While many are still being turned on to the perks of Bitcoin as a speculative asset, platform, and currency, there are other players in the game. Here is a brief look at how these cryptocurrencies stack up in terms of features. Also, if you’re interested in the rest of the top 10, be sure to check out Quarkcoin vs. Megacoin vs. Protoshares vs. Worldcoin vs. Feathercoin.
Bitcoin – First and Biggest (but Maybe Not the Best)
Capitalization: 12 Billion Dollars. Price as of 12/2/12: ~$1000
• Sophisticated, entrenched platform could allow for use beyond currency in stock markets, digital quid-pro-quo agreements, and other revolutionary uses due to nearly zero transaction fees.
• Biggest market capitalization, greater than 10 billion dollars (11/25/13).
• Secure with some minor caveats including colluding miners (previously 51% attack, now may be 33% attack),
• Massive fanbase for its true decentralization.
• Established and accepted by 1000s of merchants.
• Scarce, only 21 million will ever be mined.
• Transactions take a long time to confirm. Three confirmations (usual minimum) takes at least 15 minutes, but closer to an hour on average in my experience.
• Scarcity and finitude means BTC is inherently deflationary. Some feel this is bad, but this really only for people who think BTC could plausibly take over Fiat completely — not plausible in my opinion and therefore irrelevant.
• Mining is expensive, costing some $150,000 a day reports Bloomberg. Mining costs may be prohibitive in future growth and transaction verification. This could lead to fees on Bitcoin transactions.
• For speculative growth, Bitcoin is perceived as expensive, people don’t like to own one or two of something, but rather 10s or 100s, but this may be solved by a naming convention, calling Bitcoin, mBTC, or millibitcoin. In this way, people could buy a thousand milliBitcoins for the price of one Bitcoin. It’s psychological, but it is a real factor in valuation and adoption.
Litecoin – 84 Million Coins Faster Than Bitcoin
Capitalization: 734 Million Dollars. Price as of 12/2/12: ~$30
• At .5 billion dollars, it has the second or third biggest market cap, depending on whether or not you consider Ripple to be cryptocurrency (as of (11/25/13).
• Transaction times happen 4x faster than Bitcoin.
• Still affordable to a lot of people as an investment whereas Bitcoin is seen as too expensive. It has a good combination of momentum and affordability right now.
• Theoretically, one Litecoin should be worth 1/4 Bitcoin since there will be 4x as many coins. Right now LTC is around $20, and BTC is almost at $1000. It could be argued that Litecoin is therefore undervalued by an order of magnitude (1/50 when it should be 1/4).
• More coins than Bitcoin means that Litecoin may be more future-proof than Bitcoin.
• Cannot be purchased directly with USD or other currencies as easily as Bitcoin, ultimately meaning its price is directly connected to Bitcoins.
• Ultimately, Bitcoin has more momentum and support from the community. Litecoin may be the second biggest cryptocurrency, but many feel similar to one pundit who said, “There can only be one. The Network effect is simply too strong. Bitcoin has orders of magnitudes more adoption, acceptance and use compared to any other cryptocurrency on the market. The game is over and Bitcoin won.”
Peercoin – The Environmentally Friendly Standout
Capitalization: 122 Million Dollars. Price as of 12/2/12: ~$6
• Said to be sustainable and long-term environmentally friendly because mining will require orders of magnitude less power than Bitcoin and Litecoin.
• Distinguishes itself from other coins by using “Proof-of-Stake/Proof-of-Work” hybrid. Proof of stake requires less energy.
• .01 Peercoin Transaction fee (on every transaction) is said to render Peercoin a better “store of value,” and it may be used as a backbone cryptocurrency according to some, and its creator, Sunny King.
• In terms of speculative value, Peercoin has attractive branding and an excellent logo. This may increase early adoption.
• Peercoin is inflationary, tantamounting to each user’s number of Peercoins growing 1% per year. This means that the number of Peercoins is technically limitless. This may be seen as a con for speculation, but for real-world use is more comparable to modern money systems.
• .01 Peercoin transaction fee means that Peercoin is less liquid and less multifaceted in use than competitors. It would be impractical to use in everyday transactions, a stock market, or anything with high transaction volume. This will only become more true as its value increases.
• Not truly decentralized. Peercoin uses “centralized checkpointing,” but Sunny King, Peercoin’s creator, says this feature will be removed with future versions and when the cryptocurrency stabilizes.
• Peercoin is inflationary which some feel is intrinsically bad. Others have said that “the rich get richer” with peercoin, but the reality is that Peercoin users all stand to benefit equally from Peercoin’s inflation.
Ripple – Venture Capital’s Electric Money
Capitalization: 5 Billion Dollars. Price as of 12/2/12: ~$.05
• Company behind it, OpenCoin received some 2M dollars in Venture Capital in May. Additional round of funding for Opencoin’s evolution into Ripple Labs netted 3M dollars.
• Non-decentralization means simpler legal integration and likely government adoption, but has invoked the wrath of decentralization fans who call it “the Ripple Scam.”
• Versatile platform is said to allow conversion between any currencies.
• Ripple platform allows for issuing debt via “IOUs,” Bitcoin can also do this as a platform, but this feature has yet to be explored.
• Mining Ripple now means donating computing time to solve scientific and medical problems.
• 100 billion total Ripples (XRP) with all of them “pre-mined,” as Ripple is not a cryptocurrency.
• Ripple Labs possesses some 50 billion Ripples in hopes they will increase in value.
• Muddled marketing strategy. Ripple Labs stated they would give away Ripple and even did so to some extent to build awareness. This has led to many thinking their Ripples may be worthless and will hurt price increase. Some have said that Ripple Labs will no longer be used this strategy.
• Largely perceived by crypocommunity as a scam. Adoption and use will have to be from other, mainstream avenues.
Namecoin – Cryptocurrency, Buy Now, Get One Free Internet
Capitalization: ~60 Million Dollars. Price as of 12/2/12: ~$8
• 21 Million total means that Namecoin will be relatively scarce, exactly the same as Bitcoin’s scarcity level.
• Permits for creation of uncensored internet, disallowing governmental control.
• Versatile platform can be used to recreate decentralized, unregulated Domain Name System, sort of like its own internet. Can also be used for messaging, voting, and login system – all within the cryptocurrency.
• Uses identical cryptography to Bitcoin protocol meaning Bitcoin miners could mine Namecoin profitably should Bitcoin mining become unprofitable.
• Permitting for an uncensored internet means Namecoin could lead to illegal activities online, beyond even the scope Bitcoin, such as child abuse or similarly illegal websites.
• While an alternate DNS system is useful, Namecoin as a cryptocurrency distinguishes itself in no other way from Bitcoin.
• Namecoin vulnerability revealed that underminds domain name registration service. Vulnerability will be repaired in a future block, however.
Questions/Comments/Corrections please email danny at heavy dot com.