15 min läsningBitcoin (BTC) may be the original cryptocurrency, but don’t dismiss altcoins. While they may not boast the same longevity and market capitalisation, many of the protocols and applications issuing these tokens are driving the innovation that’s helping blockchain technology establish itself as a potential foundation for the next iteration of the web. This article explains how altcoins differ from BTC and where they fit in a crypto portfolio.
What exactly is an altcoin?
Put simply, any crypto that isn’t BTC. But using altcoin as an umbrella term can be misleading because the universe is vast. At one end of the spectrum are native tokens issued by protocols providing the infrastructure for a new digital economy, such as Ethereum, Solana and Avalanche, and decentralised applications (dApps) disrupting traditional finance (TradFi). We explore several of these use cases later in the article. The other end of the spectrum is populated by cryptos that offer less utility, like memecoins, tokens inspired by internet memes (a Japanese dog named Kabosu in the case of DOGE).
From an investment perspective, altcoins can help diversify your portfolio. They complement BTC rather than compete with it. Newer projects resemble startups because they’re high-risk, high-reward. They raise funds by selling their native tokens via the crypto version of an IPO, making these opportunities accessible to retail investors, unlike private equity. Projects with a proven track record, such as Ethereum, have more in common with small-cap stocks, which can be volatile but offer substantial potential upside (think Netflix in the early noughties).
Some of the finance industry’s biggest players are experimenting with blockchain technology to test its efficiency potential. BlackRock launched its first tokenised money market fund, BUIDL, on Ethereum in March 2024, and its assets under management have grown to $2.8B as of October 2025. More recently, Société Générale tapped Ethereum and Solana to issue its pending stablecoin, USDCV.
How do altcoins differ from BTC?
As the original crypto, BTC is the benchmark which investors measure other tokens against, so it’s useful to understand the differences.
Satoshi Nakamoto, the pseudonymous founder, designed BTC as a medium of exchange, with an underlying infrastructure to match. It’s highly decentralised- thousands of computers, known as nodes, run the software underpinning BTC- and the consensus mechanism used to ensure the entire network agrees on the record of transactions also boosts security by making attacks prohibitively expensive. However, as BTC has matured, it has earned a reputation as digital gold due to its capped supply (21M to be exact). Some believe it could act as a store of value given its portability, though its price remains highly volatile.
Altcoins, in contrast, serve a much broader range of use cases. These use cases are enabled by smart contracts, agreements that automatically execute when preconditions are met, a concept introduced by Ethereum in 2015. Smart contracts eliminate intermediaries from transactions, so they’re frequently compared to vending machines- you make a payment and in return, the machine dispenses a bar of chocolate or bottle of water. No need for human interaction.
Another major difference between BTC and altcoins is their funding. BTC was funded by the burgeoning crypto community in the early days, although speculators and institutional investors have contributed to its growth over the last five years or so. Many altcoins, on the other hand, are issued by companies or foundations backed by entities such as venture capital firms (VCs)
Before we move on, a word of warning - beware any altcoin claiming it’s better than BTC. Just ask the victims of the notorious ‘cryptoqueen’ Ruja Ignatova, who launched OneCoin in 2014.
"In two years, nobody will speak about bitcoin anymore!" she told an audience at London’s Wembley Arena in 2016. Ignatova vanished a year later, leaving investors out of pocket to the tune of billions of dollars.
The altcoin investment opportunity
Now that you understand their broader utility, let’s explore some of the projects driving the new digital economy.
Smart contract platforms: Ethereum may have pioneered smart contracts, but several protocols have followed in its wake, including Solana and Avalanche. Smart contract platforms provide the infrastructure for the use cases listed below, along with others like non-fungible tokens, which represent a specific item such as a piece of art, and the tokenisation of real-world assets.
Stablecoins: Stablecoins are one of blockchain technology’s killer apps, leveraging crypto’s speed, low fees and inclusivity to make cross-border transactions cheaper and offer savings products to citizens of developing countries. The biggest coins by market cap are USDT and USDC, backed by dollars and dollar-denominated assets.
Decentralised Finance (DeFi): DeFi applications are revolutionising TradFi, lowering costs by allowing counterparties to transact directly and reducing barriers to financial services, for instance for people lacking official ID. Platforms like AAVE and Pendle offer lending and borrowing, while Uniswap is a popular decentralised crypto exchange.
Payments: One of the original cryptos, Litecoin was built on Bitcoin’s architecture with the intention of addressing some of its predecessor’s limitations as a medium of exchange, chiefly scalability. It also addressed privacy concerns with a 2022 update named after a Harry Potter spell. Ripple, another early crypto project, was designed to compete with the global SWIFT payment network, which processes trillions of dollars of transactions each day.
Memecoins: While their utility may be questionable, memecoins build a sense of community in the crypto ecosystem- DOGE holders have raised funds for various causes, such as water wells in Kenya. What’s more, despite being labelled ‘shitcoins’, primarily by BTC maximalists, memecoins have managed to achieve a market capitalisation of $57B (as of October 2025).
Risks of investing in altcoins
Of course, before adding altcoins to your portfolio, you need to understand the risks. While BTC is considered volatile, altcoin prices tend to fluctuate more due to their lower market caps and liquidity. During the mass liquidation of positions in October 2025, following the threat of a new trade war between the US and China, BTC fell by 14% according to Reuters, whereas the Avalanche protocol plunged by 70%. However, Ethereum responded similarly to BTC (losing 12%), which explains why CoinShares is less inclined to classify it as an altcoin.
Altcoins also carry a much higher risk of failure than BTC due to their speculative nature. More than 50% of the nearly seven million coins listed on CoinGecko since 2021 have disappeared. Some projects failed (like early-stage startups), but others only launched to extract money from unwitting VCs and retail investors.
Another notable risk is crypto’s inconsistent and evolving regulatory environment, which causes uncertainty for investors. For instance, the US Commodity Futures Trading Commission classifies BTC, ETH and Litecoin as commodities, but the Securities and Exchange Commission only recently dismissed longstanding charges against crypto exchanges Binance and Coinbase for supporting multiple coins that it claimed should have been registered as security tokens. Meanwhile, the EU’s Markets in Crypto-Assets (MiCA) regulation classifies both BTC and altcoins as ‘crypto-assets’.
Finally, dApps are vulnerable to outages and breaches. Leading blockchains TON (six hours) and Polygon (one hour) both experienced downtime in the summer of 2025, while Venus Protocol, a lending platform running on BNB chain, lost $27M at the start of September after hackers compromised one of its smart contracts.
Conclusion: ‘altcoin’ doesn’t do the category justice
Make no mistake: there won’t be another BTC. But the altcoin universe is broad. Some of these tokens may become the rails for tomorrow’s financial system, so it’s important to do your research and distinguish between those delivering critical infrastructure and services and others that are more speculative in nature.
