AU What Is an Altcoin? Exploring the Crypto World Beyond Bitcoin

IE: What Is an Altcoin? Exploring the Crypto World Beyond Bitcoin

Meta: From Ethereum to Dogecoin, learn what sits beyond Bitcoin and how these different types of crypto-assets compare.

Highlights

An altcoin is a general term for any cryptocurrency or crypto-asset that is not Bitcoin.

These assets range from full blockchain networks like Ethereum to tokens used for payments, governance, or access to services.

Altcoins are usually more volatile than Bitcoin and often aim to provide additional features or experiment with new technology.

Defining the Altcoin

In simple terms, an altcoin is an “alternative coin”. It refers to any cryptocurrency or crypto-asset other than Bitcoin. However some people consider Altcoins to be anything other than Bitcoin and Ethereum.

Bitcoin was launched in 2009 and, for a while, it stood alone. Over time, developers realised that blockchain technology could be adjusted to meet different goals. Some projects tried to increase transaction speed or reduce energy use. Others focused on programmable money, digital ownership, or new forms of online coordination.

Today, there are thousands of altcoins. They range from large global networks with high market capitalisation, such as Ethereum and Solana, to small experimental projects with limited use. Bitcoin is often described as “digital gold” or a store of value. By contrast, altcoins are usually seen as the “application layer”, where most of the new features and experiments take place.

Altcoins are highly speculative. Many will not achieve long-term adoption or sustainable value.

How Altcoins Work: Coins vs Tokens

Although grouped under one label, most altcoins fall into two broad technical categories: Layer 1 coins and tokens.

Layer 1 Coins

Layer 1 coins operate on their own independent blockchains. Examples include Ethereum (ETH), Solana (SOL), and Cardano (ADA).

These coins are the native asset of their network. They are typically used to pay transaction fees, reward validators or miners, and help secure the system. You can think of a Layer 1 network like a computer operating system (for example, Windows or macOS). It provides the base environment that other applications can use.

Not all Layer 1 projects achieve meaningful usage. Some remain experimental or lose community support over time.

Tokens

Tokens do not run on their own blockchain. They sit on top of an existing network, most commonly Ethereum, and use that network’s security and processing power.

Examples include Uniswap (UNI) and Shiba Inu (SHIB). If Layer 1 coins are the operating system, tokens are similar to the apps and files that run on the system. They can be used for many purposes, such as:

• Accessing a service
• Taking part in governance votes
• Representing a claim on an external asset or protocol

Token creation is relatively easy from a technical perspective. This lowers barriers to innovation, but also makes it easier for low-quality or fraudulent projects to appear.

Real-life Examples and Categories

Altcoins are not all aimed at being general-purpose money. Many are designed for a specific role within the digital economy. Below are some of the most common categories. Some assets may fall into more than one group.

Smart Contract Platforms

Smart contract platforms are some of the largest altcoin projects by market value.

Networks like Ethereum and Solana allow developers to build decentralised applications (dApps) that run on the blockchain. These platforms support a wide range of use cases, including decentralised finance (DeFi), gaming, and digital collectibles or art.

Smart contract platforms can be complex and experimental. Users interact with code that may contain bugs or unexpected behaviour.

Stablecoins

Stablecoins aim to maintain a stable price, usually linked to an external reference such as a fiat currency.

An example is USD Coin (USDC), which typically targets a value close to 1.00 USD (around €0.90 to €1.00, depending on the exchange rate). Some stablecoins are backed by reserves held by a central issuer. Others use algorithms and crypto collateral.

Traders often use stablecoins to move value between exchanges or DeFi platforms without converting back to traditional money. Stability is not guaranteed. The value of a stablecoin can deviate from its target if reserves, design, or market confidence fail.

Governance Tokens

Governance tokens are often compared to voting slips.

Holders of tokens such as Uniswap (UNI) can vote on proposed changes to a protocol. This may include fee settings, software upgrades, or how a project’s treasury is used. In theory, governance tokens give the community a say in how a project evolves.

In practice, participation can be low and voting power may be concentrated in a small number of holders. Governance tokens usually do not represent shares or legal ownership in a company, unless the issuer clearly states otherwise.

Memecoins

Memecoins are usually inspired by internet culture, jokes, or viral trends.

Examples include Dogecoin (DOGE) and Pepe (PEPE). These projects often begin with light-hearted branding and limited stated purpose. Their prices can be heavily influenced by social media, celebrity comments, or community sentiment rather than fundamentals.

Memecoins are extremely speculative and can be subject to sudden, sharp price changes. Many memecoins never reach broad adoption or long-term value.

Emerging Trends: RWAs and DePIN

The altcoin sector changes quickly and new themes appear regularly. As of 2026, two notable areas of experimentation are Real World Assets (RWAs) and Decentralised Physical Infrastructure Networks (DePIN).

Real World Assets (RWAs) involve tokens that aim to represent rights or claims linked to external items such as real estate, government bonds, or trade receivables. The token is usually not the asset itself, but a digital representation based on a legal structure set up by the issuer. Legal rights, regulatory treatment, and counterparty risk can vary widely from project to project.

DePIN projects reward users for providing physical resources, for example WiFi hotspots, energy metering, or data storage. Participants may receive tokens in exchange for contributing hardware or bandwidth. Income, if any, depends on network demand, token economics, and the long-term viability of the project.

Both RWAs and DePIN are early-stage areas. Regulatory requirements, especially in the European Union, can be onerous where tokens refer to financial instruments or to claims on real-world assets.

Understanding “Alt Season”

You may hear traders use the term “Alt Season”. This is an informal phrase for a market period when many altcoins rise in price faster than Bitcoin and attract higher trading volumes.

Market participants often speak about “rotation” between different types of assets. Some start by buying Bitcoin, which is widely known and often treated as a reference point for the market. If Bitcoin increases in price and then stabilises, some traders choose to move part of their profits into larger altcoins, such as Ethereum. Later, some may move on to smaller, higher-risk tokens, hoping for larger percentage gains.

During what is called an Alt Season, price movements can be extremely volatile in both directions. Periods of strong growth have often been followed by steep corrections, where many altcoins lose a substantial share of their previous value. There is no guarantee that past patterns of “Alt Season” will repeat in the future.

Risks and Red Flags

Altcoins generally involve higher risk than Bitcoin. Many projects are experimental, and liquidity can be limited. Prices may move sharply with relatively small trades.

Before you consider gaining exposure to altcoins, it is important to understand the main risks.

• High volatility: Altcoins often experience large daily price swings. Double-digit percentage moves in a single day are common. This can work in both directions, gains and losses.
• “Zombie” projects: Many altcoin projects fail because of technical issues, loss of user interest, or funding problems. These networks may continue to exist on paper, but with no real activity, development, or meaningful market value.
• Scams and rug pulls: New tokens can be created quickly and promoted aggressively. In a “rug pull”, project insiders or malicious actors use marketing to attract buyers, then remove liquidity or sell large holdings, leaving others with tokens that have little or no market value.
• Operational and smart contract risk: Bugs, design flaws, or poor security practices can lead to hacks, lost funds, or malfunctioning protocols. Once a transaction is confirmed on a public blockchain, it is usually irreversible.
• Regulatory and legal uncertainty: The regulatory status of many altcoins is still being clarified, including in the European Union under MiCA and other frameworks. Some tokens may be treated as financial instruments or e-money, which can affect how and where they can be offered or traded. If a project fails, is hacked, or behaves fraudulently, there is often no guarantee of compensation.

Always check whether a token is issued by a regulated entity, whether there is a clear white paper, and which rights, if any, the token provides.

Why Altcoins Matter

Bitcoin is often seen as the anchor of the crypto market. Altcoins, on the other hand, are where much of the experimentation happens.

Developers use altcoins to test new ideas in areas such as decentralised finance, digital identity, data storage, gaming, science funding, and artificial intelligence. Some projects aim to complement traditional financial services. Others are purely experimental or community-driven.

Many altcoins will not succeed or achieve mass adoption. A small number may find sustainable use cases or become critical infrastructure for digital services. By understanding how altcoins differ from Bitcoin in purpose, design, and risk, you can form a more balanced view of the broader crypto ecosystem.

Altcoins should be approached with caution and thorough research. Never risk money that you cannot afford to lose.