Ethereum and the World of Altcoins

Ethereum: Programmable Blockchain for Smart Contracts

If Bitcoin is digital gold, Ethereum is like a digital oil or infrastructure – powering an entire ecosystem of applications. Launched in 2015 by a team led by Vitalik Buterin, Ethereum introduced a groundbreaking feature: smart contracts. These are self-executing programs that run on the blockchain and execute automatically when certain conditions are met. In simpler terms, Ethereum turned the blockchain into a global decentralized computer that anyone can use to run code, not just to record transactions.

Key things to know about Ethereum:

• Ether (ETH): Ether is the native cryptocurrency of the Ethereum network. It’s used to pay for computation on the network. Whenever you execute a transaction or smart contract on Ethereum, you pay a fee in ETH (often called “gas”). Think of ETH as the fuel that runs the network.
• Smart Contracts: A smart contract is like a digital agreement or program that self-enforces. For example, a simple smart contract might say “if Alice sends 1 ETH to the contract, release the ownership of a digital asset to her.” Once written and deployed, no one can alter the contract’s rules – it will execute exactly as coded, every time. This opens the door to trustless applications: you don’t need to trust a person or company, you trust the code on the blockchain. Ethereum’s language (Solidity) allows developers to create tokens, financial applications, games, and more as smart contracts.
• Tokens and ERC-20: Ethereum enabled the creation of new tokens on top of its blockchain. These tokens piggyback on Ethereum’s infrastructure instead of having their own blockchain. A common technical standard for tokens is ERC-20, which defines how tokens can interact on Ethereum. Thousands of ERC-20 tokens exist – many of the altcoins out there are actually ERC-20 tokens running on Ethereum rather than standalone blockchains. This made it relatively easy for new projects to launch their own token (which fueled the ICO boom of 2017, where projects raised funds by selling new tokens).
• Decentralized Apps (DApps): Beyond currency, Ethereum is used for decentralized applications. These are apps (like finance protocols, games, marketplaces, social networks) that run on the blockchain via smart contracts. They often have no central server or owner – the code itself is law. For instance, Uniswap is a popular decentralized exchange (DEX) on Ethereum that lets users swap tokens directly with a smart contract, without an intermediary company setting prices.
• Evolution (Proof-of-Stake): Ethereum started with a Proof-of-Work system like Bitcoin. But in September 2022, Ethereum made a highly-anticipated upgrade called “The Merge”, transitioning to Proof-of-Stake (PoS) for securing the network. Now, instead of miners and energy-intensive puzzles, Ethereum relies on validators who stake ETH (lock it up as collateral) to propose and verify blocks. This change reduced Ethereum’s energy consumption by over 99% and is a notable example of a blockchain evolving over time. Validators are rewarded with ETH for honest participation and can be penalized (slashed) for malicious activity, aligning incentives for security. (You might have seen staking rewards for ETH on Gate.com – that’s essentially you participating in this new consensus by locking your ETH to help secure the network in return for rewards.)
• Ethereum 2.0 and Scaling: Even after moving to PoS, Ethereum has constraints – it can handle around 10-15 transactions per second on its base layer, and gas fees can be high during congestion (many recall times when a simple ETH transaction fee cost $50+). To solve this, Ethereum’s roadmap includes scaling solutions like “sharding” (splitting the network load) and encourages Layer-2 networks. Layer-2s (like Polygon, Arbitrum, Optimism) are separate networks built on top of Ethereum that can process many transactions and then post summaries to Ethereum, inheriting its security. As a user, you might interact with a Layer-2 without even realizing it, enjoying faster and cheaper transactions while still ultimately relying on Ethereum’s robustness.

Overall, Ethereum broadened what was possible with blockchain – from just sending digital money to building entire financial systems and virtual worlds. This flexibility has made Ethereum the second-largest crypto by market cap (often around 17–20% of the total crypto market, behind Bitcoin’s ~40-50% dominance). It’s the backbone of sectors like DeFi (Decentralized Finance) and NFTs (Non-Fungible Tokens) – topics you’ll encounter in later courses.

🔑 Key Terms:

• Altcoin: Any cryptocurrency that is not Bitcoin. This includes coins with their own blockchains (like Ether, Litecoin, Ripple) as well as tokens that live on other platforms (like many DeFi tokens on Ethereum). Altcoins can serve various purposes or experiment with different designs.
• Smart Contract: Code deployed on a blockchain that automatically executes transactions or actions when conditions are met. Smart contracts enable complex logic (like “if/then” rules) to be carried out without human intervention or centralized control. Ethereum’s smart contracts are the most widely used.
• Token: A digital asset that is created on an existing blockchain. On Ethereum, these often follow standards like ERC-20 (for fungible tokens) or ERC-721 (for unique one-of-a-kind tokens, i.e., NFTs). Tokens can represent anything from currency units to governance rights in a protocol or even physical assets.
• Decentralized Application (DApp): An application that runs on a decentralized network like Ethereum. It typically consists of smart contracts on the blockchain and a user interface. DApps can be financial (decentralized exchanges, lending platforms), games, social media, and more – the key is they operate without centralized servers or owners.
• Proof-of-Stake: A consensus mechanism where validators lock up cryptocurrency (stake) to secure the network and create new blocks, rather than spending energy on mining. Ethereum’s current consensus is PoS. Validators earn rewards in proportion to their stake and can lose funds for misbehavior (this deters attacks).

The Diverse World of Altcoins

Beyond Bitcoin and Ethereum, there is a vast universe of other cryptocurrencies. As of 2025, there are reportedly over 26,000 cryptocurrencies in existence! However – and this is crucial – only a tiny fraction of those have significant value or meaningful use cases. Many were created, had a moment of hype, and then faded away or turned out to be outright scams. So while the number of altcoins is enormous, the crypto market is still relatively top-heavy: a handful of major coins make up most of the total market value.

Here are some of the major categories and examples of altcoins:

• Payment-focused Altcoins: These are cryptocurrencies aiming to be faster or more private digital cash than Bitcoin. For instance, Litecoin (LTC) launched in 2011 as a “lite” version of Bitcoin – it’s faster (2.5 minute blocks) and uses a different mining algorithm. Ripple (XRP), launched in 2012, is tailored for fast cross-border payments and is used by some banks and payment networks; it doesn’t use mining at all, but a consensus among a set of validators. Monero (XMR) and Zcash (ZEC) are privacy coins that focus on making transactions untraceable and private, addressing Bitcoin’s traceability by obscuring transaction details.
• Platform Coins (Smart Contract Platforms): These compete with or complement Ethereum. Binance Smart Chain’s BNB (now just BNB, as the chain is called BNB Chain) is a coin used for transaction fees on the Binance Chain and as part of the Binance ecosystem; it’s both an exchange token (providing discounts on Binance exchange) and a platform coin. Cardano (ADA) is a research-driven blockchain platform for smart contracts, Solana (SOL) emphasizes high-speed transactions (claiming thousands of TPS) with low fees, and Polkadot (DOT) focuses on interoperability between blockchains. Each of these has a native coin (ADA, SOL, DOT, etc.) that powers their networks. Investors sometimes call these “Ethereum killers” (though Ethereum is still by far the largest smart contract platform as of 2025).
• Stablecoins: We’ll cover these in depth in the next module, but briefly, stablecoins like Tether (USDT), USD Coin (USDC), and DAI are tokens designed to hold stable value (e.g., 1 USD each). They have become extremely important trading pairs and mediums of exchange in the crypto market. In fact, Tether’s trading volume often exceeds Bitcoin’s, reflecting its heavy use in day-to-day trading.
• DeFi Tokens: Decentralized Finance (DeFi) protocols often issue their own tokens. For example, Uniswap (UNI) is the token for the Uniswap DEX, used for governance (UNI holders can vote on protocol changes). Chainlink (LINK) is a token for an oracle network that feeds real-world data to smart contracts. These tokens may give holders a share in fees, governance rights, or other utility within their platforms. DeFi tokens gained popularity in 2020-2021, and many are built on Ethereum or other smart contract chains.
• Game and Metaverse Tokens: With the rise of blockchain gaming and virtual worlds, tokens like Axie Infinity (AXS) (for a popular play-to-earn game) or Decentraland (MANA) (for a virtual real estate metaverse) have become known. These often allow users to buy in-game items, vote on game development, or earn rewards.
• Meme Coins: These started as jokes but some gained massive followings. Dogecoin (DOGE), created in 2013 based on a dog meme, initially had no serious purpose – yet, years later, it gained a huge boost from internet communities and even Elon Musk’s tongue-in-cheek endorsements. Shiba Inu (SHIB) followed as another meme coin riding on Dogecoin’s popularity. Meme coins are highly speculative; their value is driven almost entirely by community sentiment and hype rather than technical innovation. They can surge or crash dramatically, so caution is advised – but they are part of the crypto culture and show how open the market is to any idea (even silly ones).

Given the variety, how do you make sense of this altcoin ocean? It helps to consider market capitalization (market cap), which is the total value of all coins in circulation (price per coin times circulating supply). Bitcoin still holds roughly half of the entire crypto market’s value. Ethereum is usually around 20%. The rest of the market (30% or so) is split among all other altcoins. As of mid-2023, the next biggest names included stablecoins and a few platform coins – for example, the Top 5 cryptocurrencies by market cap in mid-2023 were BTC, ETH, USDT (Tether), XRP (Ripple), and BNB (Binance Coin). This mix shows that after Bitcoin and Ethereum, a stablecoin and two utility tokens were leading, underlining that crypto is more than just “coins” acting as money: it encompasses payment networks, exchanges, and more.

However, remember that the rankings can change. New projects rise and fall. Many coins from past years are now virtually dead. In fact, studies found that most cryptocurrencies don’t survive ten years, often due to abandonment or lack of usage. This is a high-risk, high-innovation environment. While Bitcoin and Ethereum have established themselves with years of history and large communities, when dealing with newer altcoins you should be prepared for anything. Some might be revolutionary and yield high returns; others could be scams or fizzle out to zero.

So, it’s wise for beginners to stick to better-known projects at first, or if exploring small-cap tokens, never invest more than you can afford to lose. The crypto market is open 24/7 and largely unregulated (though this is changing gradually), which means prices can be extremely volatile and subject to market whims.

💡 What This Means for Gate Users: Gate.com is known for offering a wide selection of cryptocurrencies. This means as a Gate user, you have access to both the big names (BTC, ETH, etc.) and many altcoins that might not be easy to find elsewhere. It’s an exciting opportunity – you can diversify and explore various crypto sectors all on one platform. For example, you could buy some Bitcoin and Ether for the “blue-chip” exposure, a bit of GT or ADA if you believe in other platforms, maybe some UNI if you’re interested in DeFi, or even dabble in a meme coin just for fun. But with that opportunity comes responsibility: do your research (DYOR) on any coin you plan to invest in. Gate provides information and sometimes research articles on projects, so use those resources. A listing on Gate.com doesn’t guarantee that a coin will be successful – it just means it’s available for trading. The crypto landscape is dynamic; as you use Gate to explore altcoins, always be mindful of the risks and avoid chasing quick gains without understanding what you’re buying. In short, enjoy the smorgasbord of options, but keep your analytical hat on!