Any crypto-asset other than Bitcoin is informally called an “altcoin,” and Ethereum is the oldest and most widely used of them.
What Ethereum adds
Bitcoin was built almost entirely to transfer value from one address to another. Ethereum adds a layer on top: smart contracts, small programs that run directly on the blockchain and automatically execute rules written in advance, without depending on a company to operate them. A smart contract can, for example, hold two people’s funds safely until both confirm a transaction, or issue a new token according to fixed rules. This capability opened the door to thousands of applications built on Ethereum, from lending platforms to games.
What an “altcoin” is
The term covers everything from large networks with their own blockchain and purpose, like Ethereum, to tokens issued in a few minutes on an existing platform, with no code of their own and no team behind them. Between these extremes sit stablecoins (covered separately in the USDT guide), networks competing with Ethereum on smart contracts, and tokens tied to a single project or community.
Why the quality varies so much
Launching a new token is technically simple and cheap, which means anyone can create one, regardless of whether there’s a real product behind it. Most altcoins have a small market cap and a thin market, so their price can be far more volatile than Bitcoin’s or Ethereum’s, and can drop to zero if the project is abandoned. A technical-sounding name or a well-made website says nothing about whether the network behind it actually works or has real users.
Where it fits in the law
The crypto-assets law places Bitcoin, Ethereum, and most well-known coins in the same broad category, separate from stablecoins and from tokens tied directly to an official currency, with less strict rules than for those two. We cover the categories in the law guide. The legal classification says nothing about the quality of any specific project; that check remains on you.
What to remember
- Ethereum adds smart contracts on top of Bitcoin’s core idea: programs that run automatically, directly on the blockchain.
- “Altcoin” means any crypto-asset other than Bitcoin, from large, established networks to tokens created in a few minutes.
- A small market cap and no real product behind a token raise the risk: check the project before investing, not just what its website looks like.