Recently, I’ve been looking at questions from beginners and realized that many people still have a vague understanding of the concept of altcoins. Actually, to put it simply, altcoins is the general term for all cryptocurrencies other than Bitcoin. Most of the early ones were derived by copying Bitcoin’s code, which is why they got this name.

But now, this term is outdated. With the development of blockchain technology, each project has developed its own unique ecosystem and applications. Those emerging public chains and tokens are now on a completely different level of innovation. So nowadays, more people refer to them as "mainstream coins" rather than "altcoins," which carries a pejorative connotation.

Speaking of which, the most noteworthy categories within altcoins. Stablecoins are a must; USDT, as the largest stablecoin in the market, is basically a standard for every trading pair, along with options like USDC and BUSD. Meme coins, although lacking practical applications, have strong community cohesion, large price swings, and are easy to create FOMO emotions. Governance tokens allow holders to participate in protocol decisions, such as UNI for Uniswap. Functional tokens are essential for maintaining blockchain operation, like Ethereum’s ETH and Solana’s SOL.

Personally, I focus on a few projects. USDC has become increasingly popular in DeFi and DEXs over the past two years, becoming the standard for spot trading and lending collateral. Dogecoin, although originating as a joke, has lasted a long time due to its low price and unlimited supply, which in itself shows the power of community. UNI, as the purest governance token, has a profound impact on the development of DeFi through its AMM mechanism. Aave has the largest locked-in amount, but its risks are relatively concentrated, so attention is needed.

The rhythm of a bull market usually goes like this: BTC and ETH rise first, then funds flow into smaller market cap altcoins. This is what’s called Alt Season. The ICO boom in 2017, DeFi Summer in 2020, meme coins, and GameFi in 2021 all follow this cycle. But the problem is, after each Alt Season, there’s often a sharp retracement. Because of their smaller market caps and higher volatility, altcoins are easily trapped.

Honestly, investing in altcoins carries significant risks. Besides the volatility, you also need to watch out for scams and rug pulls. Projects that seem reliable can turn out to have teams that disappear gradually or run off with the funds. Everyone should remember the Squid Game token that dropped from 3,000 yuan to 0.0033. So don’t get caught up in online wealth myths.

But data shows that the proportion of altcoins in the entire crypto market has increased from 6% in 2014 to 58% in 2022, indicating that market demand for altcoins is indeed growing. Stablecoins solve payment issues, governance tokens enable user participation in decision-making, and these innovative applications are things Bitcoin’s simple peer-to-peer payments can’t achieve.

So the conclusion is, although altcoins seem to offer many opportunities, they also come with high risks. Even if you’re optimistic about a project, you should allocate assets according to your risk tolerance. Don’t be blinded by short-term gains, or you might end up losing everything in a bear market.