What are altcoins?
How they differ from Bitcoin and why we care
Altcoins, short for "alternative coins", are all the cryptocurrencies that aren't Bitcoin. Think of them as Bitcoin’s younger siblings, created by developers who wanted to improve on Bitcoin’s original design or serve new purposes.
Altcoins tweak the "rules" of how Bitcoin works, making them appealing for different uses.
How they differ
Bitcoin is the first cryptocurrency, designed to be a secure, decentralized store of value and a peer-to-peer digital cash system. Often called “digital gold”, Bitcoin is valued for its stability, limited supply of 21 million coins, and robust security.
Altcoins build on this foundation with unique features that cater to different uses. For example, Ethereum, a leading altcoin, introduced "smart contracts". These are self-executing contracts that allow developers to create decentralized applications (DApps) on the blockchain. This innovation has paved the way for decentralized finance (DeFi), digital collectibles known as NFTs, and other blockchain-based services.
Some altcoins, such as Chainlink, offer specific tools Bitcoin doesn’t, such as connecting smart contracts with real-world data, enabling applications like insurance and supply chain management. Altcoins often use different systems for transaction validation.
Bitcoin operates on Proof-of-Work (PoW), a consensus method that requires energy-intensive mining. In contrast, many altcoins, including Ethereum after its recent update, have adopted Proof-of-Stake (PoS) to lower energy consumption and increase transaction speed, making them more environmentally friendly and scalable.
Bitcoin remains the most recognized and stable cryptocurrency, with the largest market cap and lower volatility compared to altcoins. Altcoins, however, typically have smaller market caps, leading to more price volatility, which can offer both high-reward opportunities and greater risk.
Altcoins are also a hub for blockchain experimentation. Privacy-focused coins such as Monero prioritize anonymous transactions, while stablecoins like Tether (USDT) are pegged to traditional currencies for price stability, making them useful for daily transactions or as safe havens in volatile markets.
Bitcoin focuses on being a secure, decentralized digital currency, while altcoins expand the possibilities for blockchain technology with specialized features, innovative applications, and enhanced transaction methods that meet diverse needs in the crypto ecosystem.
