ForexMinute.com – In order to better understand the future prospects and risks related to Bitcoin and Altcoin (Non-Bitcoin crypto-currencies) it is a good yardstick to gauge their architecture and the differences they have from the other. The basic idea is to use cryptography to control the creation and transfer of money, rather than relying on central authorities and their success depends on how much “cash” (the total value of transactions) they have in circulation around the peer-to-peer network (the virtual economy).
Starting with Bitcoin, it is an open-source, which means that anyone can develop their own crypto-currency using the same technology through a process called mining. The process involves repeatedly running an intensive mathematical function (the cryptographic hash function) on a set of randomly seeded inputs until a specific pattern is found. At the very same time, a big number computers from all over the world are racing to solve the same function—but typically only one wins. The results are then publicized on the Internet for the rest of the Bitcoin network.
Similarly, there is a list of other variants with some modifications to the process. Litecoin is a version of Bitcoin that can be mined with ordinary computers while Bitcoin now requires a specific chipset. Dogecoin is a variation on the Litecoin that boasts of better security measures. As of now, hundreds of such currencies exist, such as Ripple, Namecoin, BlackCoin, Peercoin etc.
They differ largely in the hashing algorithms they incorporate, the number of coins they generate over time, and few other details related to amount of energy used, such as faster transaction confirmation transfer, idiosyncratic variations and security etc. Each one of them is hoping to find a sweet spot in the emerging global crypto-currency marketplace.
Coming to the differences in utility of these variants, essentially on a macroeconomic perspective Altcoin essentially serve two purposes, “First, they test new tech features, showing whether they work and whether the market will accept them”. To start with, Namecoin is a system that creates and exchanges domain names, the coins themselves contain information about the domain names. Bitmessage is much a Bitcoin-inspired messaging platform that enables anonymous communication. Primecoin, being a unique one uses its proof-of-work algorithm to search for new prime numbers.
To sum it up, among the many variations available within the crypto-currency regime, while all are struggling to prove their mettle through differences in algorithm and functionality, it again boils down to the ability of each to entice investor confidence. Though the market is in doldrums in current times, we are definitely looking at some making up to the mark and to provide the very intent of an alternate currency, it’s true meaning while others just adoring the history literature.
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