Beyond Bitcoin: The World of Alt Coins
Bitcoin may be the most well-known cryptocurrency, but it's hardly the only one. Numerous others with various objectives are competing for your e-wallet.
Cryptocurrency is a familiar phrase now with bitcoin being easily the most widely-known, but it’s not alone, as we have seen an inexorable growth in the number of cryptocurrencies. Some are broad and others have specific goals.
Dogecoin, inspired by the Doge meme, doesn’t sound like one should take it too seriously but it has seen an uptake from loyal users.
In May 2015, one U.S. dollar was valued at around 7,500 DOGE, according to dogepay.com. So, the currency isn’t exactly making waves in the same way that bitcoin has, but its use has still taken off with Reddit users creating a community around it.
Derived from Litecoin, an open-source P2P cryptocurrency, Dogecoin was co-founded by Billy Markus and Jackson Palmer and is billed as "the internet currency." While some online stores accept Dogecoin, it has gained traction through tipping-like transactions, where good deeds online can be rewarded with a few Dogecoins.
The currency has slowly begun infiltrating the mainstream too by sponsoring NASCAR racer Josh Wise, whose car has been emblazoned with Doge imagery.
Dogecoin also held its first conference in San Francisco in April 2014, with Palmer as keynote speaker. He touched on how Reddit adopted the currency and added that $150,000 worth of tips had been made among Reddit users.
He went on to stress that Dogecoin isn’t based around its value to the dollar. "Unfortunately, a lot of communities around cryptocurrency, that’s all they care about," said Palmer.
"You shouldn’t wake up every day and worry about what Bitcoin is in U.S. dollars or what Dogecoin is in U.S. dollars."
The next big goal for Dogecoin and Palmer is business. "The key to our success is to build merchant and user redemption," added the co-founder.
"We need to encourage more small businesses and big businesses to start adopting Dogecoin as a form of payment. We need to build demand for people that want to pay using Dogecoin."
On a different scale, we have cryptocurrencies aimed at specific countries, and Iceland’s Auroracoin is leading the charge. In March 2014, its developers, under the pseudonym Baldur Friggjar Óðinsson, made $125 million worth of Auroracoin available to the people of Iceland, which has a population of just about 320,000 — that’s about $380 each — but only a small percentage of the population accepted their coins.
Auroracoin drew a lot of influence from Iceland’s economic disasters of recent years. The creators’ frustration with this and long-term currency controls on the Krona have brought about one of the latest Litecoin-based cryptocurrencies.
"Since Icelanders are not allowed to buy bitcoins and other cryptocurrencies from abroad, I felt the nation was losing out on an important moment in monetary history," the creator(s) tell Techopedia.
"Launching Auroracoin was my way of bringing this technology to the forefront in Iceland. Hopefully, in future, it will make it harder for politicians and bankers to mismanage the Icelandic financial system."
The Icelandic government, however, has not been receptive of the currency, saying it can lead to tax evasion and users aren’t protected. MP Frosti Sigurjónsson is one such official that has challenged the currency’s legitimacy.
Iceland’s Central Bank warned: "Current Icelandic law does not protect consumers against losses they may suffer from using virtual currency; for instance, if a 'market' that exchanges or holds virtual currency reneges on its obligations, or if a payment fails or ends up in the hands of the wrong party."
"New technologies tend to disrupt the old system in various ways," says Baldur Friggjar Óðinsson. "Maybe cryptocurrencies make it harder to enforce tax laws. That is just something regulators will have to deal with."
We’re also seeing the rise of "cause-based" currencies like SolarCoin, aimed at those working in the solar power space.
The currency was born from a paper written in 2011 by Nick Gogerty and Joseph Zitoli, called DeKO, proposing a digital currency that works towards a better planet, with users earning one SolarCoin for every megawatt-hour (mWh) produced.
Joseph Zitoli describes the technology behind digital currencies as the "how" but that leaves behind the question of the "what." What can be achieved through a cause-based currency and what creates its value?
"Bitcoin and other cryptocurrencies are still backed by scarcity," he says, much like gold as its value is created if people are willing to accept it. "Whether it’s in physical form like gold or digital form like bitcoin but still backed by scarcity and the belief in that," he adds.
"Our argument is of truth and goodness," Joseph continues. "You have forms of truth in terms of the technology, the blockchain which you can trust; the coins aren’t double spent, they’re exactly what’s in circulation, and number two of the trust factor is the megawatt-hour. It’s an objective proof of work.
"You’re helping the planet or not harming the planet," says Joseph on goodness, which is why such a plan wouldn’t work with oil, coal, etc. The other stage is "raising the standard of living for humanity".
For every mWh, producers receive one coin, but what happens next? What can someone do with SolarCoin once they have them?
"It’s just like any currency, if people are willing to accept," he says. "What we’re looking into is to have discounts on solar panels that solar manufacturers accept SolarCoin as a portion of payment."
Solar energy is of course only one renewable source, so what makes it most suitable for a currency? "We want projects both big and small. We want homeowners and commercial owners of plants to be able to earn SolarCoin," explains Joseph. "If we based it on geo-thermo or biomass, that’s mostly going into companies."
Wind energy, for example, does not have an "objective third-party way of measuring if they’re telling the truth," says Joseph.
With solar one can use a PV watts calculator, which will measure solar energy production. "We know that because that’s just straight physics," Joseph says. "Let’s say there’s a wind coin, and we welcome people that do that. Was the wind blowing? How fast was the wind blowing? It’s harder to do. It’s much easier to do with solar."
What’s the Future for So Many Currencies?
The future of cryptocurrencies is anything but certain as volatility and trust will play a huge role in how people view them. Nevertheless, more currencies with different aims are cropping up, which means there is a great chance of fraud, especially with the rise of supposedly nation-based currencies since Auroracoin arrived.
"There have already been numerous scam-coins that have claimed to be national cryptocurrencies," says Baldur. "It will probably be hard for many of these coins to build the trust necessary to survive."
Establishing trust will be pivotal to any currency’s success. Without trust, it will fail, and in the future we’ll start to see the weaker attempts weeded out.