What Are Altcoins?

Altcoins are cryptocurrencies other than Bitcoin. They share characteristics with Bitcoin but are also different from them in other ways. For example, some altcoins use a different consensus mechanism to produce blocks or validate transactions. Or, they distinguish themselves from Bitcoin by providing new or additional capabilities, such as smart contracts or low-price volatility.

As of March 2021, there were almost 9,000 cryptocurrencies. According to CoinMarketCap, altcoins accounted for over 40% of the total cryptocurrency market in March 2021.1Because they are derived from Bitcoin, altcoin price movements tend to mimic Bitcoin’s trajectory. However, analysts say the maturity of cryptocurrency investing ecosystems and the development of new markets for these coins will make price movements for altcoins independent of Bitcoin’s trading signals.

“Altcoin” is a combination of two words: “alt” and “coin.” The word “alt” is short for alternative, and “coin” means currency.

This nomenclature comes from the idea that bitcoin is the original cryptocurrency and that all others are then considered “alternate” or “alternative” coins.

Together, they imply cryptocurrencies that are an alternative to the original cryptocurrency named bitcoin.

Many altcoins have emerged, but bitcoin remains the largest and most popular of all cryptocurrencies.

The term “altcoin” is also used broadly to refer to digital assets that would technically be referred to as “tokens” rather than coins.

The best-known examples are the ERC-20 tokens that exist on top of the Ethereum blockchain.

Since the creation of Bitcoin in 2008, more than 2,000 alternative cryptocurrencies were deployed.

Many of these altcoins were created as modified copies of Bitcoin through a process known as Hard Fork. Despite sharing some similarities, each altcoin has its own functionalities.