In the beginning, there was only Bitcoin, created by the mysterious Satoshi Nakamoto.
But thanks to the open-source nature of Bitcoin's underlying code, that didn't last for long.
Understanding Open-Source Code
"Source code" refers to the fundamental instructions programmers can use to alter how a software program operates.
Open-source software is defined as software whose source code anyone can inspect, run, copy, modify, and enhance.
If you have access to a program's source code, you can make changes. You might fix a broken feature, improve something to make it run more smoothly, or add a completely new function.
A helpful way to think about open-source software is to imagine it as a recipe that everyone can see and copy.
For instance, if you've ever had KFC fried chicken, you know how uniquely tasty it is because it's made from Colonel Sanders' original recipe with its 11 herbs and spices. 😋
However, that recipe is a secret. It's locked away in a vault (presumably a cold storage one) at KFC headquarters. The "source code" for KFC fried chicken is considered "closed-source" or "proprietary."
Because we don't know the exact recipe, if you wanted to make the same fried chicken yourself, you'd have to start from scratch, likely through much trial and error.
You'd probably end up wasting a lot of time and, unfortunately, not eating a lot of great fried chicken.
Ultimately, you'd most likely end up with GFC (Gross Fried Chicken) instead of KFC. 🤣
Now, imagine if Colonel Sanders had decided to make his recipe public, allowing anyone to use it. That would be considered "open-source."
This is exactly what Satoshi Nakamoto did! He intentionally shared the "recipe" (source code) with the public, releasing the Bitcoin software as open-source online.
Instead of having to reverse-engineer the Bitcoin software or create a cryptocurrency from scratch, other cryptocurrencies quickly began to emerge.
These other cryptocurrencies are now universally known as "altcoins."
Defining an Altcoin
The term "Altcoin" is a combination of the words "alt" and "coin." Here, "alt" is short for "alternative."
Therefore, an "altcoin" stems from the idea that all other cryptocurrencies are "alternative" coins to the original, Bitcoin (BTC).
They are considered alternatives because they generally attempt to either replace or improve upon Bitcoin in some way.
The beauty of open-source software like Bitcoin is that anyone in the world can take the original codebase and try to improve or expand the software's functionality.
Credit where credit is due: the very first altcoin was Namecoin (NMC).
Namecoin's mission was to provide a decentralized Domain Name Service (DNS) system.
The idea was that instead of being limited to domains ending in ".com" or ".net"—which are controlled by ICANN (the domain name authority)—websites could use ".bit" domains that were free from ICANN control, censorship, or shutdown.
For example, instead of using "babypips.com," one could use some NMC to buy "babypips.bit" and use that as a web address. Unfortunately, the technical barrier to actually viewing a ".bit" website was very high. Namecoin was notoriously difficult to use, which limited its adoption. 😔
While Namecoin was the first altcoin, it certainly wasn't the last.
Within a few years of Bitcoin's source code being released, hundreds of altcoins were born. Then came thousands! 😱
Many developers simply copied or slightly tweaked Bitcoin's software code and launched their own cryptocurrency. Unsurprisingly, most failed to gain any user traction and were abandoned after a few weeks or months.
These altcoins earned the unflattering nickname "shitcoins" because they ultimately became worthless.
However, not all altcoins were garbage. Some managed to make meaningful enough adjustments or offer features different from Bitcoin, allowing them to attract and grow their own user communities.
Here are some examples of early altcoins that are still active and evolving today:
Litecoin (LTC)
In 2011, a Google developer named Charlie Lee began experimenting with Bitcoin's source code. He decided to create an "easier-to-use" version of Bitcoin, which he named "Litecoin."
While Litecoin is based on Bitcoin's source code, it features several technical differences, including faster transaction confirmation times (2.5 minutes vs. 10 minutes), a different hash function for mining (Scrypt vs. SHA-256), and a larger maximum supply (84 million vs. 21 million).
Charlie Lee stated that his goal in creating Litecoin was not to replace Bitcoin but to serve as "silver" to Bitcoin's "gold."
Dogecoin (DOGE)
Launched in 2013, Dogecoin is an altcoin that was created initially "as a joke" but quickly amassed a massive following and developed its own strong online community.
It was inspired by the Doge meme)—a picture of a Shiba Inu dog surrounded by multicolored text in Comic Sans font.
Due to its popularity, Dogecoin's native token, DOGE, is considered the first "memecoin" and the original "dog coin."
While Litecoin was based on Bitcoin's source code, Dogecoin was actually forked from Litecoin's source code.
(Starting to see the "beauty" of open-source software? Once you create something, anyone can take your work and copy it. Awesome.)
Ripple (XRP)
Imagine you are in the U.S., and your famous partner—a Brazilian supermodel or soccer player (you choose)—wants to send money from their bank to your bank.
This requires a series of steps to complete, with each step typically incurring a fee. This is why international bank transfers can take days and are often expensive.
Ripple aimed to change this. Its founders wanted to create a platform for banks designed to settle international cross-border payments in seconds at a low cost.
Ripple is a company (founded in 2012 as Opencoin, later renamed Ripple Labs, and then just Ripple) that created the XRP Ledger, their version of a public blockchain, which uses XRP as its native cryptocurrency.
The creators chose the ticker "XRP" from the working name "ripple credits" or "ripples," adding the "X" prefix as per the ISO 4217 standard for non-native currencies.
Stellar (XLM)
A few years after Ripple was created, one of its co-founders, Jed McCaleb, started Stellar alongside Joyce Kim. Although Stellar was initially based on Ripple's codebase, this was eventually completely replaced.
Stellar's goal is very similar to Ripple's: to enable cross-border payments between any two currencies. Send money fast and at a low cost.
However, the two companies' approaches differ. Ripple initially focused on bank-to-bank transfers, while Stellar focused from the start on person-to-person transfers, especially for the "unbanked" (people in developing nations without access to financial services).
Transfers or remittances sent over the Stellar network can be completed in near real-time and for a very low cost.
The biggest difference between Stellar and Bitcoin is transaction processing speed. Stellar can handle approximately 3,000 transactions per second, while Bitcoin manages only about 5.
"Lumens" or XLM (the native cryptocurrency was originally called "stellars") is the native cryptocurrency of Stellar. XLM is required to pay the base fee for any transaction charged by the Stellar network.
While Stellar's original goal was to improve financial inclusion by helping the world's unbanked population, its priorities have shifted toward helping financial firms connect via blockchain technology.
Ethereum (ETH)
No discussion about altcoins would be complete without mentioning (arguably) the most famous one of all: Ethereum.
Conceived in 2013, Ethereum was born from a desire to expand the potential of blockchain technology. Before Ethereum, most altcoins were essentially clones or derivatives of Bitcoin, designed for one very specific function: to act as an alternative "currency" outside the traditional financial system.
In essence, they were a form of digital cash that could be sent directly from one user to another without an intermediary.
For example, Bitcoin users could transact directly in bitcoin, Litecoin users in litecoin, Dogecoin users in dogecoin, Ripple users in XRP, and Stellar users in lumens. (You could also exchange them for your local fiat currency if you wished.)
Yes, Ethereum can also be transacted with its native currency, Ether (ETH), but that is not its primary purpose.
What set Ethereum apart from Bitcoin and other altcoins (at the time) was that its blockchain was designed to be more flexible, acting like a software platform.
So, rather than being just another "currency," Ethereum is a software platform capable of expanded functionality, such as enabling the building of decentralized applications ("dApps") and even the issuance of other unique "tokens."
Ethereum is so significant that it deserves its own deep dive later. For now, you just need to know it is an altcoin.
It is one of the largest cryptocurrencies by market value, second only to Bitcoin.
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Frequently Asked Questions
What exactly is an altcoin?
An altcoin is any cryptocurrency that is an alternative to Bitcoin. The term combines "alt," meaning alternative, and "coin." Most altcoins project themselves as better substitutes or successors to Bitcoin, often by introducing new features or capabilities.
Was Ethereum the first altcoin?
No, Ethereum was not the first altcoin. That distinction belongs to Namecoin (NMC), which was created in 2011. Ethereum launched later, in 2015, but it introduced the revolutionary concept of a programmable blockchain, which significantly expanded the use cases for crypto beyond simple payments.
Are all altcoins just copies of Bitcoin?
While many early altcoins were direct forks or slight modifications of Bitcoin's code, this is no longer the case. Modern altcoins like Ethereum, Solana, and Cardano have been built from the ground up with entirely different architectures and purposes, such as supporting smart contracts and decentralized applications.
What is the main risk of investing in altcoins?
The primary risk is their high volatility and lower liquidity compared to Bitcoin. Many altcoins are also projects with unproven use cases or teams, making them highly speculative. The vast majority of altcoins historically have lost value over time, earning the nickname "shitcoins."
How can I identify a promising altcoin project?
Look for projects with a clear, real-world utility, an active and transparent development team, a strong community, and solid tokenomics. Always do your own thorough research, read the project's whitepaper, and understand what problem it aims to solve before considering any investment.
Do I need a different wallet for every altcoin?
Not necessarily. Many modern software and hardware wallets are multi-currency wallets, meaning they can support a wide variety of different cryptocurrencies, including Bitcoin, Ethereum, and numerous altcoins, all within a single wallet interface. Always check the supported assets list for your chosen wallet.