The rise of Bitcoin has spawned a massive influx of new cryptocurrencies: some aim to optimize Bitcoin’s functional shortcomings, while others explore entirely new application scenarios. In a broad sense, all cryptocurrencies except Bitcoin are collectively referred to as “Altcoins” (short for “alternative coin”). Today, the global crypto market has seen the emergence of thousands of altcoins, each carrying unique technical concepts and application positioning. This module will focus on the most influential altcoin — Ethereum — while providing a panoramic interpretation of the cryptocurrency ecosystem beyond Bitcoin.

Ethereum: A Programmable Blockchain Driven by Smart Contracts

If Bitcoin is likened to digital gold, Ethereum aligns more closely with digital oil or foundational infrastructure — providing core power support for the entire blockchain application ecosystem. Launched in 2015 by a team led by Vitalik Buterin, Ethereum’s revolutionary breakthrough lies in introducing the core function of “smart contracts.” A smart contract is an automatically executing program deployed on the blockchain; when preset conditions are triggered, it completes predefined operations without human intervention. In simple terms, Ethereum successfully upgraded blockchain into a globally distributed decentralized computer, allowing anyone to run custom code on it, rather than being limited to simple transaction recording.

Core Highlights of Ethereum

  1. Ether (ETH): As Ethereum’s native cryptocurrency, ETH serves to pay for network computing resources and transaction fees. When users initiate transactions or execute smart contracts on the Ethereum network, they must pay a certain amount of ETH as “gas fees” — these fees incentivize network nodes to complete computation and validation, acting as the “energy core” that keeps Ethereum running efficiently.

  2. Smart Contracts: Essentially self-executing digital protocols whose logic strictly follows pre-written code. For example, a basic smart contract could be set to: “If Alice transfers 1 ETH to the contract, automatically transfer ownership of a certain digital asset to her.” Once deployed on the Ethereum mainnet, the contract’s rules are permanently locked, and every execution strictly adheres to the code logic, eliminating the possibility of human interference at the root. This enables “trustless” applications — users only need to trust the transparent code on the blockchain to complete various transactions and collaborations. Ethereum’s Solidity programming language provides developers with flexible tools to build token systems, financial applications, blockchain games, and more.

  3. Tokens and the ERC-20 Standard: Ethereum allows developers to create new tokens on its existing blockchain without building independent blockchains, leveraging Ethereum’s security and compatibility. Among these, ERC-20 is the most widely adopted standard, unifying token interaction rules (such as transfers, balance queries, approvals) on the network, significantly lowering the technical barrier to token issuance. Currently, thousands of altcoins in the global crypto market are essentially ERC-20 tokens, a mechanism that fueled the 2017 ICO (Initial Coin Offering) boom and remains a key way for new projects to raise funds and build communities.

  4. Decentralized Applications (DApps): Ethereum’s value extends beyond cryptocurrency into supporting a vast ecosystem of decentralized applications. These apps (covering financial protocols, blockchain games, decentralized marketplaces, social platforms, etc.) are powered by smart contracts and require no centralized servers or single operators — the code itself is the ultimate rule. Take Uniswap, the most influential decentralized exchange (DEX) on Ethereum: users can swap tokens directly via smart contracts without intermediaries setting prices or matching trades, with the entire process transparent, efficient, and trustless.

  5. Network Evolution: Proof of Stake (PoS): Ethereum initially used a Proof of Work (PoW) mechanism similar to Bitcoin but completed the highly anticipated “Merge” upgrade in September 2022, officially transitioning to Proof of Stake (PoS) for network security. Post-upgrade, security no longer relies on energy-intensive mining but is maintained by “stakers” — users lock a certain amount of ETH as collateral to gain block proposal and validation rights. This reduced Ethereum’s energy consumption by over 99%, marking a milestone in green blockchain development. Honest stakers earn ETH rewards; malicious behavior (e.g., submitting false records) risks “slashing” of staked assets. For example, ETH staking on platforms like Gate.com empowers network security while earning rewards.

  6. Ethereum 2.0 and Scaling Solutions: Despite PoS reducing energy use, Ethereum’s base layer still faces bottlenecks — processing only ~10-15 TPS, with gas fees spiking above $50 during congestion. To address this, Ethereum’s roadmap includes “sharding” and promotes Layer-2 (L2) networks like Polygon, Arbitrum, and Optimism. These L2s batch-process high-volume transactions off-chain and settle results on the mainnet, inheriting mainnet security while drastically improving speed and cost. Users experience near-instant confirmations and low fees with mainnet-grade security.

Overall, Ethereum vastly expands blockchain’s application boundaries — far beyond digital currency transfers, enabling full decentralized financial systems, virtual worlds, and more. Its flexibility and scalability keep it firmly in second place on crypto market cap rankings, typically holding 17%-20% of global market value (behind Bitcoin’s 40%-50%). It is also the core infrastructure for DeFi, NFTs, and other innovations, to be explored in later modules.

🔑 Key Term Glossary

  • Altcoin: Refers to all cryptocurrencies except Bitcoin, including those with independent blockchains (e.g., ETH, LTC, XRP) and tokens issued on other platforms (e.g., DeFi tokens on Ethereum). Altcoins typically target specific use cases with differentiated technical designs.

  • Smart Contract: Programmatic code running on blockchain that automatically executes when conditions are met. It enables complex “if… then…” logic without human or centralized control. Ethereum’s smart contract ecosystem is the most mature and widely used.

  • Token: Digital assets created on existing blockchains, often following ERC-20 (fungible) or ERC-721 (NFT) standards on Ethereum. Tokens can represent monetary value, governance rights, or real-world assets.

  • DApp: Applications built on decentralized networks like Ethereum, powered by smart contracts and front-end interfaces, spanning finance, gaming, and social. They run entirely on code and blockchain, without centralized servers.

  • Proof of Stake (PoS): A consensus mechanism where participants stake cryptocurrency to validate blocks, replacing energy-intensive mining. Rewards scale with stake; malicious actions trigger slashing.

The Diversified World of Altcoins

Beyond Bitcoin and Ethereum, the crypto market is highly diverse. As of 2025, over 26,000 cryptocurrencies exist, but most lack real use cases or value. Many fade after brief hype; some are outright scams. Despite the volume, the market remains concentrated: a few top coins dominate total market cap.

Major Altcoin Categories and Examples

  1. Payment-Focused Altcoins: Aim to improve payment efficiency and privacy over Bitcoin. Examples:

  • Litecoin (LTC): Launched in 2011, a “lite” version of Bitcoin with ~2.5-minute blocks and Scrypt algorithm, lowering mining barriers.

  • Ripple (XRP): Launched in 2012 for cross-border payments, adopted by some banks; uses consensus, not mining, for fast, low-cost transfers.

  • Monero (XMR) & Zcash (ZEC): Privacy-focused, hiding addresses and amounts via cryptography.

  1. Platform Coins (Smart Contract Platforms): Compete or complement Ethereum in high-performance contract execution. Examples:

  • BNB (BNB Chain): Pays gas fees and offers ecosystem perks like fee discounts.

  • Cardano (ADA): Research-driven, secure, compliant, with layered architecture.

  • Solana (SOL): High throughput (~thousands TPS), low fees, for high-frequency use.

  • Polkadot (DOT): Focuses on cross-chain interoperability, building a “blockchain internet.”

Native tokens (ADA, SOL, DOT) power these networks; some are called “Ethereum killers.” Yet in 2025, Ethereum remains the largest, most mature smart contract platform.

  1. Stablecoins: Pegged to fiat (e.g., USD) for stability. Examples: USDT, USDC, DAI (decentralized). Key for trading, hedging, and transfers; USDT often out-trades Bitcoin in volume.

  2. DeFi Tokens: Issued by DeFi protocols for governance and fees. Examples:

  • Uniswap’s UNI: Voting on upgrades and fees.

  • Chainlink’s LINK: Pays for oracle data feeds, staked for accuracy.

DeFi tokens surged in the 2020-2021 boom and are now a core market segment.

  1. Gaming & Metaverse Tokens: Tied to blockchain games and virtual worlds. Examples:

  • Axie Infinity (AXS): Play-to-Earn rewards for battles and breeding.

  • Decentraland (MANA): Buys virtual land and assets, used in governance.

Used for in-game trading, virtual consumption, and governance.

  1. Meme Coins: Often born from internet memes with little utility but massive community hype. Examples:

  • Dogecoin (DOGE): 2013 Shiba Inu joke, later boosted by Elon Musk.

  • Shiba Inu (SHIB): Followed DOGE’s meme success via community.

Highly speculative, driven by sentiment; high risk but showcases crypto culture’s inclusivity.

Altcoin Market Structure and Risk Warnings

Market cap (price × circulating supply) measures scale and influence. Bitcoin holds ~50%, Ethereum ~20%, and altcoins split the rest. Top 5 by mid-2023: BTC, ETH, USDT, XRP, BNB — showing stablecoins and platform coins as market pillars beyond “digital gold.”

Rankings are highly dynamic: new projects emerge, old ones fade due to obsolescence or scams. Most cryptos don’t survive a decade. Bitcoin and Ethereum lead due to tech maturity and adoption; new altcoins are high-risk — some disruptive, others rug pulls.

Beginners should stick to established projects (BTC, ETH). For small-cap altcoins, invest only what you can lose. The 24/7 market lacks full regulation, making prices volatile to news, policy, and influencers. Assess risks rationally.