Bitcoin introduced a decentralized currency system based on a peer-to-peer network where currency is not issued per se; instead it is mined with advanced computers by cracking difficult math-based equations. Bitcoin can be called the trendsetter, as its success has spurred the launch of many other virtual currencies (there are more than 150 cryptocurrencies). The currencies inspired by Bitcoin are collectively called altcoins and have tried to present themselves as improvised and modified versions of Bitcoin. These currencies are easier to mine, but involve greater risk in terms of lesser liquidity, acceptance and value retention. Here are five digital currencies picked from the lot. (See: How Bitcoin Works)

  • Litecoin

Litecoin, the second largest cryptocurrency in the world was launched in the year 2011. It was created by Charlie Lee, a MIT graduate and former Google engineer and can be described as the second-in-command to Bitcoin. Litecoin is based on an open source global payment network that is not controlled by any central authority and uses "scrypt" as a proof of work, which can be decoded with the help of CPUs of consumer grade. Litecoin has a faster block generation rate and well as more rewards per block as compared to Bitcoins. (Stores Where You Can Buy Things With Bitcoins)

  • Darkcoin

Darkcoin is a more secretive version of Bitcoin. Though Bitcoins are anonymous when compared to traditional money, there is still a record of all transactions ever carried out in a ledger “blockchain” which can reveal a lot of information. Darkcoin offers more anonymity as it works on a decentralized mastercode network that makes transactions almost untraceably. Launched in January 2014, Darkcoin has an increasing fan following in a short span of time. This cryptocurrency was created and developed by Evan Duffield and can be mined using a CPU or GPU. (See: What is Bitcoin Mining?)

  • Peercoin

Peercoin, also referred to as PPCoin, Peer-to-Peer Coin and P2P Coin, was created by software developers Sunny King (a pseudonym) and Scott Nadal. It was launched in August 2012 and was the first digital currency to use a combination of proof-of-stake and proof-of-work. The coins are initially mined through the commonly-used proof-of-work hashing process but as the hashing difficulty increases over time, users are rewarded with coins by the proof-of-stake algorithm, which requires minimal energy for generating blocks. This means that over time, the network of Peercoin will consume less energy. Peercoin is an inflationary currency since there is no fixed upper limit on the number of coins. (See: A Look At The Most Popular Bitcoin Exchanges)

  • Dogecoin

Dogecoin is another currency from the family of cryptocurrencies that recently turned a year old (launched in December 2013). Dogecoin, which has a Shibu Inus (a bread of a Japanese dog) as its logo, was created by Billy Markus and Jackson Palmer. Dogecoin presents itself broadly based on the Bitcoin protocol, but with modifications. It uses scrypt technology as a proof-of-work scheme. It has a block time of 60 seconds (1 minute) and the difficulty retarget time is four hours. There is no limit to how many Dogecoin can be produced i.e. the supply of coins would remain uncapped. Dogecoin deals with large numbers of coin that are lesser in value individually, making the currency more accessible with a low entry barrier and fit for carrying out smaller transactions.

  • Primecoin

Primecoin is an altcoin with a difference. Developed by Sunny King (who also developed Peercoin), its proof-of-work is based on prime numbers, which is different from the usual system of hashcash used by most cryptocurrencies based on the Bitcoin framework. It involves finding special long chains of prime numbers (known as Cunningham chains and bi-twin chains) and offers greater security and mining ease to the network. These chains of prime numbers are believed to be of great interest in mathematical research. (See: The Risks Of Buying Bitcoin)

The table below shows the market capitalization and price of the digital currencies discussed above. The data is from and accurate at the time of writing.


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Bottom Line

Bitcoin has a huge lead in terms of its market capitalisation, acceptance and usage. However, some of the peer currencies are slowly developing their own fan following, though none is currently in a position to challenge the dominance of Bitcoin. One thing which common to the whole virtual currency family is volatility in the prices. Till the time that is solved, none is risk-free. Other than the above five, some other cryptocurrencies which are popular are counterparty, mastercoin, digitalcoin, novacoin, zetacoin, feathercoin and zetacoin, among others. Going by the belief that virtual currency is the future, it will be interesting to see which ones survive the growing cryptocurrency competition. (See: Liquidity Of Bitcoins)

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