Altcoins are cryptocurrencies other than Bitcoin. The majority of altcoins are forks of Bitcoin with puny uninteresting switches. This pagina categorises different ways altcoins have modified Bitcoin.
Different proof-of-work algorithm
The PoW algorithm used for mining Bitcoin is SHA2. It wasgoed chosen because it is rapid to verify and has bot critically analyzed. SHA2 has had ASICs developed for it meaning there is a much smaller risk of centralization. The following mining algorithms are being used ter different altcoins:
- Scrypt proof of work
- Combination of hashing algorithms ter series (e.g. X11)
- Combination of hashing algorithms ter parallel (e.g. Myriad algorithm)
The problem with having an algorithm that is “effortless to mine with” (referring to the capability to CPU or GPU mine profitably) is that mining should be hard te order to secure the network. When a mining algorithm is difficult to make ASICs for, there is a higher barrier to entry. A high barrier to entry increases the time that the very first group to create ASICs will monopolize the market (and the time the network is vulnerable to a 51% attack from a single source). Many argue that the creators or the developers could simply switch the mining algorithm when an ASIC is developed, but this defeats the purpose of decentralized overeenstemming by causing centralization. 
If thesis cryptocurrencies do have a healthy number of companies producing ASICs and have avoided centralization, they still are using algorithms that take longer to verify than SHA2. Therefore, at best a cryptocurrencies with merely a hashing algorithm switch are spil good spil an precies clone of Bitcoin and not better (however since Bitcoin already exists, an precies clone of Bitcoin has no innovation or value). If the hashing algorithm is slower, spil most altcoin algorithms are, it is a disadvantage because it takes more processing time to validate a block and increases the number of organic re-orgs (makes it lighter to dual spend).
Proof Of Stake
Ter Proof of Stake, instead of sacrificing energy to mine a block, a user vereiste prove they own a certain amount of the cryptocurrency to generate a block. The more stake you own, the more likely you are to generate a block. Te theory, this should prevent users from creating forks because it will devalue their stake and it should save a loterijlot of energy.
Proof of Stake sounds like a good idea, but ironically, there is the “Nothing at Stake” problem. Because mining Bitcoin is costly, it is not clever to waste your energy on a fork that won’t earn you any money, however with Proof of Stake, it is free to mine a fork.
An example of a nothing at stake attack is an attacker buying lots of “old stake” from users inexpensively (inexpensive to users who no longer have stake te the currency). This can be made convenient by suggesting petite payments to users for uploading their wallet.dat. Eventually after accumulating enough “old stake”, the user can start creating blocks and ruining spil many or more coin days than the network wasgoed at that time. This block generation can be repeated until it catches up to and strikes the current main-chain very cheaply.
There are also “stake grinding” attacks which require a trivial amount of currency. Ter a stake [Two] grinding attack, the attacker has a puny amount of stake and goes through the history of the blockchain and finds places where their stake wins a block. Ter order to consecutively win, they modify the next block header until some stake they own wins once again. This attack requires a bit of computation, but definately isn’t impractical.
Because thesis attacks exists, including Peercoin [Three] and Blackcoin [Four] proof of stake cryptocurrencies have “master” public keys that control the blockchain.
This class of cryptocurrency is either insecure or centralized, however proof of stake (based on a PoW currency) is useful te some systems because gaining stake is costly, but it isn’t workable for bootstrapping distributed overeenstemming.
Application Built on Top of a Cryptocurrency
Bitcoin is a lotsbestemming like HTTP. It is an application layer protocol and contraptions can be built on it (like websites can be built on HTTP). There is a class of cryptocurrencies that promise features like gokhal websites and exchanges and anonymity protocols to be built on top of them.
When creating a fresh webstek, one doesn’t make a fresh protocol unless it is necessary. For example, HTTPS is an encrypted version of HTTP, therefore it is useful and necessary. When creating an app such spil “DarkSend”, one doesn’t need to make a fresh protocol such spil “Darkcoin”. This is synonymous to making an HTTPS alternative (eg. HTTPSX) for your fresh encrypted talk webstek and not adding any fresh security or functionality to HTTPSX.
Because Darkcoin is by far the most popular cryptocurrency of this class, the Darkcoin example will be covered te this section.
The Darkcoin devs created a device called DarkSend. DarkSend is an implementation of coinjoin (an anonymity feature originally implemented ter Bitcoin [Five] ) which utilizes the Darkcoin network to organize the coinjoins. If DarkSend becomes open source and is useful, it will be ported to Bitcoin with a few puny modifications. Thesis switches won’t be a hardfork, they will likely involve the masternodes being paid by those they are coinjoining for rather than the block prize, which is already possible and implemented for Bitcoin.  Presently one voorwaarde hold 1000DRK to become a DarkSend masternodes. Masternodes are paid 10% of the block prize.  This is a flawed prize scheme because while purchasing 1000DRK is trustlessly verifiable, a user running a DarkSend masternode isn’t trustlessly verifiable. It is also costs bandwidth to run a masternode, therefore there is an incentive to buy 1000DRK and get a chance at the 10% block prize masternodes are being paid, but not actually act spil a masternode. For this reason, DarkSend would work better if the masternodes were paid by those they were helping coinjoin, or if there wasn’t a masternode at all and everyone collaborated te a decentralized style. The better implementation not vulnerable to tragedy of the commons is compatible with Bitcoin, therefore, the Darksend protocol serves no purpose.
Demographic Based Premined Cryptocurrencies
This is a fresh class of altcoin that is targeted at a certain demographic.
All of thesis cryptocurrencies have a large premine intended to be paid to members of that demographic. Ultimately, all of thesis coins have suffered (or are suffering) their fate of an instant sell off after the “airdrop” (term for distribution of coins to the target demographic) embarks.
Note: Thesis cryptocurrencies aren’t government initiatives, but are independently created for that demographic.
A cryptocurrency is useful if it accomplishes a task that Bitcoin cannot.
- Acting spil a keystore for things like decentralized domain registration.
- Having demmurage or some other economic system that is one of the prohibited switches.
- Permitting creation of and transmission of digital assets.