What Are Altcoins and How Do They Work?

Here’s a number worth sitting with before going any further: more than half of all cryptocurrencies ever tracked have already failed, according to CoinGecko’s own research. The overwhelming majority of those were altcoins, and most of the failures happened astonishingly recently, as low-effort token launches became easier than ever. That doesn’t mean altcoins are a bad idea, but it does mean the category deserves more scrutiny than “not Bitcoin” usually gets. So, what are altcoins, and why do so many of them disappear? This guide answers both.

Bitcoin vs Altcoins: What’s the Difference? covered the basics. This goes deeper into what actually makes something an altcoin, how they’re built, and what separates the ones that last from the ones that don’t.

What Are Altcoins, Exactly?

Technically, an altcoin is any cryptocurrency that isn’t Bitcoin. That’s a definition by exclusion, not a description of what it actually is, which is exactly why the category is so broad. Ethereum, a stablecoin pegged to the dollar, and a meme coin launched yesterday are all, technically, altcoins, despite having almost nothing else in common.

How Are Altcoins Actually Created?

There are three common paths:

• A fork. Copying and modifying an existing blockchain’s code to create a new, separate network with different rules. Litecoin, created this way from Bitcoin’s own code, is one of the earliest and best-known examples.
• A new Layer 1 blockchain. Building an entirely independent blockchain from scratch, with its own consensus mechanism and infrastructure.
• A token on an existing platform. Building on top of an established blockchain like Ethereum, using its infrastructure rather than creating a new one. Ethereum’s ERC-20 standard, a shared template for creating tokens, made this so accessible that launching one can take minutes rather than months. This is by far the easiest and cheapest path, and it’s also why the vast majority of new tokens, including most meme coins, are created this way.

That last point matters. Low technical barriers to launching a token are a big part of why so many altcoins exist, and why so many fail: creating one requires far less effort and commitment than most people assume.

The Main Categories of Altcoins

What Actually Gives an Altcoin Value?

Beyond speculation, a handful of factors tend to separate altcoins that hold value from ones that eventually fail. None of these guarantee success individually, but their absence is a reliable warning sign:

Real utility. Does the token actually do something people need, or is its only function being bought and sold? A useful test: could you explain what the project does to someone else in one sentence, without mentioning its price?

Network effects. Platforms that developers and users are actively building on top of tend to become more valuable as adoption grows, similar to how a social platform gets more useful as more people join it. This is part of why established smart contract platforms are harder to displace than their raw technology alone would suggest.

Active development. A project with ongoing, visible development activity is a meaningfully different bet than one that launched and went quiet.

Genuine scarcity or a clear economic model. Understanding how a token’s supply works, and whether it’s designed sustainably, matters more than most beginners initially assume.

Team transparency. A publicly identifiable team with a track record carries different accountability than an anonymous one, though anonymity alone doesn’t automatically mean a project is illegitimate.

The Risks Specific to Altcoins

Beyond the general volatility that applies to all of crypto, altcoins carry a few risks Bitcoin, as the most established asset, is comparatively less exposed to: lower liquidity, meaning larger price swings on smaller trades; a real possibility of the project being abandoned entirely; and, for newer tokens, a level of centralization where a small team or small group of wallets can meaningfully influence the price. That last point is worth taking seriously: a small number of wallets holding a large share of a token’s supply means a single large sale can move the price dramatically, something worth checking before buying into a smaller project.

How Altcoins Fit Into the Bigger Picture

It’s worth holding two facts at once here: the category has produced genuinely transformative projects, and it has also produced the overwhelming majority of crypto’s total failures. Despite the sheer number of altcoins in existence, Bitcoin has consistently held roughly half or more of the total crypto market’s value, a dynamic Bitcoin vs Altcoins: What’s the Difference? covers in more depth. How to Research a New Altcoin Before Investing is the natural next step for actually evaluating a specific project rather than treating the category as a single bet.

Frequently Asked Questions

The altcoin category is far too large and varied to treat as one decision. Understanding how a specific project is actually built, what gives it value, and what risks it carries is what separates informed participation from a guess dressed up as conviction. That distinction is exactly what most people skip, and exactly what tends to separate outcomes over time. If you came here asking “what are altcoins?”, the short answer is every cryptocurrency that isn’t Bitcoin, and each one deserves to be judged on its own.

Prefer to learn from a book, at your own pace? The Crypto Book Series covers this in more depth. If you’re new to crypto, start with Book 1, then work through the series as you go.

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