Attack of the Bitcoin Clones

Cryptocurrency has become the currency/forex story of December 2013, with the unquestioned king bitcoin dominating the conversation. Unsurprisingly, on the heels of the “bitcoin boom” have come a slew of imitators and alternatives to what is already an alternative investment. And like bitcoin, their prominence is on the rise.

As Nirvana spawned an army of wannabes trying to capture the zeitgeist of the Seattle Sound, so has the bitcoin boom spawned its own bevy of cryptocurrency imitators. Coinmarketcap.com lists 43 total alternative currencies trading on the web, almost all to a T variations of the originator, bitcoin in both design and name: Litecoin, Namecoin, Quarkcoin, all the way to sub $200,000 market cap, Minecraft-specific Craftcoin.

While most are worthless pump-and-dumps, some of the cryptocurrencies have interesting aspects worth exploring. Here’s a closer look at three of the most popular alternative-to-the-alternative digital cryptocurrencies currently flooding the market, and what differentiates them from bitcoin:

Litecoin

At roughly $1 billion market cap, Litecoin is far and away the most popular bitcoin alternative. Differences from bitcoin include faster blockchain processing, a different mining algorithm, and four times as many total litecoins available.

However, those differences are just tweaks on the original bitcoin formula, and otherwise litecoin basically mimics bitcoin. Except right now it’s even more speculative-driven.

Litecoin proponents sometimes call litecoin the silver to bitcoin’s gold, an idea is reinforced by the grey coin design of the litecoin logo. Of course, while gold and silver are similar as speculative vehicles, silver has a broad array of real-world uses that differentiate it greatly from the yellow metal, making it a truly separate investment entity, and not just a shadow imitator.

To really be considered the silver alternative, litecoin must find its own differential use outside of speculation, or it will just be for amateur daytraders trying to build their own pyramid.

Namecoin

Namecoin is a really interesting creation, as unlike other cryptocurrencies, namecoin has something akin to a built-in-usage aspect to the currency. Each piece of the namecoin also acts a sort of free-floating decentralized DNS, which can be used to park domain names, login systems, and other places to stoe and transmit keys. Otherwise, economically, namecoin behaves like bitcoin.

Except the design isn’t quite as elegant. Namecoin had a major flaw exposed in October which made it possible for unscrupulous users to steal namecoins.  While the discovery was certainly worrisome, the inherent usability of namecoin (along with a big endorsement from WIkileaks) separate namecoin from its pure-junk counterparts.

Peercoin

Peercoin is most notable among the crypotocurrencies for its decidedly liberal design. Almost every other cryptocurrency answers only to the god of numbers: rates are fixed; mining increases in difficulty at an exact rate; nobody controls the supply. Of course, the lack of anything resembling centralized control leads to all cryptocurrencies having a deflationary bias, and thus largely favor early adopters.

But not Peercoin. Peercoin, as a currency, is designed to eventually attain one percent inflation – making it mimic not gold, but actual, functional paper currencies.This encourages proponents to create avenues to spend money and create liquid economies, not hoard and speculate.

Of course, this all comes at an ideological price: measured inflation requires human intervention to make sure the system runs correctly. This means peercoin has the closest thing any major cryptocurrency has to a central authority.

The overseers of peercoin’s supply promise to step aside once the system becomes self-perpetuating. But as the most progressive cryptocurrency, peercoin least resembles its digital counterparts, and most resembles government-backed currency – except in this case, the backing government is no country or precious metal, it's "checkpoints" and self-selected programmers