DEFINITION of 'Altcoin'

Altcoins are the alternative cryptocurrencies launched after the success of Bitcoin. Generally, they project themselves as better substitutes to Bitcoin. The success of Bitcoin as the first peer-to-peer digital currency paved the way for many to follow. Many altcoins are trying to target any perceived limitations that Bitcoin has and come up with newer versions with competitive advantages. As the term 'altcoins' means all cryptocurrencies which are not Bitcoin, there are hundreds of altcoins. 

BREAKING DOWN 'Altcoin'

"Altcoin" is a combination of two words: "alt" and "coin"; alt signifying 'alternative' and coin signifying (in essence) 'cryptocurrency.' Thus together they imply a category of cryptocurrency that is alternative to the digital currency Bitcoin. After the success story of Bitcoin, many other peer-to-peer digital currencies have emerged in an attempt to imitate that success. While Bitcoin was the first cryptocurrency, and remains the best-known, it is now only one of hundreds of cryptocurrencies, which all seek to improve upon Bitcoin in various ways.

Many of the altcoins are built up on the basic framework provided by Bitcoin. Thus most altcoins are peer-to-peer, involve a mining process by which users solve difficult problems to unlock blocks, and offer efficient and cheap ways to carry out transactions on the web. But even with many overlapping features, altcoins vary widely from each other - altocoins differ themselves from bitcoin with a range of procedural variations, including different proof-of-work algorithms, different means by which users can sacrifice energy to mine blocks, and application enhancements to increase user anonymity. 

The earliest notable altcoin, Namecoin, was based on the Bitcoin code and used the same proof-of-work algorithm - and like Bitcoin, Namecoin is limited to 21 million coins. Introduced in April 2011, Namecoin primarily diverged from Bitcoin by making user domains less visible, allowing users to register and mine using their own .bit domains, which was intended to increase anonymity and censorship resistance. 

Current leading examples of altcoin include Litecoin, Dogecoin, Ethereum (2nd to Bitcoin in market capitalization as of May 2018), and Ripple. Litecoin is seen as the closest competitor to Bitcoin.

Introduced in October 2011, shortly after Namecode, Litecoin was branded as the 'silver to Bitcoin's gold.' While fundamentally similar in code and functionality to Bitcoin, Litecoin differs from Bitcoin in several essential ways. It allows mining transactions to be approved every 2 1/2 minutes, to Bitcoins 10 minutes, and it also allows for a total of 84 million coins to be created - exactly 4 times higher than Bitcoin's (and Namecon's) 21 million coins. It also uses a different proof-of-work algorithm than Bitcoin - scrypt, a sequential function that is much more memory-hard than most proof-of-work algorithms. This is supposed to make it much more difficult to generate bitcoins, as increasing memory space required for the proof-of-work algorithm reduces the mining speed, and makes it harder for any one user or group of users to dominate the blockchain. 

As of May 2018 there are more than 1500 cryptocurrencies available over the internet, all but one of which are altcoins. New cryptocurrencies can be created at any time; additionally, there are many older cryptocurrencies which are no longer on the market.  

RELATED TERMS
  1. Bitcoin Exchange

    A bitcoin exchange is a digital marketplace where traders can ...
  2. Litecoin

    Launched in the year 2011, Litecoin is an alternative cryptocurrency ...
  3. Bitcoin Classic

    A fork from Bitcoin Core that proposed increasing the size of ...
  4. Bitcoin Private (BTCP)

    Bitcoin Private combines the popularity of bitcoin with the privacy ...
  5. Bitcoin Whale

    Large holders of bitcoins are called bitcoin whales, whose actions ...
  6. Bitcoin XT

    A fork from Bitcoin Core that proposed increasing the size of ...
Related Articles
  1. Tech

    Cryptocurrency Market Cap Surpasses $200 Billion

    The total market capitalization for all cryptocurrencies topped $200 billion for the first time ever.
  2. Tech

    What is Bitcoin Gold, Exactly?

    Bitcoin gold is a hard fork of bitcoin that attempts to decentralize the mining process.
  3. Tech

    Bitcoin Price Tops $18K: TD Ameritrade To Launch Bitcoin Futures Trading Dec. 18

    The cryptocurrency took less than a week to cover the distance between $17k and $18k.
  4. Tech

    How Bitcoin Can Change The World

    Bitcoin has the potential to not only create savings for consumer, but also to transform global transactions.
  5. Tech

    Crypto Market Cap Hits Record High As Bitcoin Price Rises Again

    Bitcoin's price crossed the $7,000 mark again after crashing over the weekend.
  6. Tech

    Bitcoin Vs. Litecoin: What's The Difference?

    Litecoin is often referred to as "the silver to Bitcoin's gold." But what is Litecoin, and how does it compare to its more famous counterpart?
  7. Tech

    How Much Will the Cryptocurrency World Keep Growing?

    Bitcoin was the first major cryptocurrency; now there are 800 others. Where will the cryptocurrency industry end up as it continues to grow?
  8. Tech

    Two Factors Influencing Bitcoin's Price Right Now

    Bitcoin has been on a roll this year. Here are two factors that could further drive up prices.
  9. Tech

    Bitcoin Price Reverses Course And Is Moving Up Again

    The cryptocurrency's price is nearing $6,000 once again, after reversing two days of declines.
  10. Tech

    Have Cryptocurrency Prices Peaked?

    After weeks of gains for Bitcoin, Ethereum, and other cryptocurrencies, many prices plummeted last week. Have we reached the peak?
RELATED FAQS
  1. Why do Bitcoins have value?

    Performing with transactional anonymity, Bitcoin has value as a private digital currency, investment tool and social networking ... Read Answer >>
  2. Is Bitcoin legal in the US?

    Learn about the legality of Bitcoin as a form of payment in the United States, as well as how it is produced and concerns ... Read Answer >>
  3. What Does the Bitcoin Blockchain Record?

    Read about the bitcoin blockchain, a public ledger shared among all bitcoin users that records the information of every single ... Read Answer >>
Trading Center