Bitcoin has inspired the emergence of numerous digital assets, with over 17,000 altcoins currently in circulation, and counting. If you are a crypto enthusiast and are still not completely aware of what this term means, make sure you don’t miss out on the altcoin definition below.
What Is An Altcoin?
The term “altcoin” is used to refer to any coin or token other than Bitcoin. It derives from the idea that BTC is the original cryptocurrency and the rest are its alternatives.
What You Need To Know About Altcoins
The appearance of altcoins dates back to 2011, three years after the birth of Bitcoin, with Namecoin being the pioneer.
Many of the existing altcoins are forks – the products of modifications of Bitcoin’s underlying protocol. Typically, forks have multiple reasons for occurring. However, most of the time, the split happens when a group of developers is not in agreement with the existing solutions and proceeds to make its own altcoin.
This means that, despite the presence of some overlapping features, every altcoin has a distinct purpose and its own functionality. For instance, some altcoins, like Bitcoin Cash, are designed to compete with Bitcoin as a payment method, while others, like Bananacoin, promote themselves as a way to raise funds for specific projects.
The altcoins that were forked from Bitcoin often follow a mining process based on the Proof of Work consensus algorithm. However, some altcoins utilize other mechanisms, such as Proof of Stake, Proof of Burn, and more.
As new altcoins keep emerging, it’s hard to predict which ones will have lasting value. One example of a cryptocurrency’s fast downfall is the Omicron altcoin, which gained 1,000% in value during the coronavirus outbreak and then fell by nearly just as much in no time.
Overall, altcoin investing can yield significant returns. However, to be successful at it, one should keep up with the crypto market dynamics and be ready to take risks, so it isn’t a good match for traders with a passive approach.
