At a bitcoin conference in Miami this January, Jeffrey Tucker, a laissez-faire economist and libertarian icon, made an unexpected observation. “There are people in this room who would think bitcoin is a little old-fashioned,” he quipped. Well, that was fast. After all, it was only five years ago that bitcoin appeared on the scene and provided the world with the first open-source, decentralized alternative to government controlled currencies. And it’s really only in the last year that bitcoin has begun to gain traction as a payment option.
Now bitcoin faces competition. Hundreds of bitcoin knockoffs—“altcoins,” as they are commonly called—have been built.
The software that underpins bitcoin is open-source, so anyone can copy and tweak the code to create their own digital currency. You can even pay someone to do it for you: The owner of a Web site called Coingen, for example, promises to start a new bitcoin clone for anyone who pays a fee of 0.05 bitcoin. All you have to do is give it a name.
Some of these new altcoins are truly innovative. People have made bitcoin versions that process transactions faster, consume less energy or better protect user privacy. Other iterations differ from bitcoin only in their branding and implementation. For example, a few altcoins are intended to serve specific geographical communities. Last month an altcoin called auroracoin was distributed to the people of Iceland to serve as a nation-specific digital currency.
(Of course not all altcoins attempt to create an improved product. Many are pump-and-dump schemes. Someone will make a new version of bitcoin—usually tweaking minor features of the protocol—hype it as the new best thing and then cash out as soon as the coins take on a bit of value.)
Regardless, altcoins are now advancing the evolution of digital currency at a rate that bitcoin, as a relatively established project, can no longer keep pace with. Although none of these altcoins have yet flourished enough to surpass bitcoin in either value or rate of adoption, many are doing well enough to prove one point: the alternative currency experiment is far from over.
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