What are Altcoins ?

Bitcoin emerged as the first and most successful “peer-to-peer” digital currency. Yet while Bitcoin paved the way, it’s not traveling the road alone. After the success of Bitcoin, numerous other digital,  peer-to-peer currencies have emerged to attempt to emulate Bitcoin’s success. Some also attempt to address perceived short-comings in Bitcoin and to provide competitive advantages.

These alternative currencies are often referred to as “Altcoins”, mimicking the Bitcoin moniker, while also emphasizing that they are “alternatives” to Bitcoin itself. Altcoins have become pretty hot in the last few months, especially as Bitcoin mining has become extremely difficult, and Bitcoin prices are pricing Bitcoins out of the wallets of many would-be purchasers.

Most AltCoins are very similar to Bitcoin in that they involve a mining process, are peer-to-peer, and aim to offer a cheap and efficient way to make transactions and purchases on the web. How each Altcoin accomplishes these goals, however, can vary widely from coin to coin. For this reason, if you are looking to invest in Altcoins, you should do your homework and study each potential investment closely.

There are many different AltCoins now available on the market. Perhaps the most popular and well-known AltCoin is “Litecoin.” This currency is very similar to Bitcoin and has been backed by Silicon Valley venture firms. Recently Dogecoin, a currency that became famous after a dog-based meme went viral, has become all the rage. Other Altcoins, such as Feathercoin and Peercoin have also gained momentum. Then there’s Namecoin, which isn’t a currency at all, but is instead a domain registration system based on Bitcoin’s underlying code.

So what will happen with all of these Altcoins? No one can predict the future, of course, but most of the available “AltCoins” are modifications of the Bitcoin’s software and/or concept. Given that Bitcoin is already the dominant P2P currency, and that most investors and the online community back it, it will be difficult for an AltCoin to over take Bitcoin. Of course, a few years ago it would have seemed impossible for any P2P currency to take off at all, and Bitcoin has already dispelled that notion.

The most likely to be successful in carving out its own long-term existence might be be NameCoin, but it does not aim to be a currency. As NameCoin aims to be a decentralized DNS, rather than a currency, there may be enough room for both Bitcoin and NameCoin to co-exist together and to not compete with one another. NameCoin also serves a unique and useful purpose in allowing for domain registration and battling internet censorship.

Bitcoin itself may eventually fail. As the first serious attempt to create a universally used Cryptocurrency, Bitcoin may prove to be a flawed system.  If so, a later successor may indeed emerge as a better alternative, but so far neither Feathercoin nor Peercoin nor any other currency appears to be in a position to overtake Bitcoin. Any successor to Bitcoin will have to address its fundamental weaknesses, and right now while Bitcoin is indeed facing challenges, none have proven to be “fatal.”

Disclaimer

Crypto is a high-risk asset class. This article is provided for informational purposes and does not constitute investment advice. You could lose all of your capital.
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