Classifying the types of cryptocurrencies that exist is an arduous task. There are as many crypto groups as you want; proof of stake coins, proof of work, memecoins, Ethereum tokens, Solana tokens, Stablecoins... the list of categories can be as long as the list of cryptos itself.
But there is a simple way to classify cryptos that has been used since the dawn of the sector; Bitcoin and the rest. Bitcoin's prominence makes it its own category, making it the other cryptocurrencies are known together as Altcoins.
What are altcoins
Basically, an altcoin is any cryptocurrency other than Bitcoin. This distinction, which may seem a bit crude at first glance, is very accurate since Bitcoin, in general, has its own cycle and idiosyncrasy that is different from other cryptocurrencies.
In fact, in the sector there are two seasons. The Bitcoin season, in which BTC is on the rise and is the clear winner, and the altcoin season, in which the rest of the currencies enter the bull market and increase their prices.
This is not mathematical, and it does not mean that whenever Bitcoin goes up, altcoins go down and vice versa. But there is a certain historical tendency for both groups to have differentiated movement patterns.
Types of altcoins
Altcoins can be subdivided into many groups, but some categories are practically inevitable when it comes to ordering among the thousands of cryptocurrencies that exist according to their function. These are some of the main ones.
Memecoins
Memecoins are cryptos whose birth comes from some meme, joke or viral trend. They tend to be cryptos whose value is based on popularity and their community rather than their technology.
These are some of the cryptos that provoke the most speculation due to their immediacy and the fact that it is not uncommon for them to be promoted by Internet personalities. Some of the most famous are Doge, Elon Musk's favorite cryptocurrency, and PEPE, one of the biggest successes when it comes to memecoins.
Stablecoins
One of the biggest drawbacks of cryptocurrencies is their enormous volatility. Stablecoins were born to solve this. These are cryptos whose value is coupled to a reserve of fiat money (such as dollars) so that volatility is reduced and their price is stable, hence their name. Two of the most used are Tether and USDC, whose value is tied to the dollar.
Governance tokens
These types of cryptos are native to decentralized networks. To support this decentralization, governance tokens are distributed among users and, in addition to having value and being able to be bought and sold, they give their holders the ability to vote on decisions about the network. Some of the best known are DOT or UNI, the crypto that was distributed by airdrop among all users of the Uniswap exchange.
Smart Contracts
There are cryptocurrencies that allow you to create what are known as Smart Contracts. These contracts are used to develop decentralized applications within a blockchain network, creating real utility beyond the value of the crypto. The most representative would be Ethereum and Solana, whose ecosystems host thousands of apps.
Peer-to-peer crypto
This type of crypto is intended and designed to be used as a payment method. For this reason, their network usage fees are lower than those of other cryptocurrencies (BTC, for example) while the speed of transactions is higher. These types of cryptos include Litecoin (created from an independent fork of the Bitcoin code) or XRP, Ripple's token.
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