What Is an Altcoin? A Beginner-Friendly Guide to “Everything That Isn’t Bitcoin”

Bitcoin started the crypto revolution, but it was just the start. Since Bitcoin appeared, thousands of new cryptocurrencies have launched. Each one tries to solve a different problem, reach new users, or test new technology and ideas. These are called “alternative coins,” or altcoins.

Altcoins can vary widely. Some work as programmable money for decentralized apps, others try to keep a steady price for payments, and some mainly bring online communities together. Learning what altcoins are and what they do is a quick way to boost your crypto knowledge.

Altcoin means “alternative coin.” In simple terms, it refers to any cryptocurrency other than Bitcoin. Some people make an exception for Ethereum because it is so large and important, but usually, “altcoins” cover everything except BTC.

Why do altcoins exist?

Altcoins came about because developers and communities wanted to do things that Bitcoin could not do or would require big changes to support. There are a few main reasons why altcoins are created:

1) New functionality beyond payments
Bitcoin was designed to be reliable, decentralized digital money. Many altcoins try to expand crypto into other areas, such as smart contracts, decentralized finance (DeFi), NFTs, gaming, identity tools, or turning real-world assets into tokens.

2) Different technical trade-offs
Some projects seek faster transactions, lower fees, more activity, different security setups, or new ways to make decisions. Whether these trade-offs are worth it depends on the project and what you want to achieve.

3) Experiments in governance and incentives
Altcoins commonly explore new ways to organize their communities and fund development, such as on-chain voting, DAO treasuries, staking rewards, and liquidity incentives.

4) Market demand (and speculation)
Not all altcoins offer new technology. Some are made because hype, memes, or stories create short-term demand, especially when the market is going up.

How altcoins differ from Bitcoin

There is no single “altcoin blueprint,” but here are the main ways Bitcoin and many altcoins differ:

Purpose: Bitcoin aims to be strong, censorship-resistant money. Altcoins often focus on a specific area, like apps, finance, stable value, privacy, or governance.
Technology: Many altcoins use different types of blockchains or consensus mechanisms than Bitcoin does.
Supply: Bitcoin is limited to 21 million coins. Altcoins may have other limits or none at all.
Network age: Bitcoin is the oldest and most established. Many altcoins are newer, less decentralized, or still in testing.
Volatility and liquidity: Altcoins often have smaller markets than Bitcoin, so they can be harder to trade and their prices can move more with large trades.

A quick history: early altcoins and what they tried to improve

The “altcoin era” started not long after Bitcoin. Litecoin, one of the first major alternatives, launched in October 2011 as a faster, lighter version of Bitcoin with shorter block times.

A few years later, Dogecoin launched in 2013 as a joke inspired by internet culture. Despite this, it became a global brand because of its strong community and online popularity.

Then, smart contract platforms changed crypto in a big way. When Ethereum launched in 2015, it proved that blockchains could run programs, not just process payments.

The main types of altcoins

Altcoins fit into several groups, and some coins belong to more than one. Here are the main types to know.

1) Payment tokens

These are designed to work like digital cash, enabling value to be transferred from one person to another. Examples include Litecoin and other payment-focused networks. Some aim to be faster and cheaper, while others focus on privacy.

What to watch: Payment coins need people to use them. Without many merchants, wallets, and trading options, they may struggle to grow.

2) Stablecoins

Stablecoins are intended to maintain a stable price, usually tied to a currency like the U.S. dollar. People use them for trading, sending money, and crypto payments because they don’t fluctuate as much as other coins.

Stablecoins are also being used more in everyday payment systems. For example, Visa has expanded its stablecoin settlement projects, including tests with USDC and banking partners.

Important risk note: Not all stablecoins are equally safe. Some are backed by cash or government bonds, while others rely on algorithms and market rules to keep their price steady.

A good example is TerraUSD (UST), an algorithmic stablecoin that lost its price link during the Terra collapse in May 2022. This showed that “stable” is a goal, not a guarantee.

3) Utility tokens

Utility tokens let you use or operate a network. You might pay fees, reward validators, or do other tasks on the blockchain with them. Ethereum’s ETH is a classic example, used to pay for network activity and help secure the chain through staking.

Utility tokens can gain value if the network is truly useful, but they can also lose value if people stop using it.

4) Governance tokens

Governance tokens let holders vote on changes to the system, such as fees, spending, and upgrades. They are often connected to DAOs, where token holders make decisions by voting.

Reality check: Governance does not always work smoothly. Large holders or insiders can control votes, and sometimes, few people participate.

5) Security tokens (tokenized securities)

Security tokens represent ownership or claims similar to regular securities, such as shares, profit rights, or tokenized real-world assets. These are usually subject to more stringent regulatory rules.

Bottom line: If a token acts like an investment contract, it may be regulated as one, depending on the jurisdiction.

6) Meme coins

Meme coins are driven by culture. They can go viral, attract large communities, and have big price swings, often without much real value behind them.

Dogecoin is the main example: it started as a joke, but became a major asset thanks to public backing and internet buzz.

Key risk: Meme coins can go up quickly, but they can drop even faster. Many are just for speculation.

7) Layer 1s and Layer 2s

“Layer 1” (L1) blockchains are base networks, like Ethereum, Solana, and Avalanche, that support whole app ecosystems. “Layer 2” (L2) solutions are built on top of L1s, especially Ethereum, to improve scalability and lower fees, often using rollups.

This group matters because many new crypto ideas aim to make networks larger and able to work together.

Benefits and risks of altcoins

Altcoins are not automatically better or worse than Bitcoin. They are simply different tools, each having its own pros and cons.

Possible benefits

Innovation: Many new ideas, such as smart contracts, DeFi, and rollups, began with altcoins.
Specialization: Altcoins can target specific uses, like payments, stable value, privacy, or tokenized assets.
Upside potential: Coins with smaller markets can change in value quickly, both rising and falling.

Key risks

Higher volatility: Smaller coins can have large price swings based on market mood and trading activity.
Lower liquidity: It can be harder to buy or sell these coins at a fair price, especially when markets move quickly.
Scams and failed projects: Many tokens are created just for hype and do not have real long-term use.
Complexity: Token rules, release schedules, voting systems, and technical risks are often harder to understand than beginners expect.

What is “altcoin season”?

“Altcoin season” is a slang term for times when altcoins, especially smaller ones, perform better than Bitcoin. This usually happens when people feel positive about the market and are willing to take more risks.

It is also a time when scams are more common, so doing careful research is especially important.

How to evaluate an altcoin (a practical checklist)

If you are learning about altcoins or thinking about investing, these questions can help you:

What problem does it solve, and for whom?
Is the token necessary, or is it bolted on?
Who builds it, and is development active?
How is the token supply distributed (tokenomics)?
What are the biggest risks (technical, regulatory, market)?
Does it have real users—or mostly hype?

The bottom line

Altcoins make up the rest of the crypto domain beyond Bitcoin. They include important infrastructure, financial experiments, special uses, and social trends. Some have advanced blockchain technology, but many will not last.

If you treat altcoins as experiments and approach them with research, caution, and good risk management, you will understand the market much better than someone who only looks at price charts.

What Are Altcoins? Types, Use Cases, Risks, and How They Differ From Bitcoin