Understanding altcoins: Everything about alternative cryptocurrencies beyond Bitcoin

What are altcoins?

The term altcoin refers to any cryptocurrency that is not Bitcoin. The designation literally means “alternative Coin” and is based on the historical fact that Bitcoin is the first and original digital currency. Everything that was developed afterward received this categorization. In modern understanding, the definition also includes digital assets that are technically more classified as tokens – well-known representatives here are the ERC-20 tokens that run on the Ethereum blockchain.

The Explosive Diversity of the Crypto Ecosystem

Since Bitcoin was introduced in 2008, more than 2,000 alternative cryptocurrencies have emerged. A large part of these altcoins was created through so-called hard forks from the Bitcoin source code. Despite these common roots, each individual altcoin has developed its own distinct features and characteristics. This diversity has allowed the crypto market to quickly differentiate itself and explore various use cases.

Different Technical Approaches

The altcoins that have emerged from Bitcoin forks often use similar mining methods based on Proof-of-Work. However, there is a wide variety of other cryptocurrencies that employ completely different mechanisms to achieve consensus in a distributed blockchain network.

The most important consensus mechanisms

Proof of Stake has established itself as the most popular alternative to Proof-of-Work. In addition, there are other established methods such as Delegated Proof of Stake, Proof of Burn, Proof of Authority, and Delayed Proof of Work. Each of these consensus mechanisms pursues a slightly different approach to achieve network security and decentralization.

Altcoin – a neutral term

Although some market participants perceive the term “altcoin” as derogatory, it is used neutrally in the professional community. It expresses neither a positive nor a negative assessment. The term “Shitcoin,” on the other hand, is clearly negatively charged and is specifically used as a pejorative term for inferior projects.