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The Alternative Kinds of Crypto Currency

Ever since the rise of Bitcoin, people from all around the world are taking interest in the massive potential of crypto-currencies. Not only are more people investing in Bitcoin, but they are also creating new crypto-currencies that would serve as an alternative to Bitcoin. Most of these new forms of crypto-currency share the same protocols as Bitcoin. However, these digital currencies are designed to function in different ways from Bitcoin. This happens in order for these currencies to stand out from their biggest competition. Sometimes, this works to their advantage, other times to their disadvantage. Nevertheless, each of these clients reveals the seemingly endless possibilities of crypto-currency.

Before revealing the alternative kinds of crypto-currency, one should know why there was a need for these new digital currencies. Since Bitcoin has been accepted into the mainstream, why was there a pressing demand for another of its kind? The main reason is that Bitcoin is very prone to deflation. What is most surprising about Bitcoin’s rise in popularity is that its value has always remained very unsteady. One day, a single Bitcoin would be worth as much as $600 and by the next day, it would be valued at just $60. Because of Bitcoin’s instability, computer scientists and engineers wanted to create a new digital means of exchange that was is prone to precariousness. To do this, they needed to reinvent the rules of Bitcoin. Each of the new alternative crypto-currencies revamped them in their own particular way.

First and foremost is Litecoin, which remains the most popular alternative form of crypto-currency. Founded on October 2011, Litecoin is usually known as “the silver to Bitcoin’s gold”. Like Bitcoin, its popularity has risen dramatically in the past few years. The result is that today a single Litecoin is valued at around $30, which is a 600 percent increase of its original value.

Litecoin was created as a solution to some of Bitcoin’s more urgent problems. For instance, in 2011, users began to realize that Bitcoin was not suited for small value transactions. And since Bitcoin was gaining more users who did not have a large number of coins at their disposal, a new crypto-currency was required to handle these small transactions. This is exactly why Litecoin was invented. Because its transaction time is far quicker than that of Bitcoin, smalltime users have a trouble-free time with Litecoin’s system. Another thing that makes Litecoin easier is that it has around four to five times as many coins as Bitcoin, making it easier to mine for coins. In addition, its hashing algorithm, known as scrypt, was designed to cater to desktop users in contrast to Bitcoin’s SHA265d algorithm which is more suited to a large network of high-powered computers.

The disadvantage with Litecoin is that, unlike Bitcoin, not many places use it as a digital means of exchange. Hopefully though, Litecoin’s rise in popularity will enable it to become a legitimate type of crypto-currency in the near future.

The second kind of alternative crypto-currency that has garnered the support of the most avid of technophiles is Peercoin. Even though a single Peercoin is only valued at $3.50, the majority of crypto-currency aficionados have been saying that Peercoin is a far better system than that of Bitcoin. They even believe that there is a possibility that Peercoin could overtake Bitcoin in the distant future. The primary reason for such enthusiasm is Peercoin’s mining system, which is far safer and more secure compared to Bitcoin’s.

There have been many security issues with Bitcoin’s mining system. Because Bitcoin mining now requires high-powered rigs, users are worried that the people who use these rigs will abuse the mining system. Some have said that these rigs will unfairly monopolize a huge number of Bitcoins. Others have stated that these rigs are powerful enough to counterfeit Bitcoins themselves.

This is where Peercoin comes in. It was created to make digital transactions more secure by including a “proof-of-stake” in each transaction. In Bitcoin, each transaction is secured by a “proof-of-work”, which simply identifies the owner of the particular transaction. Peercoin improves security by boasting of both a “proof-of-work” as well as a “proof-of-stake”. The “proof-of-stake” is basically a timestamp for each particular transaction. Such high level security makes it extremely difficult for high-powered rigs to counterfeit coins. It also makes it easier for users who do not have high-powered rigs to mine coins at a profitable rate.

Another reason why Peercoin is so beloved by technophiles is that there is no set limit to the amount of coins that will be produced. Bitcoin has a limit on the number of Bitcoins to be generated, which makes it vulnerable to bouts of deflation. Meanwhile, Peercoin continues to grow steadily without any signs of stagnation or deflation. Right now, crypto-currency experts estimate that Peercoin is growing one percent per year. Aside from its low value, there are few things standing in the way of Peercoin in its quest to become the crypto-currency of the future.

Last but not least, one has to take a quick look at Freicoin. This alternative crypto-currency is known for its policy of demurrage. What this means is that Freicoin puts a tax on the number of coins a user saves up. Among crypto-currency enthusiasts, this policy is controversial, since the system appears to be taking away the coins one has mined. According to the creators of Freicoin, the policy of demurrage was created so that people would continue to spend and exchange coins as quickly as possible. This would make the Freicoin GDP grow at a steady rate, and it would also protect the economy from any threat of deflation. Right now, Freicoin is not that popular, but its economic philosophy is turning heads.

Summary

Crypto-currency is the way of the future. Even though this future is bright with possibility, there remains the ever-present risk of instability and collapse. Understanding these forms of crypto-currency is one step forward, but the real issue is whether or not these digital means of exchange will become legitimate. Only time will tell.

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