Altcoin definition: A portmanteau of alternative and coin and a phrase used to describe all cryptocurrencies other than Bitcoin (and sometimes Ethereum).

An altcoin, short for alternative coin, refers to any cryptocurrency other than Bitcoin. Altcoins are designed to replicate or improve upon the features of Bitcoin while introducing innovative technologies, functionalities, or use cases. There is some debate about whether Ethereum can be considered an altcoin now given its dominance in the market.

Altcoins were introduced to diversify the cryptocurrency market and offer alternatives to Bitcoin, which remains the flagship cryptocurrency. These alternative coins aim to address certain limitations or shortcomings of Bitcoin, such as scalability, speed of transactions, or the underlying consensus mechanism.

Altcoins serve various purposes based on their unique attributes:

  • Functional Innovation: Some altcoins introduce novel features that set them apart from Bitcoin. For instance, Litecoin (LTC) was designed to offer faster transaction confirmations and a different hashing algorithm than Bitcoin.

  • Privacy and Anonymity: Coins like Monero (XMR) and Zcash (ZEC) emphasize privacy and anonymity features to provide users with enhanced confidentiality in transactions.

  • Smart Contracts and DApps: Ethereum (ETH) pioneered the concept of smart contracts and decentralized applications (DApps), allowing developers to build complex applications atop its blockchain.

  • Stablecoins: These altcoins are designed to maintain a stable value by pegging them to assets like fiat currencies or commodities, making them useful for trading and transferring value.

While altcoins provide further diversification in the cryptocurrency market, as well as providing competition for Bitcoin, altcoins can be highly volatile, and investing in them requires careful research and risk assessment.

The altcoin landscape is ever-evolving, with new altcoins regularly being introduced to the market. Some altcoins gain traction and recognition, while others face challenges or fade away over time.

These alternative coins offer innovations, functionalities, and use cases that expand the possibilities of blockchain technology. Understanding altcoins empowers individuals to explore the cryptocurrency market beyond Bitcoin, enabling them to make informed investment decisions and engage with the dynamic world of digital finance.

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Michelle Legge
By Michelle LeggeHead of Crypto Tax Education
Updated Nov 9, 2023
This article has been fact checked and reviewed as per our editorial policy.