Different functionalities and consensus mechanisms can make up an altcoin. Depending on these variations, altcoins can fall into more than one category. Here’s a crash course on some of the more important categories:
Mining-based altcoins are cryptocurrencies that utilize a mining process to validate and add transactions to their respective blockchains. Mining can be done using a Proof-of-Work (PoW) consensus mechanism, depending on the specific altcoin's design. Popular mine-based altcoins include Bitcoin, Litecoin, and Monero.
Stablecoins closely track the value of fiat money like the U.S. dollar or euro. They allow users to cheaply and rapidly transfer value around the world while maintaining price stability.
Security tokens are digital assets issued on a blockchain with similarities to stock market traded securities. Some offer equity in the form of ownership, dividend payout to holders, or even bonds. Security tokens are generally launched through Security Token Offerings (STOs) or Initial Exchange Offerings (IEOs).
Meme coins are cryptocurrencies that gain popularity primarily through viral internet memes and social media, often lacking significant utility or underlying value beyond their community-driven hype. Leading examples of meme coins include DOGE, SHIB, PEPE, WSM, and others.