Cryptocurrencies are often lumped together in one big category, but there are many different types of cryptocurrencies that developers are creating to try and solve a number of problems.
As of May 2019, there were over 2,200 cryptocurrencies listed on CoinMarketCap, which is why we need to talk about altcoins.
1. What is an altcoin?
Cryptocurrency market observers and pundits often refer to some cryptocurrencies as "altcoins". Altcoins are alternative cryptocurrencies to the market leader, Bitcoin.
The term comes from cryptocurrency’s early days when bitcoin was the first massively adopted cryptocurrency. As other coins followed, people started creating different types of cryptocurrencies to solve other kinds of digital currency issues such as transaction cost or scalability.
Many altcoins work in a very similar way to Bitcoin (in fact many altcoins are just variations, or forks, of the Bitcoin protocol). Other cryptocurrency projects such as Ethereum, Zcash, and Monero, are building completely different kinds of protocols to solve different kinds of problems, such as privacy, security, and decentralized computing.
2. What was the first altcoin?
Namecoin was developed in 2011, and is considered the first altcoin. Namecoin is a fork of Bitcoin and uses the same proof-of-work algorithm. It was designed to improve the decentralization, security, censorship resistance, privacy, and speed of some internet infrastructure, such as DNS and identities.
After Namecoin, hundreds of altcoins came into existence to solve more specific problems or provide different forms of governance.
Today there are more than 2,200 different kinds of altcoins and new projects and companies are being announced regularly, signaling massive growth in the space.
3. Cryptocurrency use cases
These are a few cryptocurrency projects that are building platforms and networks to accomplish various goals:
- 0x protocol (pronounced “zero-ex”) is a decentralized, permissionless exchange protocol that allows ERC20 tokens to be traded on the Ethereum blockchain. Developers can also use the 0x protocol as a platform to build their own decentralized exchange applications for Ethereum-based assets.
- The Basic Attention Token (BAT) is the currency that powers a blockchain-based digital advertising system made up of users, publishers, and advertisers. The BAT is an ERC20 utility token for the Brave browser — an open source browser with a privacy focus. When BAT is integrated into the Brave browser, the attention that a user gives to content on the browser is valued in BAT tokens; users receive a payout (in BAT) equal to 70% of the gross ad revenue, and publishers receive a percentage of the remaining 30% as well as a payment (in BAT) from the advertisers whose content they publish.
- Status is an open-source messaging platform and mobile interface that allows users to access and interact with decentralized applications built on the Ethereum network, all in one place. You can think of it as the crossover between WeChat and App Store for the Ethereum blockchain. Status is available for both Android and iOS users and also offers a Desktop app.
- EOS was announced in May of 2017. Through an ICO the project raised $4 billion before launching in July 2017. The blockchain is being built to be able to host and run decentralized applications faster and cheaper than existing blockchain infrastructure. Also unique, the system will be governed by a delegated proof-of-stake model.
In the next lesson, we’ll dive into the growing cryptocurrency market.
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Upcoming Lesson: [Lesson 3] Cryptocurrency market