All cryptocurrencies other than Bitcoin (BTC) were first described as altcoins for a single reason: There was a rise of projects that copied and pasted Bitcoin’s source code. The cryptocurrencies in the early stages weren’t unique enough to have a distinctive term, so “altcoin” (alternative coins) best fit their description. The community, at that point, didn’t put too much thought into other cryptocurrencies due to Bitcoin’s potential advancement — its future price growth, use cases, mainstream adoption, etc. It was the leading head in crypto.
But things changed when people caught onto Ethereum’s smart contract platform, as it can produce “smart contract tokens” — cryptocurrencies with the ability to perform intelligent tasks autonomously.
This led the community to distinguish altcoins from tokens. Altcoins were now coins that had their own blockchain, and tokens were defined as cryptocurrencies created on smart contract platforms. The other factor now at work is that there are many blockchain projects that are scaling rapidly and decreasing Bitcoin’s dominance.
The community started noticing weaknesses in Bitcoin’s correlation to other coins as other interesting new projects popped up, which provoked the crypto world to rethink how it sees cryptocurrencies.
Now, every altcoin distinguishes itself on the market by offering a unique set of features related to things such as transaction management, scripting language, mining mechanisms and consensus algorithms. Although altcoins’ superior features may outperform Bitcoin in one way or another, their value is still completely dependent on Bitcoin’s market capitalization.
The community started to envision a world where various cryptocurrencies, not just Bitcoin, can disrupt the world. Now, with Ether’s (ETH) growing dominance in the market, it’s clear that Ethereum is the leader of crypto innovation. A large percentage of tokens today are Ethereum ERC-20 smart contracts, so the ways token minters classify their projects are easily normalized in the community.