Guide to DeFi tokens and altcoins

Whether you're just starting your crypto journey or you've been trading Bitcoin for years, there’s a good chance you’ve tried to dig into the world beyond Bitcoin and Ethereum only to find yourself confused by all the different cryptocurrencies out there.

After all, in the decade since Bitcoin began to catch on, thousands of alternatives have emerged — with an ever-growing selection available via Coin Lot. In the last few years, tokens that help power decentralized finance (or DeFi) protocols have become increasingly popular — and so a number of the cryptocurrencies on this list come from that world.

If you’re ready to figure out the difference between XTZ and XLM, you've come to the right place. Here (presented in alphabetical order) is key information about some of the biggest and most important cryptocurrencies that aren't Bitcoin or Ethereum. Each of these "altcoins" (short for “alternative coins”) is tradable via Coin Lot and other major exchanges, and they all have unique features, goals, and use cases.

Aave (AAVE)

Released: November 2017

Aave is a decentralized lending protocol (part of the broader group of protocols known as DeFi) that allows users to deposit crypto assets to earn APY rewards, and to borrow other crypto assets against that collateral. It makes it possible for users to borrow, lend, and earn interest on their crypto — making use of smart contracts instead of intermediaries like banks.

AAVE is a “governance token” that gives holders a say in the future of the protocol. It can also be staked, thus earning rewards for holders.

The Aave protocol facilitates the creation of lending pools. If you want to lend some of your crypto, you can deposit it into a pool. Anyone who wants to borrow deposited assets can draw from Aave pools as long as they provide sufficient collateral. (Fun fact: “Aave” means ghost in Finnish.)

How it works:

There are two types of tokens issued by the protocol: the native AAVE token and aTokens.

AAVE tokens, beyond giving holders a say in the protocol’s governance, offer advantages including discounts on fees or free use of some of the protocol’s services.
aTokens are received by lenders depositing to the lending pools, and they entitle them to earn interest payments. (If you deposit, say, ETH, you’ll receive aETH in return. When you pull your ETH out of Aave, your aETH will automatically be converted back to ETH.)
To help users take advantage of arbitrage opportunities (where a crypto might be valued higher on one exchange than it is on another) and maximize profits in the DeFi ecosystems, Aave also provides flash loans. These loans require no collateral and are settled instantly. The condition is that the borrowed amount needs to be paid back within the same transaction, along with a 0.09% fee, or the whole process will be cancelled and no funds are borrowed.
You can connect your crypto wallet to Aave at app.aave.com

Keep in mind: Standard loans on Aave require collateral (such as ETH) provided by the borrower. Because crypto can be volatile, it’s important to choose the collateral carefully if you use Aave to borrow crypto. If your collateral’s value drops below a certain threshold it can be liquidated (as in: you won’t get your money back) and you might be subject to added fees. For this reason, stablecoins are a popular collateral option. Be sure to carefully read Aave’s terms and conditions.

Algorand (ALGO)

Released: June, 2019

Algorand seeks to build on similar projects like Ethereum by improving scalability, security, and reducing the amount of time it takes for transactions on the network to be considered “final.”

Developers can use Algorand to create decentralized applications — for loans, decentralized trading, and many other uses — that can take advantage of fast, low-cost transaction processing while scaling to a large number of users.

How it works: Algorand nodes reach consensus about what should appear in the blockchain through a process called PPoS (or “Pure Proof of Stake”) — which uses a staking system (instead of a Proof of Work mining system like Bitcoin’s) to verify new transactions and produce new crypto tokens.

Algorand network participants (or nodes) are able to stake some of their ALGO in exchange for the chance to be randomly selected to propose a new block of verified transaction. The winner is awarded new ALGO.

Keep in mind: PPoS systems like Algorand’s are more efficient than Proof of Work blockchains like Bitcoin in terms of electricity consumption, because they don’t rely on thousands of miners spending energy to solve cryptographic puzzles for the chance to win a block reward and earn transaction fees.

Bitcoin Cash (BCH)

Released: August, 2017

Bitcoin, in its original conception, was designed to be a form of digital cash people could use to make transactions online. Over time it has evolved into a “store of wealth” more like digital gold. Bitcoin Cash was created to continue the original peer-to-peer cash idea — via a high-volume, low-fee network that would be accessible to anyone with an internet connection.

How it works: The Bitcoin Cash blockchain is based on the original Bitcoin blockchain, but it has some distinct differences. A major one is an increased maximum block size of 32MB, compared to just 1MB on Bitcoin. Increased block size allows Bitcoin Cash to process transactions faster than Bitcoin, with lower fees and an increased per-second transaction capacity.

Keep in mind: Bitcoin Cash is available via virtually all exchanges and is supported by PayPal. But remember that even though it was designed to be faster and cheaper than Bitcoin, that doesn’t mean that Bitcoin users have abandoned the original for a newer version.

Cardano (ADA)

Released: September 2017

Cardano is designed to be a next-gen evolution of the Ethereum idea. It’s intended to be a flexible, sustainable, and scalable platform for running smart contracts, which will allow the development of a wide range of decentralized finance apps, new crypto tokens, games, and more.

Cardano’s native cryptocurrency is ADA, which can be used to store value, to send and receive payments, and for staking and paying transaction fees on the Cardano network.

How it works:

Cardano’s goal is to be the most environmentally sustainable blockchain platform. It uses a unique proof-of-stake consensus mechanism called Ouroboros, as opposed to the energy-intensive proof-of-work system currently used by Bitcoin and Ethereum. (Ethereum is also moving to a proof-of-stake system via the ETH2 upgrade).
The Cardano blockchain is also divided into two separate layers: the Cardano Settlement Layer (CSL) and the Cardano Computing Layer (CCL). The CSL contains the ledger of accounts and balances (and is where the transactions are validated by the Ouroboros consensus mechanism). The CCL layer is where all the computations for apps running on the blockchain are executed — via the operations of smart contracts.
The idea of splitting the blockchain into two layers is to help the Cardano network process as many as a million transactions a second.

Keep in mind: As of May 2021, smart contact functionality has yet to be rolled out on Cardano. Developers say it will happen this year.

Chainlink (LINK)

Released: November, 2017

Chainlink is a decentralized oracle network that is powered by the LINK Ethereum token.

Oracles are an important part of the decentralized finance (or “DeFi”) landscape: in the absence of a centralized authority, they’re the main mechanism by which DeFi apps receive accurate external data (especially prices). Until Chainlink was developed, there was no reliable solution that allowed smart contracts and DeFi apps to access external market prices.

How it works: Chainlink was designed to incentivize a global network of computers (or “nodes”) to provide accurate data to Chainlink’s oracles. There are many oracles operating today, including ones that provide price data across a wide range of assets, weather data, and location data.

LINK is the token used to pay for services on the network and to incentivize nodes to perform verifiably honest work and provide accurate data.

Keep in mind: In order to become a node and start providing data to Chainlink oracles, holders must stake LINK tokens into a smart contract to act as an incentive against misbehaving or submitting false data to the network.

Compound (COMP)

Released: September 2018

Compound is a decentralized lending protocol that allows users to deposit crypto assets to earn APY rewards, and to borrow other crypto assets against that collateral. It’s part of the growing suite of DeFi apps that primarily run on the Ethereum blockchain.

How it works:

When you supply an asset to Compound, you immediately begin receiving interest on that deposit. A borrowing limit is then determined, based on the value of the collateral you’ve supplied.
When you deposit funds into Compound, you receive a special cToken in return. For example, if you deposit USD Coin into Compound, you’ll find cUSDC in your wallet — and when you withdraw your USDC, the cUSDC will disappear from your wallet. (cUSDC can also be held, transferred, and traded just like any other token.)
The yield on the crypto you deposit into Compound currently comes in two forms: interest in the form of cTokens and rewards in native COMP token. The interest rate for each Compound market is dynamic and based purely on supply and demand.
Holders of COMP tokens also get to vote on the future of the protocol itself, enabling Compound to operate in a fully decentralized way.
You can connect your crypto wallet to Compound at https://app.compound.finance

Keep in mind: In traditional finance, the model of supplying one asset to borrow another is called “over-collateralized lending.” It can help investors to gain exposure to more markets and enable advanced trading strategies like leveraging borrowed crypto to invest in other assets (but keep in mind that there are risks associated with collateralized lending, including potentially losing your collateral).

Cosmos (ATOM)

Released: March 2019

Cosmos aims to be the “internet of blockchains” by allowing developers to build their own blockchains, each of which are interconnected via the Cosmos network. ATOM is the native cryptocurrency, used for staking and securing the “Global Hub,” which connects all of these blockchains.

How it works: The main idea of Cosmos is to allow for faster and cheaper decentralized applications — anything from an NFT marketplaces to decentralized exchanges — by allowing them to run on their own dedicated blockchains.

All of these independent blockchains (called “zones”) are interconnected by the Inter-Blockchain Communication protocol, or IBC.
Cosmos also provides developers with prebuilt modules that allow them to quickly create blockchains that are completely customizable for their specific use case.
The Cosmos consensus engine, IBC protocol, and software developer kit are designed to enable ease of use and interoperability between chains, while maintaining the security and transaction cost and speed developers would expect from other leading blockchain platforms.

Keep in mind: You can earn rewards by staking ATOM via Coin Lot.

Zcash (ZEC)

Released: October 2016

ZEC is known as a “privacy coin” due to its focus on anonymity for users and the transactions they make on the ZCash blockchain. It was developed by cryptography experts to address what they saw as privacy issues with the Bitcoin network.

How it works: ZCash enables a range of public and private transaction types. Public addresses can send “shielded” transactions to private addresses, or transactions can either be fully private or fully public. ZCash makes use of Zero-Knowledge proofs (or “zk-SNARKS”) in order to keep information about the sender, receiver, and the transacted amount private whenever a “shielded” ZEC transaction is made. An optional “Memo” field can also be filled in whenever a user makes a payment. This field can only be accessed by the recipient, which could prove useful for a number of interesting use cases across the FinTech and DeFi spaces.

Keep in mind: The Zcash protocol was designed to evolve in-line with the needs of the community over time. Governed by the Zcash Improvement Proposal process, ZCash token holders can vote towards proposed changes and upgrades to the protocol.