Could new cryptocurrencies be a threat to bitcoin?

17 August, 2015

Bitcoin has now become increasingly mainstream, yet a rising number of alternative cryptocurrencies are waiting in the wings, anxious to take the place of the most well known digital currency.

Among the most popular of those alternative cryptocurrencies is Litecoin. Often ranked as the second-most popular digital currency, Litecoin falls into a category known as "altcoins." Together, alternative cryptocurrencies comprise less than 10 percent of the total cryptocurrency market.

With that said, they are still a force to be reckoned with in this rapidly evolving world of alternative currencies, with the daily exchange volume valued at millions of dollars. Why the Move to Alternative Digital Currencies

One of the reasons that many people are now considering alternative digital currencies can be traced to the sheer popularity of bitcoin. There are two ways in which individuals can obtain digital currency. One is by purchasing such currencies with cash, including traditional currency. The other method is by generating digital currencies through a mining process. Technically speaking, mining digital currencies is free as the individual simply uses special programs to solve puzzles that work to verify cryptocurrency transactions. When those puzzles are solved, the individual is rewarded with digital coins. As more participants have entered the mining race, the process has become increasingly difficult. Consequently, it has now become much more expensive to generate bitcoin, necessitating the need for miners to purchase specialized equipment.

Minting your own cryptocurrency

Although Litecoin is now one of the more popular alternatives to bitcoin, many other such altcoins are coming onto the scene. Earlier in the year, NXT announced its Monetary System, a revolutionary platform that will make it possible for new cryptocurrencies to be created more quickly and in a straightforward manner. The system went live on January 10and allows users to create new currencies and secure those currencies using the NXT blockchain. Rather than bootstrapping the currency using their own network, developers will instead be able to utilize the established NXT network. Ultimately, the market will determine the value of the digital coin, based on demand and adoption along the parameters established by the developer.

Among the benefits offered by such a system is increased convenience and speed for a process that can otherwise be complicated and time-consuming. Designed to make it as easy as possible for both businesses and individuals to launch new cryptocurrencies, the NXT Monetary System opens up the process to larger pool of users and a variety of applications. The range of prospective uses could include new alt coins as well as crowdfunding efforts and even loyalty points.

Since the system is extremely customizable, developers can create tokens and coins in just a few minutes while taking advantage of the opportunity to denote a variety of parameters, including exchangeability, controllability, reserveability, claimability, and mintability.

Gold-backed cryptocurrencies

Currently, such altcoins have a long way to go before they could conceivably compete with bitcoin, but there are certainly many reasons why such alternatives could one day be taken quite seriously. Critics of bitcoin have launched many arguments over the last few years, the most legitimate of which is the fact that the digital currency is not backed by anything. Rather than being backed by anything of tangible value, bitcoin is instead backed by belief in the process. Now, a gold storage company is banking on changing that concept by launching its own cryptocurrency.

Looking to shake things up a bit, Anthem Vault has announced that its cryptocurrency will actually be backed by precious metals. The company says that each coin will have a value of a single gram of gold. 1 The coin is called the Hayek, after Nobel-winning Austrian economist Friedrich Hayek. Whether Hayek actually has a chance of being a viable alternative to bitcoin remains to be seen, but many proponents are already pointing out that it could serve as an alternative form of payment for individuals in developing countries known for their rather volatile domestic currencies. In this regard, the new cryptocurrency could provide an alternative to risks related to currencies issues by central banks.

Government-issued alternative cryptocurrencies

While many countries have been quick to warn against the use of digital currencies, including bitcoin, others have already taken steps to issue their own cryptocurrencies. Among them is Ecuador, which banned bitcoin last summer, but then released its own electronic money system later in the year. Since then, a German economist has also begun to point out the benefits of the country making the transition to a cashless society in an effort to fight drug trafficking and tax evasion. Denmark has already announced plans to stop printing fiat currency, while the majority of purchases in all around Europe are now made via electronic methods.

Government-issued cryptocurrency is a totalitarian state's dream. There will be nowhere to hide for the slaves of the new world order!


1) Anthem Vault.