The term altcoin is used very differently and everyone seems to have their interpretation. That sparked a lot of discussions. Why is that and how can we easily differentiate between a Coin and an Altcoin?
The term altcoin is a combination of the two words alternative and coin. Depending on your position and attitude towards the crypto scene, the question: "What is an altcoin?" can be answered very differently. However, there are three possible and popular answers:
1. Bitcoin was the very first cryptocurrency. If you would ask a Bitcoin enthusiast, he would try to emphasize this point in his answer. So, for Bitcoin-lovers every other cryptocurrency other than Bitcoin is an Altcoin. But this answer is very formal and therefore also very unspecific.
2. The second possible answer takes into account the background and history of a cryptocurrency. In this case, every cryptocurrency that derived from Bitcoin or has used the Bitcoin source code for development is an Altcoin. Bitcoin was the first cryptocurrency and is also an open-source project. That means the code is available for everyone and can be used freely. This answer is a little more precise, but it doesn’t include coins that were created completely independently and without the use of Bitcoin's Blockchain.
3. Finally, a third possible answer is: Any cryptocurrency that fulfills the same function as Bitcoin is an Altcoin. Bitcoin was developed primarily as a store of value. As a result, all cryptocurrencies that were developed only for transactions and financial means can be declared as Altcoins. Tokens would be excluded in this case, as they have no intention of being a currency - I will explain more about Tokens in the next part of this article - This explanation is very specific and, in contrast to the second formulation, also takes into account projects that are not based on Bitcoin but pursue the same or very similar goals.
The only commonality that all 3 formulations share is that Bitcoin is not an altcoin. With its pioneering position, Bitcoin is accepted as a point of comparison and differentiated from the Altcoins.
As already mentioned, the term Altcoin stands for Alternative Coin. Altcoins are therefore alternatives to Bitcoin. Bitcoin as the first cryptocurrency was an absolute pioneer and opened a world that did not exist before. As you might imagine, when developing a whole new territory, problems arise that one could not have foreseen in advance. The same thing happened to Bitcoin. The most famous hurdles that Bitcoin was facing include:
Scaling problems. These lead to a slower transaction rate
Inefficient mining, which in the long term becomes a burden on resources and the environment
High transaction fees
This is where the altcoin developers come in. They intend to offer a better solution than Bitcoin.
A less flattering, but not entirely out of hand, justification for Altcoins is the financial aspect. Bitcoin has made millions in profits for its developers and investors. Understandably, others want to imitate this success. Nevertheless, to date, no altcoin has managed to surpass Bitcoin's market capitalization.
Depending on which formulation for Altcoins you use, the list of cryptocurrencies that belong here can be very different. In the following, I will ignore the first formulation, because in this case, every conceivable crypto-project would be on this list. I will rather list some Coins that fit for formulation 2 or 3. However, the list is by no means complete and could be expanded as required. I will only mention a few well-known projects as an example:
• Bitcoin Cash
You might be wondering why Ether is not on my list. Ethereum is one of the most successful Crypto-Projects. But its currency Ether is not listed here, and especially not as an Altcoin for a lot of reasons:
1. Ethereum has its own blockchain.
2. Strictly speaking, the currency Ether is not a coin, but a token. So, it is primarily not a currency, but an instrument.
3. Ethereum was not developed as a store of value or a means of payment and is not planned as such. Ether is used to develop other blockchain projects and DApps.
Ether does not meet any of the conditions described above to be classified as an Altcoin. Ethereum is by definition not an alternative to Bitcoin because intentions, functions, and technical architecture are completely different.
The term altcoin leaves a lot of room for interpretation. Nevertheless, altcoins are a great invention and can be an asset to the development of blockchain technology in the future.