Altcoins are basically cryptocurrencies apart from bitcoin. Some other persons define altcoins as cryptocurrencies apart from bitcoin and ethereum. This is due to the fact that most cryptocurrencies are forked from either bitcoin or ethereum. Some Altcoins try to differentiate themselves from bitcoin and ethereum by presenting an extra use or verifying transactions by utilizing a separate consensus mechanism.

Various altcoins are made by developers who have a separate goal or purpose for their cryptocurrency.

The word "Altcoin" is derived from both words "Alternative" and "coin". Altcoins belong exclusively to the blockchain for which they were made. Fork means dividing a blockchain that is harmonious with the original chain. As mentioned before, a lot of Altcoins are forked from either bitcoin or ethereum. There could be several reasons for these forks happening. Usually, it's because some set of developers don't agree with other developers, and then they break out to create their own cryptocurrency or token.

Altcoins aim to improve upon the setbacks of the blockchain or cryptocurrency they are forked from or in competition with. Litecoin was the first altcoin. It was created in 2011 and was forked from the bitcoin blockchain.

Another major altcoin is Ether. It was not forked from ethereum. It was made by Vitalik Buterin, Dr Gavin Wood and several others. The Ether was made to support the ethereum blockchain. It is used to pay transaction fees on the blockchain network.

Altcoin types

Payment token

Just like the name says, these tokens are meant to be used for payment and transactions between individuals. A good example in this category bitcoin

Stablecoins

Due to the fact that the cryptocurrency market is characterized with price volatility, stablecoins were introduced. Stablecoins counter this volatility by attaching their value to a pool of goods like fiat currencies, other cryptocurrencies or even valuable metals. The pool acts as a reservoir to replenish holders just in case something negative happens with the cryptocurrency. Changes in price for stable coins do not exceed a small range. USDT, USDC and DAI are popular stablecoins.

Security Tokens

These are assets which have been tokenized and made available on the stock market.
Tokenization simply means transferring the value of an asset to a token. The token is then made accessible to investors. Basically any kind of asset can be tokenized, but for this to work out, the asset has to be secured and be in possession, otherwise the tokens would not represent anything and they would be worthless.

Utility Tokens

These tokens are utilized inside a network for services provided. They could be used pay transaction fees, pay for services purchased or even reward redemption. An example of a utility token filecoin. It is used to purchase space for storage on a network and safely store information

ETH(Ether) is another utility token. On the ethereum blockchain and virtual machine, ETH is used to make payments for transactions done. Utility tokens are available on exchanges and can be bought for holding. However they are designed to be used on the blockchain network for normal activities.

Meme coins

Just like their name implies, the inspiration behind meme coins is usually a joke or a funny reference to other popular cryptocurrencies.

Meme coins earn their fame usually within a short period of time, mostly due to hype by famous influencers or investors seeking to cash in on short lived gains.

Governance Tokens

These tokens gives holders the right to vote and have a say in decision making in DAOs(Decentralized Autonomous Organizations). They are actually utility tokens because they are specific to a blockchain and are used for certain purposes on the blockchain, but they are now known as a different type due to their use.

Advantages of Altcoins

• Altcoins are better versions of the cryptocurrency they are gotten from because they try to make up for shortcomings

• Altcoins with more uses, like Ether stand stronger chances of surviving.

• Investors get to select from a variety of altcoins in order to perform certain activities in the cryptocurrency market.

Disadvantages of Altcoins

• Altcoins present a smaller market to invest in comparison to Bitcoin.

• The market for altcoins is known to have lesser investors and activities. This results in tiny liquidity.

• Due to the fact that it's difficult to differentiate between various altcoins and their uses, investors find it confusing to make an investment decision

• Various dead altcoins exist that have wasted the funds of investors

Conclusion

Some altcoins have been really useful and important in recent times. The popular altcoins: Ether, USD coin and Tether have come to form majority of the most traded cryptocurrencies. However, one has to be really careful when investing in Altcoins in order not to lose money as there are a lot of altcoins out there that aren't worth investing money in.