Understanding Altcoins: Beyond Bitcoin

Since Bitcoin was introduced in 2008, the cryptocurrency ecosystem has expanded exponentially. Today, there are over 2000 digital assets that are not Bitcoin but are collectively referred to with a common term – altcoin. This term originates from the idea that Bitcoin is the original cryptocurrency, and all others are alternative options.

What exactly is an altcoin?

An altcoin is any digital asset – coin or token – that is not Bitcoin. The nomenclature has become popular as a practical solution for categorizing thousands of different projects. Interestingly, many of these assets technically should be called tokens, but the term altcoin covers both categories. Iconic examples include ERC-20 tokens, which operate on the Ethereum blockchain.

Beginnings and evolution

A large part of early altcoins were created through a process known as a hard fork – essentially modified versions of Bitcoin with certain changes. Despite some structural similarities, each altcoin has unique features and functionalities that distinguish it from others.

Consensus mechanisms

Altcoins derived from Bitcoin typically inherit the proof-of-work consensus algorithm (PoW). Mining remains a central process, but the cryptocurrency world is not limited to this approach.

Many projects experiment with alternative methods for achieving consensus in decentralized blockchain networks:

• Proof of Stake (PoS) – the most common alternative, where validators are chosen based on their stake in the network
• Delegated Proof of Stake (DPoS) – a variant where token holders delegate their voting rights
• Proof of Burn (PoB) – a mechanism where cryptocurrency is burned for validation
• Delegated consensus algorithms – based on delegated authority
• Delayed Proof of Work – a modified version of PoW

Language and perception

The term “altcoin” today is used as a neutral descriptor, regardless of the status or performance of a given asset. It should not carry a positive or negative connotation. In contrast, the term “shitcoin” is explicitly dismissive and expresses clear disapproval.