Recently, I’ve seen quite a few newcomers in the community asking what shanzhai coins are, so I decided to organize my understanding. Actually, the term “shanzhai coin” is a bit outdated; nowadays, more people call them Altcoins, or simply call them tokens.

In the early days, it was true that many projects were created by copying Bitcoin’s code, which is why the term “shanzhai” came about. But now it’s completely different. Various public chains, DeFi protocols, and stablecoins have each developed their own ecosystems and technical innovations. Honestly, besides the two leaders, Bitcoin and Ethereum, other crypto assets have already accounted for about 58% of the total market cap. The figure grew from 6% in 2014 to now, which shows that demand for altcoins is indeed exploding.

Let me break it down into a few main types. Stablecoins should be the most practical. Coins like USDT and USDC are pegged to the U.S. dollar, making them especially convenient for trading and settlement. Governance tokens like UNI and AAVE allow token holders to participate in the protocol’s voting and decision-making—this is a core innovation of DeFi. Then there are meme coins. Put simply, they are community-driven tokens; their prices swing wildly and are easily driven by emotions. Functional tokens are used to keep the chain running—for example, ETH is used to pay gas fees, and SOL on the Solana chain plays a similar role.

As for specific projects: USDC is issued through a partnership between Circle and a certain major exchange, backed by real U.S. dollar reserves. DOGE, although it started as a joke project, has a very active community because of its low price and effectively unlimited supply. UNI is Uniswap’s governance token, and the AMM mechanism has contributed greatly to the development of DeFi. AAVE is currently the DeFi protocol with the largest lending volume. Token holders can also stake to earn yield, but the risks are not small either.

When it comes to opportunities in altcoins, it usually goes like this: mainstream coins like BTC and ETH rise first, attracting new capital, and then that money flows into smaller coins with higher risk. Historically, there have been several clearly defined small-coin seasons (Alt Season): the ICO boom in 2017, the DeFi Summer in 2020, and the meme coin and GameFi wave in 2021. Each time, “100x coins” show up frequently—then the market makes a large pullback, leaving a total mess everywhere.

The biggest pitfall of investing in altcoins is that the volatility is too high and the projects are too mixed. For tokens with small market caps, their daily price fluctuations can reach 50% or more, which is especially dangerous in a bear market. Even more painful is that DeFi’s openness allows anyone to issue tokens, so scams and pump-and-dump events happen frequently. The Squid Game token case should still be remembered by some—its price dropped from over 3,000 to 0.0033 in an instant, and the official even shut down the community and ran away. There are also projects that look like they’re operating normally at first, but then the team gradually disappears, with community admins fleeing as well. This kind of Scam is particularly well hidden.

So my advice is: altcoins do have opportunities, but you must control your risk exposure. Don’t let the stories of “100x gains” blow your mind—allocate according to how much risk you can actually tolerate. Stablecoins and top-tier altcoins are relatively safer, but even if you’re bullish on smaller coins, you still need to be cautious. In bull markets, chasing pumps is easy, but getting trapped in a bear market is even easier. On a platform like Gate.io, with ample liquidity and security protections, at least you don’t have to worry about an exchange running away—but you still need to judge the project’s own risks yourself.