As the name implies, cryptocurrencies are digital currencies that use cryptography techniques for secure transactions. They’re decentralized, which means that they’re not under the control of banks and governments, and their value can’t be manipulated by these organizations.
Bitcoin, the first decentralized cryptocurrency, was launched in 2009. Its success generated a bunch of spin-off currencies, which are usually referred to as altcoins.
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And while we would love to paint a perfect picture of a utopian society where deregulated currency is traded freely and easily, that’s not really the case. There’s no consensus surrounding the legality of Bitcoin, and regulatory attitudes towards it run the gamut from legal, to frowned-upon, to downright illegal.
Argentina, for instance, considers it money but not legal currency. In Finland, you can be taxed on Bitcoin earnings, and in Bangladesh, you can wind up in jail for using any virtual currency.
One of the main issues cited as a reason for regulating or even outlawing virtual currency is that it can be used in illegal transactions. Since the transactions taking place through cryptocurrency provide anonymity to users, it makes them difficult to track, which makes purchasing and selling illegal goods much easier.
Fluctuating market value
Deregulation also means that Bitcoin is volatile, since the value of any cryptocurrency depends on factors like investment, acceptance, and number of users, all of which can change in a heartbeat.
Bitcoin is by far the most popular (and definitely the best-known) cryptocurrency, but there are others available. A few successful altcoins include Litecoin, Peercoin, Namecoin, and Novacoin.
There are some investors who believe that Bitcoins have reached maturity, and the scope for their growth is minimal. If this is true, then these alternative cryptocurrencies have enormous potential in the market. According to Technavio analysis, the extent of growth is tremendous if the business model of the altcoin provider is capable of surviving in a highly competitive market.
Bitcoin
In Bitcoin mining, supercomputers generate a complex encrypted code that is unique to each Bitcoin. The number of Bitcoins is restricted to 21 million, and the mining rate has decreased over time, resulting in slow growth of Bitcoins.
The total volume of Bitcoins is forecast to reach 19.05 million by the end of 2020.
Litecoin
One of the major advantages of Litecoin is that it is affordable, and specifically targets late movers into the cryptocurrency market. The number of Litecoins is limited to 84 million—four times the number of bitcoins.
Litecoin mining is significantly faster than Bitcoins, which encourages cryptocurrency miners to use Litecoin, leading to its increased adoption.
As of October 2015, 42.54 million Litecoins were mined, and this is forecast to reach 67.72 million by October 2020.
Peercoin
Peercoin (PPC) is another major altcoin that entered the market as an answer to the limitations of Bitcoin. One major advantage that Peercoin has over Bitcoin is that the latter is limited to only 80 transactions per second and 6.9 million transactions per day. This prevents Bitcoin miners from yielding sufficient profit to sustain their mining cost at low transaction fees.
However, the transaction fee of Peercoin is fixed at 0.01 PPC per transaction, which scales the price of the transaction and prevents the network from hitting a transaction volume that is too high to handle.
As of October 2015, the total number of Peercoins in circulation was 22.67 million, and this is forecast to reach 25.14 million by 2020.
Namecoin
The business model of Namecoin is similar to Bitcoin aside from the fact that Namecoin uses a subdomain created by developers instead of the centralized domain name system used by Bitcoin and other cryptocurrencies.
One of the primary advantages of this concept is that it is difficult for governments, corporations, and criminals alike to compromise the system. Namecoin subdomains are called .bit domains and they are decentralized alternatives to building a personal web presence on standard top-level domains.
The volume of Namecoins as of October 2015 was 12.57 million and is forecast to reach 19.65 million by 2020.
Novacoin
Novacoin was considered a fraudulent currency in 2013 and the fact that it is still trading at Bitcoin Exchange (BTC-E) has led to speculation about whether Novacoin developers paid BTC-E to trade it in order to increase the value of Bitcoin.
The growing market value of the cryptocurrency has also led investors to believe that it is a pump-and-dump coin.
Despite its rocky reputation, association with Bitcoin has attracted investors to Novacoin, and we expect it to grow through the forecast period. As of October 2015, 1.18 million Novacoins were present in the market, and the volume is forecast to reach 2.95 million by October 2020.
