The term 'altcoin' refers to any cryptocurrency besides Bitcoin. Many of the first altcoins were intended to be variations on the Bitcoin protocol.
Over time, as the blockchain space diversified, many different tradable digital assets began to take shape. Here we’ll discuss some of the top altcoins, as well as the broad categories of coin-types, including privacy coins, utility tokens, and more.
So what is a token? What is a crypto? Does ICO stand for Ice Cream Operation? You’ve come to the right place.
Let’s start with the big picture. An asset is defined as a piece of property that has some kind of value. If you own a house, a car, or a currency, you own assets. Bitcoin helped create a new type of asset: a digital asset. Cryptocurrencies are a special kind of digital asset, dubbed cryptoassets. Cryptotokens and cryptocommodities also fall under this category, and they have distinct definitions and implications. We’ll get there in a moment.
Before we dig in, there’s one more broad topic to address: the difference between a protocol and a currency or token. A protocol is a set of rules governing a system. Bitcoin (with a capital B) is a protocol, outlining how a decentralized system of miners can keep track of and transfer digital assets. The digital assets themselves, the bitcoins (with a lower case b), are separately defined (unfortunately, these capitalization rules don’t hold for all cryptocurrencies, just for Bitcoin).
You transact using bitcoins. The way bitcoins can be exchanged is determined by the Bitcoin protocol, which is a set of rules.
Let’s take a deeper dive into some common classifications:
a. Privacy Coins–as laid out in the Bitcoin protocol, blockchain technology is pseudonymous. These coins aim to make transactions entirely anonymous by using bleeding edge cryptography and specially designed protocols. Bitcoin might be quasi-anonymous, but privacy coins take anonymity to the next level. Examples: Monero, Zcash, Dash.
2. Cryptocommodities–these provide raw digital resources, allowing developers to build finished, decentralized products. They provide access to blockchain technology, allowing interested parties to utilize it in a variety of industries and services without needing to create a blockchain protocol from scratch (this would require an entire community of third-party verifiers).
a. Platform Tokens–these have a specific role within a greater ecosystem. A prime example is Ethereum, a blockchain protocol allowing users to build decentralized applications using smart contracts. Its native token is known as Ether. Developers pay in ether to build on the Ethereum blockchain. This makes ether a cryptocommodity.
3. Cryptotokens–tied to a particular product, service, or value.
a. Utility Tokens–as the name suggests, these assets have a utility, a purpose. Utility tokens can be redeemable for some type of service, or may allow you to participate in a market in some way. There are many types of utility tokens, but keep in mind that they allow you to access a specific product or service. Examples: SALT (lending platform), Augur (prediction market).
b. Equity Tokens–buying an equity token grants you ownership of part of… well… just about anything. There are lots of things that can be “tokenized.” For example, you could split up a company into 1000 tokens and sell them. Owners of 1 token would then own 1/1000th of the company. The same philosophy could be applied to real estate, art, or any other physical commodity.