The creation of Bitcoin in 2009 marked the emergence of the new age currency called cryptocurrency, which is managed through an encryption technique known as cryptography. Cryptocurrency is basically virtual currency and is valued in world currency units, like the US dollar. The popularity of Bitcoin and the growth in its value due to investor interest and media attention soon after it was launched, has resulted in the emergence of similar new age currencies that people can invest in. Here is a note on some of the emerging new age currencies today.
What is Bitcoin? Getting Familiar with New Age Currency
The first cryptocurrency ever, Bitcoin is also the current standard of new age currency. All the functions including issuance, transfer, transaction processing etc of this virtual, decentralized currency are carried out through peer-to-peer technology, and within the network. Unlike the world currencies like USD, Euros, GBP etc, Bitcoin is mostly available in the virtual form and is also free from manipulation by government agencies and the like, due to its decentralized nature.
Physical Bitcoins are also available and can be obtained through a few companies, although they are usually for novelty. Bitcoin is designed to function and is best as digital currency. During its peak period, the value of this new age currency reached $2 billion, but declined by 50% soon after. This currency has a limited issuance of 21 million and is not widely accepted.
Another pitfall of this currency is that Bitcoin currency is not insured, which means if lose your Bitcoins, regardless of the reason, you lose them for good. Loss of Bitcoins can happen due to hacking of you e-wallet, hard drive crashes, etc. Today, Bitcoin is largely used for speculation, and little for online retail and commercial purposes.
If Bitcoin is considered to be gold, Litecoin is considered as silver. An alternative to the popular Bitcoin, Litecoin is a cryptocurrency launched in 2011. Bitcoin establishes a chain of transaction called Blockchain once every 10 minutes, which continues to grow and record every Bitcoin transaction on the network. The currency is suitable for larger transactions that take time and is unsuitable for smaller retail transactions online.
Litecoin on the other hand is more suited for smaller and faster transaction processing, owing to double the circulation it has when compared to Bitcoin. Also, Litecoin enables faster transaction processing with its smaller currency units.
The value of Litecoin is only 1/30th of the value of Bitcoin, and is the second most valuable cryptocurrency after Bitcoin. At present, it is accepted only in certain online sites that accepted Bitcoin in the beginning. One of the things you should be concerned with regards to Litecoin, is the ongoing debate about how secure this new age currency is when compared to Bitcoin.
Freicoin is an alternative cryptocurrency with a unique framework inspired by the work of Silvio Gesell, a German economist and social activist. Freicoin was launched in 2012 and its system consists of what is called a demurrage fee, which is a holding fee charged for storing something like gold or other precious metals in bullion form. Demurrage is more like tax on the Freicoins you hold, which according to Freicoin developer Mark Friedenbach, is the only way to encourage investors and merchants to spend away the unwanted Freicoins soon.
This not only improves the GDP, but also reduces the length of the business cycle. The idea behind development of this new age currency is to encourage people to invest their Freicoins safely, rather than just hold them in their account as they do Bitcoins.
Apparently, Bitcoin’s Blockchain is susceptible to attacks and can result in counterfeiting of the currency and even pave way for re-using the same currency twice, which is considered as a major problem in the world of cryptocurrencies.
Short for Peer-to-Peer Coin, PPCoin was launched in 2012 to deal with this issue. This new age currency has a “proof-of-work” attached to each block of the transaction chain generated, to prevent re-use of the currency and also to prevent counterfeiting. Stealing PPCoins becomes so much more difficult than stealing Bitcoins owing to this proof, and reduces the chance of attack on the PPCoin Blockchain by 51 percent.
Investing in cryptocurrencies
Cryptocurrency investment us highly speculative and should be treated like any other high risk investment you make. Remember that most cryptocurrencies have no intrinsic values, and are valued only at the price that they are offered in the market. So there is always a risk that you could lose most of your investment, if not all, in these cryptocurrencies due to high volatility.