ALTCOINS & TOKEN TYPES
Plain English
Altcoins are everything other than Bitcoin. Ethereum, Solana, Chainlink, Dogecoin — all altcoins. Tokens are different from coins: coins have their own blockchain, tokens are built on existing ones. Understanding the difference matters a lot for risk.
Going deeper
Altcoins (alternative coins) include all cryptocurrencies besides Bitcoin. They range from established layer-1 blockchains (Ethereum, Solana, Avalanche) to meme coins (Dogecoin, Shiba Inu). The key distinction: Layer-1 coins have their own blockchain and security model; Layer-2 tokens and application tokens build on top of existing chains. Token types include: Utility tokens (used to access a service — ETH for gas), Governance tokens (vote on protocol decisions — UNI for Uniswap), Security tokens (represent ownership in an asset), Stablecoins (pegged to fiat), and Meme coins (no inherent utility). In bear markets, most altcoins lose 80-95% of value. In bull markets, some 10-100x. Understanding the token's purpose is critical to evaluating its long-term viability.
Examples
Layer 1 vs Token
ETH is a Layer-1 coin — it runs the Ethereum blockchain. AAVE is a governance token built on Ethereum. If Ethereum has a critical bug, both could be affected. If AAVE's protocol is hacked, ETH is fine. Different risk profiles.
Altcoin Season
In late 2020 and early 2021, BTC rose from $10k to $60k. Then altcoin season hit — Ethereum 5x'd, Solana 100x'd from lows. But in the 2022 bear market, most altcoins fell 90%+ while BTC fell 'only' 75%. Alt risk cuts both ways.