While Bitcoin steals headlines and the bulk of the world’s attention when it comes to digital currency – other cryptocurrencies, or “altcoins”, have also risen to some prominence amongst the more tech savvy.
Cryptocurrencies are a digital medium of exchange and are defined primarily as specifications for the use and distribution of the currency they create.
These digital coins are created mainly from “mining” – using algorithms and PC processing power to solve cyptographic problems. The more processing power, the coins mined.
While dominant currency, Bitcoin, was the first cryptocurrency to be created, various changes to the algorithms, methods and limits of the Bitcoin specifications resulted in new currencies being created.
|Market capital||$7.37 billion|
|Trade||$305 (Average, Mt.Gox, 16 February)|
Bitcoin – the biggest and most popular cryptocurrency by market capitalisation – was started in 2009 as a currency free from government controls; an entirely digital means of exchange for a digital age.
As Bitcoins are “mined” or generated by computers, they get harder to generate all the time, which means the inflow of fresh bitcoins keeps falling.
While 12.3 million coins are currently in circulation, Bitcoin will slow down to such a rate that it will only hit its maximum peak – 21 million – in year 2107.
Bitcoin has had to bear the brunt of the cryptocurrency focus, having been associated with many dodgy dealings online, money laundering, drug trade and governmental concern over regulation.
Due to its prominence and high value – having hit well over $1,000 for one BTC – the currency is becoming more widely distributed, as well as accepted for trade across the globe.
Its popularity has also drawn a lot of focus from regulatory bodies and governments, however, as agencies crack down on the coin’s uses, and more restrictive governments like China and Russia block its use, altogether.
|Market capital||$1.48 billion|
|Trade||$0.015 (16 February)|
Unlike the altcoins mentioned here, Ripple’s native currency, XRP, is a “pre-mined” distribution currency that forms part of the Ripple payment gateway network.
Ripple operates as a zero (or extremely low) fee payment system that bridges fiat currencies (USD, Yen et al) and cryptocurrencies (Bitcoin and others mentioned here).
XRP is traded as a bridge currency, and used by the network as an anti-spam mechanism.
Trades via Ripple require a miniscule fee of .00001 XRP (equivalent to a tiny fraction of a single US cent), and users are required to have at least 20 XRP to trade. If users maliciously spam or attack the system – which could destabilise the network – the fees would add up quickly, and turn into a costly exercise.
100 billion XRP were created at Ripple’s inception – and no more can be created according to the rules of the Ripple protocol. Transactions are automatically processed by a global network of computers running the protocol.
However, only 25% of the currency is distributed publicly, meaning only around $350 million is tradable.
|Market capital||$381 million|
|Trade||$14.79 (16 February)|
Litecoin is a peer-to-peer cryptocurrency that sought to improve on Bitcoin. While the altcoin is technically similiar, it works faster than Bitcoin in processing – or “mining” – the currency, which can be processed on “consumer grade” equipment most people have.
The currency is expected to hit a total circulation of 84 million.
Like Bitcoin, Litecoins can be used across a variety of (mostly online) marketplaces to buy a wide range of products and services. From product merchants (precious metals, gift cards, games) to web hosting and domain registrations, most cyptocurrency marketplaces that accept Bitcoin also accept Litecoin and other altcoins.
|Market capital||$80.55 million|
|Trade||$3.81 (16 February)|
|Cap||2 billion (unofficial)|
Peercoin differentiates itself from other altcoins by adopting a hybrid mining system that’s more energy efficient and more secure, according to its creator.
Like other cryptocurrencies, Peercoin “mining” also gets slower over time – however, with this altcoin, users will continue to be rewarded with coins generated by an additional mining process based on individual holding of the currency.
According to the altcoin’s creator, the secondary process – called “coinstake” – is a form of proof of ownership of the currency, and serves to combat “the deflationary tendencies that cryptocurrencies can suffer because of their hard mintage caps,” as well as disincentivise the monopolisation of the currency.
Due to its “hybrid” nature, Peercoin doesn’t have an official distribution cap (though unofficially set to 2 billion for measurement purposes), but rather seeks to hit an annual inflation of 1%.
|Market capital||$70.2 million|
|Trade||$0.0014 (16 February)|
Based on the popular Doge meme, Dogecoin is an altcoin crytocurrency derived from Litecoin and its processing functionality – but once again changes things up.
Dogecoin has an even faster coin production schedule, with 100 billion Dogecoins expected to be in circulation by the end of 2014 (compared to Bitcoin’s projected figure of 21 million Bitcoins by 2107). The currency also has no cap on the amount that will be in circulation.
While light-hearted in nature, the memetic ties of the altcoin boosted its prominence on the Internet, particularly across social networks like Twitter, making it one of the top-traded digital currencies online.
Dogecoins have limited commercial applications, but has real-world use on Twitter and Reddit.