Cryptocurrencies belong to one group, known as digital assets. However, there have been several other groups created since.
Apart from Bitcoin which belongs in its own class, all other crypto assets belong to one or more categories depending on several factors. These groups include altcoins, memecoins, DeFi, coins, tokens, politifi, etc.
If you’re a beginner in the industry, it helps to distinguish between these groups and know which assets belong to which. This will help you to easily make investment decisions and know what to expect as you do so.
In this guide, we will only focus on altcoins and memecoins, comparing the two to show their differences and characteristics where applicable.
What Are Altcoins?
Any cryptocurrency other than Bitcoin is generally referred to as an altcoin. This includes Ethereum and all other top cryptocurrencies. The name was coined to mean alternative coins to Bitcoin.
Altcoins came about for different reasons, but mainly to offer some things that were lacking in Bitcoin. For example, Bitcoin was created as peer-to-peer electronic cash. However, it became obvious later that the network lacked the scalability to sustain payments.
Transactions on Bitcoin are slow and quite expensive because of this lack of scalability. Altcoins like Ethereum wanted to proffer a solution but ended up in the same problems as Bitcoin. However, there are other altcoins that offer fast and cheap payments, such as Tron.
Apart from payments, some altcoins also brought about other possibilities to the crypto industry. There are thousands of crypto projects that are built around the web3 ecosystem, and their main focus is to strengthen that ecosystem
Ethereum plays a critical role in sustaining the web3 ecosystem, but it now has rivals which include Solana and others which are more scalable, faster, and cheaper to use. In general, different altcoins have different possibilities to offer, although there are several overlaps.
What Are Memecoins?
As stated earlier, any crypto asset apart from Bitcoin is an altcoin. This means that memecoins are only a subset of altcoins. So, what are memecoins and what makes them different from other altcoins?
First, memecoins is a general term used to refer to meme cryptocurrencies. Meme cryptocurrencies are “joe” cryptocurrencies which are created mainly for fun. These are usually inspired by a particular meme, rather than by any real use case.
For example, the first memecoin, Dogecoin, was inspired by the popular Shiba Inu dog breed which is what features on its logo. Fans of the dog therefore massively supported the project not because it had any use to them but because the liked the dog.
Shiba Inu, the second largest meme cryptocurrency was also inspired by the same dog, and with no real use cases. However, both these projects have grown to astronomical heights, making many crypto investors rich.
However, for memecoins to survive over the long term, they need to become useful in real life. Therefore, they eventually have to develop real use cases for the projects as the sentiments around the project seems to wear off over time.
Dogecoin and Shiba Inu are currently both used massively for payments as major merchants like Tesla accept them as payment for their merchandise. They are also seeking to be used to support non-fungible tokens (NFTs) and other aspects of web3.
Memecoins generally have a massive supply or even a limitless supply, which makes them generally unlikely to experience huge growths in price. Many of them have a burn mechanism which helps to regulate the supply though.
Final Thoughts
Having read this guide, hopefully you now know the difference between altcoins and memecoins. While altcoins are generally any crypto asset apart from Bitcoin, memecoins are a smaller group of altcoins.
Memecoins are generally inspired by a meme or character, and lack any real use case, at least initially. They can however include use cases eventually after the project has been established. They are mainly driven by sentiments initially.
