What Are Altcoins, and Why Do They Exist?

September 25, 2019, by Maayan
Bitcoin is one of many cryptocurrencies. Over the past decade, several alternatives have come into existence. Why are there so many altcoins?

Bitcoin is the crypto market’s leading coin, but there are also thousands of other alternative coins on the market. These are called “altcoins,” and the term includes almost every cryptocurrency that isn’t Bitcoin. In fact, some major altcoins, such as Ethereum and Litecoin, have become nearly as successful as Bitcoin itself.

“Minor altcoins,” on the other hand, are cryptocurrencies with very low market rankings, and these make up the vast majority of the crypto market. This category isn’t clearly marked, but broadly speaking, minor altcoins are the cryptocurrencies that you never hear about. Let’s dig a little deeper and find out why altcoins exist.

How Did Altcoins Originate?

Developers began to create custom versions or “forks” of Bitcoin as early as 2011. Early forks included cryptocurrencies such as Peercoin, Devcoin, Litecoin, and several other coins that shared most of Bitcoin’s code and features. Many of Bitcoin’s earliest forks have fallen into obscurity—apart from Litecoin, most early altcoins are no longer notable.

The second wave of altcoins emerged in 2017 as a result of Ethereum’s token standards. This feature made it incredibly easy for startups to create their own cryptocurrency and sell it through an Initial Coin Offering (or ICO). As of 2019, there are over 200,000 altcoins based on Ethereum, and they are still present at every level of the crypto market.

Altcoin creation is currently slowing down. This is partially due to the fact that the U.S. SEC is beginning to enforce securities regulations, which makes it very difficult to create a new cryptocurrency legally. However, crypto projects outside of the United States are still thriving, and platforms like Binance Chain attract plenty of new altcoins every month.

What Are Altcoins Good For?

Usually, major altcoins serve a specific purpose. Litecoin and Bitcoin Cash, for example, were designed to provide fast and low-fee payments. Monero, meanwhile, was created with privacy in mind. XRP was designed to serve the needs of banks. Ethereum, finally, is intended to power blockchain-based apps. These are all highly-regarded cryptocurrencies.

Minor altcoins, meanwhile, serve extremely niche purposes. Often, these tokens are simply meant to be spent on a very specific app, and they are usually created as a way to raise money for the app in question. These tokens rarely have any distinctive features, and they are often identical to higher-ranking cryptocurrencies. In fact, some minor altcoins are outright scams.

Some investors see minor altcoins as an investment opportunity. If you’re able to notice a promising cryptocurrency before it becomes successful, you stand to make a lot of money. However, this is a very risky strategy. Instead, Bitcoin and high-ranking altcoins like Litecoin provide more reliable investments: they’re low risk and highly reputable.

Disclaimer: information contained herein is provided without considering your personal circumstances, therefore should not be construed as financial advice, investment recommendation or an offer of, or solicitation for, any transactions in cryptocurrencies.