What are stablecoins, what are mainstream coins, and what are altcoins?

Introduction: When first entering the crypto space, many friends find themselves dazzled by the myriad of different tokens. Everyone knows Bitcoin, but beyond Bitcoin, terms like stablecoins, mainstream coins, platform tokens, and altcoins can be quite overwhelming. This article will explain what these crypto assets are and their characteristics.

What is the concept of stablecoins, and how are they classified?

Stablecoins, in essence, are a type of cryptocurrency with an “anchoring” property, usually pegged to fiat currencies like the US dollar or other stable assets. As a result, they do not experience dramatic price fluctuations. Stablecoins are more like a medium of exchange. The earliest stablecoin was USDT (Tether), launched in 2014 by Tether Limited, with a 1:1 peg to the US dollar.

Due to the high volatility of crypto assets, investors need a relatively stable bridge currency to preserve value when trading on-chain. For example, in the BTC/USDT trading pair, if investors expect Bitcoin to decline, they will sell BTC for USDT to maintain their assets’ value.

Stablecoins are generally divided into two types: collateralized stablecoins and algorithmic stablecoins.

Collateralized stablecoins are backed by assets to maintain their stability. Based on the type of collateral, they can be categorized as: ① Fiat-collateralized stablecoins, which are backed by fiat currency and issued on a 1:1 basis, such as USDT, TUSD, USDC, etc.; ② Crypto-collateralized stablecoins, which are backed by cryptocurrencies, such as DAI.

Algorithmic stablecoins do not require collateral or backing by any other valuable assets. Instead, they rely on automated monetary policies through algorithms that adjust supply via inflation or deflation to maintain price stability, such as UST, BAC, AMPL, etc.

What are mainstream coins, and which ones are considered mainstream?

In the crypto market cap rankings, the top-ranked assets are usually called mainstream coins. They tend to have large communities, many users, and high market activity. Mainstream coins generally have strong consensus or significant practical application value, and their liquidity is better than that of typical crypto assets. They are widely recognized by the public.

Currently, the leading mainstream coins include BTC, ETH, ADA, XRP, BCH, LTC, and others. Bitcoin (BTC) is the most prominent, holding the number one position in market cap since its inception in 2009. In most cases, Bitcoin is the market’s indicator; when Bitcoin rises, other mainstream coins tend to follow; when Bitcoin falls, they usually decline as well.

Ethereum (ETH) is the native token of the Ethereum network, also called Ether. It was developed by founder Vitalik Buterin, inspired by Bitcoin, with the goal of further development, increasing transaction speed, and supporting more applications through smart contracts. Currently, Ethereum is the second-largest cryptocurrency after Bitcoin.

Cardano (ADA) is also called the Japanese Ethereum because much of its early funding came from Japan, and its founder Charles Hoskinson was a former Ethereum co-founder.

Ripple (XRP) is the native currency of the Ripple network, operated by Ripple Labs (formerly OpenCoin). Its total supply is 100 billion. Ripple aims to become a universal standard transaction protocol for banks worldwide, enabling low-cost, fast, and convenient cross-border transfers similar to email. However, Ripple is currently embroiled in a lawsuit with the U.S. Securities and Exchange Commission (SEC), which claims that XRP issued by Ripple is a security.

Bitcoin Cash (BCH), launched in December 2017, is a result of a hard fork from Bitcoin, increasing block size to handle more transactions and speed up processing.

Litecoin (LTC) was also inspired by Bitcoin, created by developers as a cryptocurrency using proof-of-work, and has been around since 2011, making it a veteran mainstream coin.

What are altcoins, and which altcoins are popular now?

Altcoins refer to digital currencies that serve as alternatives to Bitcoin. As the market developed, the distinction between mainstream coins and altcoins has become less clear. In the early days of the crypto market, Litecoin was also created by mimicking Bitcoin, so it was called one of the earliest Bitcoin “clones,” but this term is rarely used now.

For example, Dogecoin (DOGE), launched in 2013, is a relatively long-standing crypto asset. Before 2021, Dogecoin’s price was low, and its market cap ranked relatively low as well, classifying it as an altcoin. However, recently, driven by celebrities like Elon Musk and institutions, Dogecoin has surged repeatedly, and its market cap has entered the top ten in the crypto market. Since Dogecoin’s rise is largely driven by short-term market sentiment, its future performance remains uncertain, making it difficult to definitively categorize it as an altcoin or a mainstream coin.

In fact, altcoins are not fake or counterfeit crypto assets; they are also created using blockchain technology. However, compared to mainstream coins, altcoins generally have lower recognition and liquidity.

As the market continues to evolve and capital flows into speculation, each phase tends to produce a batch of “star altcoins.” For example, in the past month, animal-themed tokens have become popular, sparked by the surge of Dogecoin, leading to a wave of tokens named after various animals, such as SHIB (Shiba Inu), SDOG (Puppy), AKITA (Akita Inu), PIG (Pig), etc. Meanwhile, DeFi tokens and NFT-related altcoins also maintain a certain level of popularity.

Conclusion: Over time, the top ten mainstream coins may fall out of favor due to slow development, insufficient technological iteration, or outdated concepts. Conversely, lower-ranked altcoins may rise to become mainstream coins. Ultimately, this depends on the recognition of the general investors in the crypto market and the intrinsic application value of the assets. When choosing investment targets, investors should carefully examine the underlying value support and market acceptance of the tokens.