Bitcoin is not only a digital currency that can be used to pay for goods and services, or an investment tool. It is also a testing ground for new technologies that can transform not only the financial world. It is a decentralized, fully transparent and cryptographically protected global transaction processing network and distributed database based on a blockchain called blockchain. Bitcoin’s investment appeal stems from the fact that its supply is limited – no more than 21 million BTC can exist, and in practice about two-thirds of that amount (just under 14 million coins as of March 2015) has been generated.
What is a “fork?”
Because Bitcoin has open source software code, its technology has become known around the world. It became the basis for the development of many alternative digital currencies. Any digital currency that uses Bitcoin’s programming code as its basis is called a fork.. The term “altcoin” (altcoin), which is similar in meaning, is also common. For the average user, forks allow you to choose which functionality is most important:
- Digital currency, convenient for quick payments with minimal fees;
- Digital commodity with mathematically limited supply;
- Further development and improvement of Bitcoin technology;
- A convenient tool for investing;
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The first of the forks was Namecoin (NMC, Neumcoin). It was the basis for an alternative DNS domain name system, not controlled by the U.S. government, approved by, among others, Wikileaks. Namecoin is co-mined with Bitcoin.
Scrypt Algorithm – Lightcoin (LTC) and Dogecoin (DOGE)
One of the first and most successful cryptocurrencies was Litecoin. It uses a modified hashing algorithm (Scrypt) rather than pure SHA-256 like Bitcoin. Lightcoin transactions are confirmed on average 4 times faster than in the Bitcoin network, and the block database takes up much less space. The number of Lightcoins is also mathematically limited – there can be no more than 84 million coins in total.
While Bitcoin has payment solutions for online stores, ATMs, POS terminals, and even gateways to the banking system, Lightcoin is not as well stocked with infrastructure. In its level of development it resembles Bitcoin a few years ago – there are not many stores that accept this cryptocurrency, there are no ATMs and other infrastructure yet. To date, LTC has gained market share, gained popularity on exchanges and loyal supporters. They believe Lightcoin still has a long way to go.
The second known member of the Scrypt family was Dogecoin (DOGE). The cryptocurrency, which began as a joke, has gained just crazy popularity. The cute shiba-inu chosen for the logo played a major role in this.. Imagine if a bull terrier had been there.. These coins are a huge number (over 100 billion) which is not limited, unlike most cryptocurrencies. The advantages of “dogged” settlement: insensible commission and high speed of transaction confirmation.
This cryptocurrency has a wide range of supporters, who are constantly working on its promotion and arranging various promotions. The decision to jointly mine Dogecoin and Lightcoin was perceived by many as ambiguous. Co-mining is that by mining Scrypt one cryptocurrency, you automatically earn another. Because of this, LTC and DOGE do not compete with each other, using the same computing resources.
Non-Fork: Ripple Payment System (XRP)
Ripple (XRP) is the second most capitalized payment system after Bitcoin. It cannot be classified as a Bitcoin fork, because the Ripple code was written from scratch. This system uses its own payment unit – XRP. The commission for transferring money between members of the system is only $0.00001. At the same time, no one collects even a thousandth of a cent – these funds are used to prevent network congestion due to DDoS attacks. The transaction only takes a few seconds, and the source code of the system is completely open.
Proof-Of-Work and Proof-Of-Stake
The only way for Bitcoin and Lightcoin to confirm transactions is through PoW (Proof-Of-Work). Cryptocurrencies such as Peercoin (PPC) and Novacoyne (NVC) use Proof-Of-Work and Proof-Of-Stake, (PoS, storage proof) technologies together. Simply put, the coins used to confirm transactions are those that are stationary in users’ wallets. In this case, the user receives a reward of several percent per year on their capital. This significantly (by a factor of 100 or more) reduces the amount of electricity required for mining. Meanwhile, Pirkoin uses the same cryptographic algorithm as Bitcoin (SHA-256), and Novacoin is based on the Scrypt algorithm (just like Lightcoin and Dogecoin). .
NXT cryptocurrency
Nextcoin cryptocurrency (NXT) uses Proof-Of-Stake technology in its pure form, which means – no mining is required, the issue of 1 billion coins took place at the start of the system and was divided between the 73 investors and developers of the project, who started their distribution. This is not a fork of Bitcoin, since the coin’s code is written from scratch in the Java language. The system is fully decentralized and does not even require the installation of a wallet program. To use your funds, you log in to the web interface with a complex passphrase known only to you. The NXT system is initially very convenient for creating various services and applications, of which there are already many.
Forks on hashing algorithms X11, X13, X15
The sensation of the last year was the original cryptocurrency DarkCoin (DRK), which uses the hashing algorithm X11. It is a combination of 11 cryptographic algorithms that use different mathematical models. Its demand for computing resources becomes the key to the fact that only graphics cards and processors can be used for mining (now only graphics cards are used). DRK is positioned as the first truly anonymous cryptocurrency, and the latest software code update allowed for instantly verifiable transactions in “darks.”
You can earn this cryptocurrency not only by mining, but also through the maintenance of so-called “nodes”, which are the key nodes of the network. The developers have also provided a quick fix for problems if something goes wrong. Work is constantly being done to improve Darkcoin, and its price is responding immediately to positive changes.
There are many other cryptocurrencies based on X11. The extension of X11 was X13 and X15 algorithms. Their principle is the same – a combination of 13 and 15 cryptographic algorithms, improved user anonymity, the impossibility of mining by special chips (only processors and video cards are used). These algorithms are especially interesting for those who mine with video cards. X13 and X15 heat the GPU less, making graphics cards last longer.
Crypto 2.0 projects
For some developers, the “old” Bitcoin and all of its forks already seem outdated and archaic. They came up with the loud name “Crypto 2.0” (second-generation cryptocurrency), although even Bitcoin has not yet officially left the testing stage and its version number still begins with zero. However, most of these projects are nothing more than add-ons on top of Bitcoin, using its blockchain.
Mastercoin
The first Crypto 2.0 project was Mastercoin. It was created as an add-on to blockchain, allowing cryptographically validated smart contracts. However, development is moving extremely slowly and has disappointed many followers. As sad as it is, it looks like Mastercoin’s best days are behind us.
Ethereum
The most sensational of the “Crypto 2.0” projects was Ethereum. Suffice it to say that the idea of the 21-year-old talent, Vitalik Buterin, which came to him during a round-the-world trip, has already interested such a titan of the industry as IBM, and has raised more than $15 million in just a month and a half. Now everyone is frozen in anticipation of what will come out of this? The developers promise full decentralization, support for the Internet of Things, paltry commissions, and the ability to create automatically executable contracts for anything.
Colored Coins.
The most promising of these projects are the colored coins. They will make it easy to issue digital stocks, bonds, transportation tickets and events that take full advantage of blockchain technology. This technology could also revolutionize the sale and purchase of digital goods. But so far, “colored coins” are far from practical implementation.
Forks on exotic algorithms
Cryptocurrency enthusiasts have come up with all sorts of mining algorithms: N-Scrypt, SHA3 (Keccak), Scrypt-jane, Groestl, CryptoNote. Of these, the most popular is the CryptoNote algorithm. It uses a cryptographic technology such as “ring signature”. The advantages of CryptoNote are the ability to mine the coin by home PC CPUs, a high degree of user anonymity without the use of “nodes” like in Darkkoon. At the same time, the transactions are incredibly fast and they can be additionally protected with a secret password. The most famous fork on the CryptoNote algorithm was the cryptocurrency Monero.
In total, more than two thousand forks were created – there are those created for fun or scams. There are even forks that have survived for weeks or even days.