There are six different types of altcoins. Altcoins can possess more than one of these characteristics.
Stablecoins
Since the launch of cryptocurrencies and up till now, the market has been filled with high volumes of volatility. What stablecoins aim to do is to reduce this volatility by pegging their value to the U.S dollar, other cryptocurrencies or metals such as gold. The prices of these stablecoins should not exceed a certain narrow range. What these stablecoins provide is a means for users to retain their purchasing power in periods of volatility and allow them to retain their profits without leaving the blockchain.
Memecoins
Memecoins are based on pop cultural references or popular trends at that moment. In a short time, these coins can gain popularity and shoot to high values. These are often promoted by online figures such as influencers or investors that wish to capitalize on short-term gains. These values usually last for a short period. One famous example is that of Dogecoin which hit an all-time high of US$0.68 but now sits at US$0.08 at the time of writing. These coins are extremely volatile and its value only remains as long as the hype.
Utility Tokens
These tokens are used to provide services in a blockchain network. They can be used to pay for network fees, purchase services or redeem rewards. One example of this is $MATIC on games such as Sunflower Land where the currency can be used to purchase items from the in-game store. These tokens can be purchase and held but should be utilised to keep their blockchain network functioning.
Governance Tokens
Governance Tokens grant holders certain rights within a blockchain. This can include having an input in decisions of decentralized autonomous organizations (DAO) or have a right to vote in the changing of protocols. These tokens are used mostly on private blockchains.
Payment Token
These tokens are primarily used as currencies to exchange value between parties. The biggest example of this is Bitcoin.
Security Tokens
These tokens are often offered on the stock market. They act as tokenized assets where values of certain assets such as stocks or real estate can be transferred into these tokens. Security tokens have to be secured and held for them to work and are regulated by the Securities and Exchange Commission.