Altcoins – definition and meaning
Altcoins are all cryptocurrencies except for Bitcoin. A cryptocurrency is a digital currency, i.e., one that exists purely electronically. They usually describe themselves as superior substitutes to Bitcoin. Bitcoin, the first cryptocurrency to go into circulation, was very popular. Its popularity encouraged the creation of new digital currencies. Altcoin creators try to target any apparent Bitcoin shortcomings.
The term ‘Altcoin’ is short for ‘alternative coin.’
There are hundreds of Altcoins in circulation at the moment. CoinMargketcap.com lists more than one thousand of them.
TechTarget has the following description of Altcoins:
“An altcoin is any digital cryptocurrency similar to Bitcoin. The term is said to stand for “alternative to Bitcoin” and is used describe any cryptocurrency that is not a Bitcoin.”
Bitcoin, the most popular cryptocurrency, came into circulation in 2009.
Altcoins use Bitcoin building blocks
Bitcoin Core is the name of the open source software that allows Bitcoin to function as a successful cryptocurrency. Open source means we can all use it freely. We can also alter and redistribute it.
Satoshi Nakamoto, who claims to be Japanese and created Bitcoin, wanted Bitcoin Core to be freely available.
That is why the most popular Altcoins use the same fundamental Bitcoin building clocks.
A typical Altcoin, however, forks at the blockchain level. Creators of new cryptocurrencies use alternate systems of consensus rules at the blockchain level.
Subsequently, each Altcoin has a completely different distributed ledger. In a distributed ledger, every transaction is recorded in multiple places simultaneously.
Some cryptocurrency creators, however, build them completely from scratch. In other words, they did not use Bitcoin’s fundamental building blocks.
Some cryptocurrencies have non-Bitcoin monetary policy rules. This is to encourage different treatment and uses.
However, like Bitcoin, most Altcoins are peer-to-peer and involve a mining process. They also offer a cheap and efficient way to carry out online transactions.
Peer-to-peer networks do not have a central server with lots of clients; all the computers are both servers and clients.
Despite their many overlapping characteristics, Altcoin makers say that they vary significantly from each other.
Altcoins are cryptocurrencies
Altcoins, like Bitcoin, are cryptocurrencies. So, what is a cryptocurrency?
A cryptocurrency is a kind of digital money or digital currency. ‘Digital,’ in this context, means that it exists only electronically. You cannot touch it like you can dollar bills or pound notes. You cannot put Altcoins in your physical wallet or piggy bank.
We also call cryptocurrencies alternative currencies or virtual currencies.
Cryptocurrency creators designed them to be ultra-secure, and in the majority of cases also completely anonymous. In other words, nobody knows the identity of the parties in a transaction.
A cryptocurrency is an online currency that uses cryptography. Cryptography is the art of creating codes and also deciphering codes.
What is a blockchain?
A blockchain provides the digital currency chain’s validity. It is a list of records or blocks. The list is forever expanding.
The blocks that make up the blockchain are secured and linked using cryptography.
Each block has a hash pointer as a link to the previous block. It also has transaction data and a timestamp.
Thanks to encryption and replication, blockchains are extremely resistant to data modification. They are also virtually impossible to hack.
To launch a cyber attack, you would need to attack every single block simultaneously. This is because the data in each block is replicated across the whole blockchain.
In the blockchain, there are nodes and miners. Nodes are the computers within the blockchain network. The computers validate transactions and enforce the rules. Miners are people in charge of the nodes. Miners complete the validation process and link blocks to the blockchain.
When miners complete a transaction process, they receive a reward in the form of cryptocurrency units. We call that process, i.e., validating and then getting a cryptocurrency unit reward, cryptocurrency mining.
Most popular Altcoins
Below is a list of the most popular Altcoins (in order):
- Ethereum or Ether (started in 2015). Ethereum refers to the decentralized platform while Ether is the cryptocurrency. However, most people also say ‘Ethereum’ when talking about the online currency.
- Ripple (Started in 2013). Ripple refers to either an open payment network or a digital currency. It is a currency exchange, real-time gross settlement system, and remittance network.
- Bitcoin Cash (Started in 2017). It is an offshoot of Bitcoin, i.e., a hard fork of Bitcoin.
- Cardano (Started in 2018). It is the technology platform that runs the cryptocurrency ‘Ada.’ You can hold Ada coins in the cryptocurrency wallet Daedalus.
- NEM (Started in 2014). This cryptocurrency’s creators introduced new features to blockchain technology such as multisignature accounts. They also introduced POI (proof-of-importance), encrypted messaging, as well as an Eigentrust++ reputation system.
- Litecoin (Started in 2011). Its system is nearly identical to Bitcoin’s. However, Litecoin is significantly faster.
Another somewhat popular Altcoin is Dogecoin. Dogecoin has the head of a Japanese dog, i.e., a Shiba Inu, in its logo. It started off as a meme (joke) currency, but caught on rapidly.