it provides added liquidity.
- Allows for collaborating within different communities
- The success of this specific token will depend solely on how well the project for it performs.
- If you are a governance token holder you will have access to voting rights on that project.
- These can be found on defi platforms
- This is a token that has a specific use case.
- It usually offers a solution to a problem and has its benefits.
- Utility tokens cannot be mined and are usually connected to a specific blockchain project or specific ecosystem.
- They are coins that make its users’ transactions very difficult to track.
- They operate on private networks, which obscures the origin and destination of all blockchain transactions.
- How they are able to do this is through many ways but the most common being where a new wallet address is required for every transaction to avoid being traced
- Now if an alt coin is just trying to be marketed and there is only hype around it; there’s really no purpose or utility and it’s not going to be here long term then you want to be very careful with those types of coins as those are known as meme coins.
- Meme coins usually gain popularity in a short period of time, often hyped online by influencers or investors attempting to make a quick profit in a short period of time.
- They are a highly risky investment as they rely on hype and market manipulative trading and when the hype or trend dies down the coins have potential to go to 0 very quickly with no actual utility to back its use case.
- They are 1st generation cryptocurrencies such as bitcoin, ripple & LTC and these coins provide a means to facilitate payments and the transfer of funds.
- They act as a global way for people to be able to purchase goods and services.
- While any crypto is technically valid for making a transaction payment coins are far more likely to be accepted as a means of payment.
- These types of coins are far more regulated than utility tokens and are generally backed by an investment.
- These tokens typically represent a share in the company who issued it and can be traded 24/7.
When you’re investing in alt coins there could be a little more risk but also potential for great reward. When looking to see if an alt coin is a good investment ask yourself these types of questions:
1. What problems does this alt coin solve? What does this project solve?
2. Who is the development team, the programmers, the developers, who are the people who have put their name behind it?
3. Does the project have a white paper? Do they have a road map? Is there a vision for this project?
4. What value does the coin offer? Will the market, people or companies find value and will they be willing to hold this crypto long term?
By figuring out the answers to these questions you will determine the value of an alt coin. It’s all based on utility and its purpose and if the value of what it offers is great then it can potentially be considered a good investment opportunity.