<p>An <strong>altcoin</strong> is any <a href="/NewSite/encyclopedia/cryptocurrency/" class="ency-link">cryptocurrency</a> that is not <a href="/NewSite/encyclopedia/bitcoin/" class="ency-link">Bitcoin</a>. While Bitcoin remains the original and most widely recognized digital currency, thousands of alternative coins have emerged, each offering distinct features, use cases, or technological improvements. Altcoins range from well‑known projects like Ethereum and Litecoin to niche tokens designed for specific applications such as privacy, smart contracts, or decentralized finance.</p>

<h2>How It Works</h2>
<p>Altcoins operate on blockchain technology similar to Bitcoin, but they often modify the underlying protocol to achieve different goals. Some change the consensus mechanism—for example, using proof‑of‑stake instead of proof‑of‑work—to reduce energy consumption. Others introduce programmable smart contracts that enable developers to build decentralized applications directly on the chain. Tokens may also serve as utility within a platform, granting access to services, voting rights, or revenue sharing. Creation and distribution vary: some altcoins launch via initial coin offerings (ICOs), airdrops, or mining rewards, while others are pre‑mined and allocated to founders or community funds.</p>

<h2>Why It Matters</h2>
<p>Altcoins expand the possibilities of cryptocurrency beyond a simple store of value. They drive innovation by experimenting with new consensus models, scalability solutions, and governance structures. For investors, altcoins provide diversification opportunities within the crypto asset class, though they also carry higher volatility and risk compared to Bitcoin. A practical example is Ethereum, which introduced smart contract functionality, enabling decentralized finance (DeFi) platforms that allow users to lend, borrow, and trade assets without intermediaries. This illustrates how altcoins can create entirely new financial ecosystems and influence the broader adoption of blockchain technology.</p>