What are altcoins?
Before we dive in, let's understand what exactly an altcoin is. The term altcoin defines any electronic coin that is an alternative to Bitcoin. These coins were released after Bitcoin and may have minor differences in technology, distribution style, purpose, etc. from Bitcoin. There are hundreds of these in the market today and they are generally considered riskier than Bitcoin.
Why do altcoins exist?
So, why are there so many altcoins out there? After looking at the Bitcoin technology, people try to improve parts of it or gear it towards a specific use. Each time someone adjusts the technology and releases it, they create a new coin. Every altcoin can have a different purpose with different capabilities - some may have faster transactional time, more security and privacy, cheaper costs, and the list goes on. Also, with Bitcoin gaining popularity, the investment pool is increasing. There is growing incentive for altcoin creators to get a piece of that pie. Due to this, you should do your research on an altcoin before investing in it.
How are altcoins created?
Each time an altcoin is created, the developer is creating a net new blockchain or adapting an existing blockchain for a specific purpose. Once the blockchain is developed, the developer will have to market the coin to attract investors and end-users. She will also have to maintain and improve it to keep the investment/end-user community interested. With all the altcoins out there, public perception defines the success of the coin.