What Are Altcoins?

Alternative cryptocurrencies to Bitcoin are known as altcoins. They have certain qualities in common with Bitcoin, but they vary in other aspects. Some cryptocurrencies, for example, create blocks or validate transactions using a different consensus process. Or they set themselves apart from Bitcoin by offering new or enhanced features, such as smart contracts or minimal price fluctuation.
There were almost 9,000 cryptocurrencies in March 2021. Altcoins accounted for almost 40% of the overall cryptocurrency market in March 2021, according to CoinMarketCap. 1 Altcoin price fluctuations tend to follow Bitcoin’s path because they are generated from it. Analysts believe that as cryptocurrency investing ecosystems mature and new markets emerge for these coins, price fluctuations for altcoins will become independent of Bitcoin’s trading signals.
Bitcoin and altcoins have a similar core foundation. As a result, they exchange code and operate as peer-to-peer systems or as a massive computer capable of simultaneously processing enormous quantities of data and transactions. Altcoins, in some cases, seek to be the next Bitcoin by becoming a low-cost means of digital transactions. However, there are many distinctions between the two entities. Bitcoin was one of the earliest cryptocurrencies, and its philosophy and design set the bar for the development of subsequent coins. However, there are numerous flaws in its execution. Proof-of-Work (PoW), for example, is an energy-intensive and time-consuming consensus process for creating blocks. The smart contract capabilities of Bitcoin are similarly restricted. To gain a competitive edge, altcoins build on Bitcoin’s perceived shortcomings. To reduce energy usage and the time it takes to produce blocks and validate new transactions, some cryptocurrencies employ the Proof-of-Stake (PoS) consensus mechanism. Other example is ether, the world’s second-largest cryptocurrency by market capitalization, which is utilised in smart contracts on Ethereum as gas (or payment for transaction fees). Traditional criticisms of Bitcoin are also addressed by altcoins. Stablecoins, for example, do not have the price fluctuation of Bitcoin, making them suitable for daily transactions.

The word “altcoin” is an abbreviation of “Bitcoin alternative,” and thus describes every single cryptocurrency except for Bitcoin. For example NagriCoin is altcoin.

Altcoins can differ from Bitcoin in a range of ways. Some have a different economic model or a different coin-distribution method, like altcoins that were given away to all citizens of a country. Others employ different proof-of-work mining algorithms, perhaps to resist specialised mining hardware — or maybe they don’t even rely on proof of work at all. Several altcoins offer a more versatile programming language to build applications on top of, while yet others offer more privacy compared to Bitcoin. And there are also altcoins that serve very specific, non-monetary use cases, like domain name registry or data storage pointers.