Blockchain technology underpins altcoins, just like Bitcoin. Blockchains are distributed, digital databases that are updated simultaneously by many computers throughout the world, often hundreds or even thousands. On the blockchain, new transactions are confirmed and stored as blocks of transactions. Once a transaction is broadcast to a blockchain, it cannot be reverted.
In order to distinguish their coins from Bitcoin and other cryptocurrencies, many altcoin developers provide distinctive characteristics. Stellar, for example, hopes to be faster, cheaper, and more energy-efficient than its larger competitors. In 2013, Dogecoin was created as a joke and gained notoriety after being backed by figures such as Elon Musk.

Altcoins, or alternative cryptocurrencies, function similarly to Bitcoin but often introduce innovative features or modifications to address perceived limitations. These digital currencies operate on decentralized blockchain technology, a distributed ledger that records transactions across a network of computers. Altcoins use cryptographic principles to secure transactions, control the creation of new units, and verify the transfer of assets.

Unlike traditional fiat currencies, altcoins aren't issued or regulated by a central authority, relying instead on consensus mechanisms like proof-of-work or proof-of-stake. Altcoins aim to offer distinct advantages, such as faster transaction processing times, enhanced privacy features, or smart contract capabilities, allowing programmable and self-executing contracts on the blockchain. Investors often engage with altcoins as a means of diversifying their cryptocurrency portfolios, capitalizing on potential innovations, and seeking opportunities beyond the dominant Bitcoin. However, the volatile nature of the cryptocurrency market underscores the importance of thorough research before investing in any altcoin.