Altcoins Explain: What Is Altcoin
What Is an Altcoin?
In general, all cryptocurrencies that are not Bitcoin (BTC) are referred to as altcoins. Since most cryptocurrencies are branched from one of the two, however, some people consider altcoins to be all cryptocurrencies other than Bitcoin and Ethereum (ETH). To validate transactions, create new blocks, or set themselves apart from Bitcoin and Ethereum by offering extra features or functions, some cryptocurrencies employ distinct consensus techniques.
Developers of altcoins typically have different goals or purposes in mind for the tokens or cryptocurrencies they create and issue. Find out more about cryptocurrencies and how they differ from Bitcoin.
Key Takeaways
All cryptocurrencies other than Bitcoin (and, for some, Ethereum) are referred to as altcoins.
Tens of thousands of cryptocurrencies are available for purchase.
Depending on their intended use, altcoins can be classified into various categories.
Although the future of altcoins is uncertain, they will endure as long as the blockchain for which they were intended is used and developed.
Understanding Altcoins
The term “altcoin” combines the terms “alternative” and “coin.” In general, all tokens and cryptocurrencies that are not Bitcoin fall under this category. Altcoins are a part of the blockchains that they were specifically made for. A lot of them are forks from Ethereum and Bitcoin, which form a new blockchain from an existing one. Usually, there are multiple reasons why these forks occur. Developers typically disagree with each other and go off to create their own coin.
Many cryptocurrencies, like ether, which is used by Ethereum to pay transaction fees, have specific purposes within their individual blockchains.
Others, like Ripple’s efforts to use the XRP Ledger and XRP to attract the banking industry with a speedier payment system, fork or are constructed from scratch in an effort to establish a blockchain and token that appeals to a particular industry or group.
The goal of altcoins is to outperform the perceived shortcomings of the cryptocurrency and blockchain that they are competing with or forking from. When Litecoin split off from the Bitcoin network in 2011, it became the first cryptocurrency. Scrypt, which is pronounced “ess-crypt,” is Litecoin’s alternative proof-of-work (PoW) consensus process to Bitcoin. It is faster and requires less energy than Bitcoin’s SHA-256 PoW consensus mechanism.
Another altcoin is ether. It did not, however, split apart from Bitcoin. It was created by Dr. Gavin Wood, Vitalik Buterin, and a few other people to be utilized in Ethereum, the biggest blockchain-based virtual machine in the world. Ether (ETH) is used to pay network participants for the transaction validation work their machines do. Additionally, it is staked, or used as collateral, to obtain the right to act as a block proposer and validator.
