Bitcoin Vies with New Cryptocurrencies as Coin of the Cyber Realm

As hundreds of “altcoin” knockoffs are minted online, bitcoins no longer dominate as the principal form of digital currency

Image: Litecoin Community via Wikimedia Commons



What it is
In bitcoin user payments are verified and secured by a peer-to-peer network of bitcoin “miners.” Miners use their computers to verify transactions by performing one calculation over and over with different inputs, searching for the “right” result. The first computer to find the result receives a reward of newly minted bitcoins.
In this way, bitcoin mining works a lot like a lottery, where buying more tickets will increase your chances of hitting the jackpot. In bitcoin mining, the more computing power you dump onto the network the better your chance of earning bitcoins.
As a result, bitcoin miners are engaged in an arms race. The computing power applied to the bitcoin network makes it nearly 3,000 times more powerful than the combined computational brawn of the world’s top 500 supercomputers. Consequently, in order to profit from mining you must have a very powerful computer—one specifically designed for the purpose of bitcoin mining—and you must be prepared to continually upgrade your equipment.
Many people have denounced this aspect of bitcoin as wasteful. One critic, a former Google developer named Charles Lee, came up with an alternative called litecoin that attempts to squelch the bitcoin mining race.
Litecoin verifies transactions using a calculation that makes upgrading equipment less profitable for the miner. The goal of doing this is to keep smaller miners in the game and to preserve the decentralized character of the currency’s payment network.
Litecoin transactions also clear twice as fast as bitcoin transactions, which will result in the production of twice as many coins.
Who started it
Litecoin was started by Charles Lee, a former Google employee who now works at Coinbase, a bitcoin exchange in California.
Other similar altcoins
Vertcoin and peercoin have both modified the bitcoin protocol to lessen the computing demands.
Current exchange rate
1 litecoin = $10.88

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