Bitcoin is the most popular cryptocurrency in use today, with the equivalent of over $1 billion currently in circulation. The value of Bitcoin dips and soars as it gains public attention. This brings up questions about whether or not it will predominate the universe of alternate currency for online transactions.
Bitcoin could potentially become the preferred cryptocurrency to pay for goods and services, bur it is not guaranteed monopoly status. Other competitors are entering the arena, and some have serious advantages over Bitcoin. They are perceived by users as being better than the established standard. Consequently, they are fast gaining popularity and value.
The Size of Cryptocurrency Markets
A single bitcoin is worth around $93 and there are between $1 and $2 billion in circulation at any given time. Litecoins are worth $2.30 each, and total over $38 million in active use. PPCoin is worth $0.22 each and accounts for $4 million in value.
At the moment, Bitcoin enjoys a large share of the cryptocurrency market. But things could change in a heartbeat. Several technological limitations restrict the widespread adoption of Bitcoin as the standard for online payments. Significant among them is the need for a time lag in order to validate Bitcoin based transactions, making it less suitable for business use.
The Technology Behind Cryptocurrency
Bitcoin is rooted in mathematical formulae which restrict the total units to a limit of 21 million. The design is such that it is possible for Bitcoin users to verify that payments sent to them are authentic. This prevents counterfeiting, but places a time delay on transactions which need to be verified and validated through a computing network.
The design on which Bitcoin is built has been published openly, with a view to engendering improvement by developers. Litecoin is an improvement on this system, with the ability to verify transactions faster. Where Bitcoin requires verification through software run by other users, Litecoin speeds up this 10 minute process four-fold through a different process.
Generating New Coins
All three leading cryptocurrency services – Bitcoin, Litecoin and PPCoin – generate new coins through a process called ‘mining’. Users run software to solve computational challenges, with winners being given the permission to generate new coins. But as computational power grows, the ability to mine new coins has become centralized into a few hands depending upon their access to huge banks of computers.
Litecoin has implemented use of a mathematical puzzle, making the process of coin generation less dependent on those with access to greater computational power. PPcoin is designed to eventually remove the need for mining completely. New coins are awarded through a lottery, where the number of coins one already has positively influences the chance of winning.
Is Competition in Cryptocurrency Helpful?
Some Bitcoin fans are concerned at the danger of alternative cryptocurrencies delaying mainstream adoption of the concept itself. But just as competition in other spheres creates more opportunity and enhances the value for users, the same effect can be expected in the cryptocurrency wars.
Just as silver plays a supportive role to gold, it is possible that several different cryptocurrencies will emerge as major players, with each having a role as accessories and support currencies for a world driven by digital commerce.