Altcoins

An “altcoin” is considered every cryptocurrency other than Bitcoin. As its name suggests, an altcoin is an “alternative coin”. Altcoins were launched after the initial success of Bitcoin and have contributed positively to the rapid development and expansion of the whole niche. Although altcoins are considered alternatives to Bitcoin, they are not its substitutions.

The list of altcoins is constantly expanding and as of the time of this writing, there are more than 2290 altcoins. However, the number of active cryptocurrencies is growing on a daily basis, as new and new token concepts come to life. Although there are so many altcoins out there, it is just a small part of them that survives in the long term and enjoys continued interest from investors.

Why were altcoins designed?

The concept of Bitcoin unleashed the potential behind cryptocurrencies to disrupt the idea of payments, information storage and value transactions. However, although a pioneer, Bitcoin was focused on solving only one problem – to find a way to ensure free-of-charge payments directly from one user to another. What was the more valuable thing here was Bitcoin’s underlying technology – the blockchain (or distributed ledger). The creators of other altcoins acknowledged its benefits and started to think about other existing problems that Bitcoin’s model can solve.

That is how altcoins were born. The first altcoin was “Namecoin”, launched in April 2011 which was a very similar concept to the one of Bitcoin but it allowed for improved anonymity. Altcoins usually try to focus on any perceived Bitcoin limitations and improve them in a way to provide competitive advantages to their users. Altcoins are designed and launched each day. What they all have in common is the fact that they try to improve the Bitcoin model in some way – some try to bring more flexibility for payment-processing services, others are focused on ensuring bigger adoption and lower transaction costs, thirds are relying on speed and efficiency, and so on.

Most altcoins are built on the basis of the Bitcoin’s framework which means they are peer-to-peer (user-to-user with no intermediaries in between), involve token mining and provide a secure way to execute and record transactions. The reason why many altcoins use the same building blocks like those behind Bitcoin is because it is relatively easy to build upon. The platform is free and open-source which makes it available to everyone. However, although all the similarities, altcoins are very different from one another.

Examples of popular altcoins

The most popular altcoins today are Ethereum, XRP (Ripple), Litecoin, Monero, Tether, Stellar, etc. Although all of them are considered altcoins, they are very different from one another. If we take Litecoin, for example, we will see that it uses a model that is very similar (in terms of code and functionality) to the one of Bitcoin. What Litecoin does differently, however, is the fact that it allows for mining transactions to be approved every 2.5 minutes, which is 4 times quicker than in the case of Bitcoin. This helps Litecoin ensure a more efficient and fast network. Another difference is that Litecoin is limited to 84 million coins, while Bitcoin is limited to 21 million coins.

The case of Ethereum is also very interesting. Aside from the coin (ETH) itself, Ethereum is a blockchain that is considered even better than Bitcoin’s one. Today, Ethereum’s blockchain is the most popular one and helps numerous applications ensures their successful and secure operation.

Aside from the abovementioned altcoins, there are plenty of others which are less popular, but still an interesting investment opportunity. Many popular altcoins are priced less than a dollar which makes them an affordable choice even for beginners with less capital.

Key Takeaways

  • Any other coin, different than Bitcoin, falls under the definition “altcoin”
  • Altcoins are designed to improve the limitations of Bitcoin by employing its underlying technology – blockchain
  • There are thousandths of altcoins, each one serving a specific different purpose or trying to solve a particular problem