Cryptocurrency is a form of money based on the secure exchange of information. Cryptocurrencies are usually designed so that a certain amount of the currency is created through the solving of algorithms or puzzles. The first cryptocurrency was Bitcoin, developed in 2009, and it remains by far the most popular.
However, many other cryptocurrencies have also been developed and put in circulation.Perhaps the best-known cryptocurrency besides Bitcoin is Litecoin. According to Bloomberg News and Businessweekreporter Olga Kharif, litecoin is “cheaper to generate, more plentiful and easier to use for small transactions than bitcoin.”1 Bitcoin mining—solving the puzzles which generate the currency—requires powerful processing equipment. Litecoin, on the other hand, is designed so that it can be mined from regular computers available to most consumers. In addition, the total number of litecoins that can eventually be mined is four times greater than the total number of bitcoins available.
The currency’s proponents hope that the greater amount of mineable litecoin will make its price lower, thus making it more attractive for use in smaller consumer transactions. Kharif quotes Anton Yemelyanov, one of the developers of litecoin, as saying, “Litecoin has always been viewed as silver to bitcoin’s gold…. Bitcoin would be used to transact larger value transactions, whereas litecoin would absorb smaller transactional value.”2Another challenger to Bitcoin is Dogecoin. This digital currency was begun as something of a joke and retains a light-hearted profile thanks to its mascot, an extremely cute Japanese Shiba Inu dog.
The cheerful image could help make Dogecoin popular with younger Internet users, its supporters hope. The coins have initially been used mostly to tip people online who post a good video, or for other small-scale online social transactions. As with Litecoin, Dogecoin is considerably cheaper to mine than Bitcoin: as of May 31, 2014, one bitcoin was worth $529.50, while one dogecoin was worth .
059 cents, according to Aaron Crowe in an article on DailyFinance.com. Despite Dogecoin’s low-key start, Ben Doernberg, a member of the board of directors of the Dogecoin Foundation, says that eventually “The goal for Dogecoin is to actually be the online currency.
“A third cryptocurrency is Quark, first presented in late 2013. Although it hasn’t been around very long, the Quark currency has attracted a good bit of attention because of its “intense security measures,”4 according to Karis Hustad of the Christian Science Monitor. Every transaction with Quark has nine different encryption rounds and six encryption algorithms. It is also supposed to be much faster to mine Quark than to mine other currencies, and (like Litecoin and Dogecoin) each quark is worth a relatively small amount, so it is more convenient than Bitcoin for small purchases.There are numerous other cryptocurrencies as well. Peercoin, for example, is similar to Bitcoin but has controls in place to make it harder for any one person or group to monopolize the mining of the currency. Namecoin is both a currency and a decentralized Internet address—which means that, when you get a namecoin, you also get a domain name which is outside the regular Internet.
Infinitecoin is similar to Litecoin but has the potential to generate more than one thousand times more coins through mining. And then there’s Megacoin and Novacoin and Feathercoin and more according to Samuel Gibbs of the British newspaper The Guardian.Obviously, cryptocurrencies are hot, and there are many tech folks who enjoy inventing them and figuring out new ways to make trickier and better currencies with new and exciting features. The question remains, however, will anyone actually use them? Money is only useful as money if it is widely accepted and circulated. There are only a very limited number of stores or vendors who will accept payment in bitcoins.
Finding someone to accept payment in litecoin is going to be even more difficult. And what are the chances of finding even one business that will accept feathercoin as payment? It’s not clear whether Bitcoin will ever gain sufficient widespread acceptance to actually be a viable form of money, much less the dozens of wannabe bitcoins that have emerged since Bitcoin’s introduction. As Adam Draper, an investor in Bitcoin startups, told Olga Kharif for her Businessweek article, “Alternative currencies are great.
… They all run into the same problem, though. They are not bitcoin.”5At Issue: Bitcoin looks at other controversies around Bitcoin, including such issues as whether the currency should be banned, whether it should be regulated, whether it favors the wealthy over the poor, and whether it is a real currency.