As the new year kicked-off, Bitcoin hit a new three-year high, and its value stands at $1063 as of writing. For the uninitiated, Bitcoin is a decentralised virtual digital currency, which can be used to make payments online. Currencies like Bitcoin are known as cryptocurrencies because encryption techniques are used to generate and use the currency digitally. There are over 200 cryptocurrencies today and while Bitcoin is the clear leader in this segment, other alternatives may offer better features in various segments. So before we begin, let’s see why exactly would you want to use Bitcoin alternatives.
Why Bitcoin Alternatives?
Bitcoin was designed in such a way that the more the miners join, the harder it gets to actually mine Bitcoins. To put things in perspective, in 2009, you could mine 200 Bitcoin in a few days. With the same hardware, it would take 98 years to mine just one Bitcoin in 2014. Your power consumption charges could skyrocket, as you’d have to power on your hardware for a longer time. Thus, many Bitcoin alternatives have arrived to the rescue. Today, I shall discuss 5 Bitcoin alternative cryptocurrencies you can use:
Note: All the current exchange rate are sourced as of 4 January 2017 from CoinMarketCap and are subject to change.
Created by former Google engineer Charles Lee in 2011, Litecoin is the second largest cryptocurrency after Bitcoin. It was built with the motive to improve over Bitcoin. Here’s why you should consider using Litecoin:
- Litecoin has a coin limit of 84 million, which means that a total of 84 million Litecoins can be mined/generated. In contrast, Bitcoin has a limit of 21 million, out of which an estimated 16 million have already been generated.
- Bitcoin uses the SHA-256 hashing algorithm, as compared to Litecoin, which uses Scrypt algorithm. The SHA-256 algorithm requires the use of more powerful ASIC hardware for mining, and GPU’s are not worth the effort. Litecoin’s Scrypt algorithm is relatively less demanding, making it a little easier to mine for Litecoins using existing desktop computers.
- The block generation time for Litecoin is 2.5 minutes as opposed to Bitcoin’s longer 10 minutes. This results in Litecoin being more efficient in handling a large volume of transactions than Bitcoin.
Current exchange rate: 1 Litecoin = $4.73
Ethereum is a relatively new entry into this segment but has quickly emerged as a viable alternative to Bitcoin. The coins in the Ethereum network are called Ethers. It brings some new concepts to the table and offers a range of services that are not possible with Bitcoin.
- In Ethereum, block generation time is set to 15 seconds as opposed Bitcoin’s 10 minutes. Ethereum sports one of the fastest transactions speeds amongst all the cryptocurrencies.
- Ethereum’s encryption technique allows you to mine Ethers with the GPU available in your computer. With Bitcoin, it’s almost impossible to mine using regular GPUs, as it requires the use of powerful ASICs.
- All the cryptocurrencies reward you with virtual money for mining. With Bitcoin, this reward halves after every four years. So along with time, it gets harder to mine and reward you receive for mining is significantly less. Ethereum rewards with the same amount every year. So, investing time in mining Ethereum may prove more beneficial than Bitcoin.
- Ethereum brings a new concept of “smart contracts“. It allows two users to make a binding commitment to exchange Ether. For example, two users could submit $500 worth of Ether to a smart contract. The network can then transfer the money after the specified amount of time, irreversibly. This type of contracts could prove beneficial in countries with lax courts, as this whole process is overseen by a computer program.
Current exchange rate: 1 Ether = $10.76
3. Dash (Darkcoin)
Darkcoin was originally launched in 2014 and was rebranded as “Dash” later in 2015. It became quite popular, owing to the fact that it brings anonymity in the transaction procedure.
- The Bitcoin system allows anybody to see any transaction on the network owing to its public blockchain. Dash blurs the transaction path as much as possible, thus protecting their anonymity.
- Compared to Bitcoin’s single SHA-256 algorithm, Dash incorporates a total of 11 algorithms, collectively called as X11. This makes it much, much tougher to break into Dash’s network. Needless to say, Dash is accepted as a way more secure cryptocurrency than Bitcoin.
- Dash’s chained algorithms make it more user-friendly for mining compared to other cryptocurrencies. For instance, GPU’s run at about 30% less electrical power than scrypt and 30-50% cooler. This results in lower power consumption and longer life of the computing setups used for mining.
Current exchange rate: 1 Dash = $16.69
Unlike many other cryptocurrencies, which are forked directly from Bitcoin, Monero is built on the CryptoNote protocol. Monero doesn’t have an ecosystem as feature-rich as Bitcoin, but it has some nice little touches of improvement over Bitcoin.
- Monero uses CryptoNote encryption which makes it possible to use GPU and even CPU for mining Monero coins whereas in Bitcoin CPU/GPU mining is really pointless. This means that there’s a good possibility that you can mine Monero using your desktop PC whereas you’ll require buying a powerful dedicated ASIC for mining Bitcoin.
- Monero’s block chain details are obfuscated, which basically means that transaction details are not visible publicly whereas, in Bitcoin, the blockchain is publicly visible so anybody can look up any transaction.
- Monero has a block generation time of just two minutes, compared to Bitcoin’s ten minutes. This results in faster transactions over the network.
Current exchange rate: 1 Monero = $16.75
Dogecoin started in 2013 as a joke over the popular Internet meme “Doge”, but today has a market cap of over $22 million. Don’t let the name fool you: it holds the record for most transactions per day for any cryptocurrency, peaking at 2.5 times more transactions than all other cryptocurrencies combined in December 2013. Dogecoin has a few advantages over Bitcoin:
- Dogecoin’s block time is one minute as compared to Litecoin’s 2.5 minutes and Bitcoin’s even longer 10 minutes. This makes the transaction faster than the two of its nearest competitors.
- The total number of Bitcoins that can be produced are capped at 21 million of which more than 75% are already mined. Thereby, it can be increasingly difficult to mine a Bitcoin. Dogecoin has no such limits set, thereby you can keep mining Bitcoin indefinitely (this could also be a disadvantage for Dogecoin, as it is prone to inflation).
Dogecoin is generally used to tip online content providers rather than buying or selling stuff.
Current exchange rate: 1 Dogecoin = $0.00023
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Bitcoin Alternative Cryptocurrencies Boost Decentralization
The way I like to see it, all these Bitcoin alternatives are rather a boost for the notion of decentralised money than competitors. Each alternate cryptocurrency has its own set of merits and you are free to choose the one you prefer. The underlying technology may be different for some cryptocurrencies, but they all have the same motive: transfer the control of money from the Governments and banks back to the people. In short, making currency for the people, by the people.
Well, those were my views but I’d love to hear your views on cryptocurrencies. So, make sure to sound off in the comments section below.