“Altcoin” is a combination of two words: “alt” and “coin”; alt signifying ‘alternative’ and coin signifying (in essence) ‘cryptocurrency.’ Thus together they imply a category of cryptocurrency that is alternative to the digital currency Bitcoin. After the success story of Bitcoin, many other peer-to-peer digital currencies have emerged in an attempt to imitate that success. While Bitcoin was the first cryptocurrency, and remains the best-known, it is now only one of hundreds of cryptocurrencies, which all seek to improve upon Bitcoin in various ways.
A lot of altcoins are built up on the basic framework provided by Bitcoin. Thus most altcoins are peer-to-peer, involve a mining process by which users solve difficult problems to unlock blocks, and offer efficient and cheap ways to carry out transactions on the web. But even with many overlapping features, altcoins vary widely from each other – altocoins differ themselves from bitcoin with a range of procedural variations, including different proof-of-work algorithms, different means by which users can sacrifice energy to mine blocks, and application enhancements to increase user anonymity.
The earliest notable altcoin, Namecoin, was based on the Bitcoin code and used the same proof-of-work algorithm – and like Bitcoin, it is limited to 21 million coins. Namecoin was created in early 2011. Its primary purpose was to decentralize domain-name registration, which would make internet censorship much more difficult.
Current leading examples of altcoin include Litecoin, Dogecoin, Ethereum, and Ripple. Litecoin is seen as the closest competitor to Bitcoin.
Introduced in October 2011, shortly after Namecoin, Litecoin was branded as the ‘silver to Bitcoin’s gold.’ While fundamentally similar in code and functionality to Bitcoin, Litecoin differs from Bitcoin in several essential ways. It allows mining transactions to be approved every 2,5 minutes, to Bitcoins 10 minutes, and it also allows for a total of 84 million coins to be created – exactly 4 times higher than Bitcoin’s (and Namecoin’s) 21 million coins. It also uses a different proof-of-work algorithm than Bitcoin – scrypt, a sequential function that is much more memory-hard than most proof-of-work algorithms.
As of July 2018 there are more than 1600 cryptocurrencies available over the internet, all but one of which are altcoins. New cryptocurrencies can be created at any time; additionally, there are many older cryptocurrencies which are no longer on the market.