Most people have heard of Bitcoin, the biggest and most successful of the "cryptocurrencies." But there are dozens of other online payment systems, known as "altcoins," that have sprung up to compete with Bitcoin. Here are some facts about them.
There are hundreds of altcoins
One list counts 344 altcoins. Of course, some of these are extremely marginal. But there are 155 actively traded altcoins with a market value of at least $10,000. And 34 of them are worth more than a million dollars.
One of the altcoins, Dogecoin, has managed to cut through the clutter by adopting a silly internet meme as its mascot. That helped its value to skyrocket in late 2013 and early 2014. It's now the fifth-largest altcoin, with a market value of $24 million.
Most altcoins are tiny
If you add up the value of all Bitcoins, the total comes to around $7.6 billion. That's more than 10 times the value of all other cryptocurrencies put together.
Bitcoin's biggest competitor is one of the first altcoins to come on the scene: Litecoin. Litecoins are worth around $274 million. The next-largest, Nxt, is worth just $60 million.
Most altcoins are losing value against Bitcoin
Since the start of the year, the value of one bitcoin has fallen by about 25 percent. But the leading Bitcoin competitors have had a much worse year. The biggest Bitcoin competitor, Litecoin, has lost more than half of its value since January. Another big competitor, Peercoin has fallen by 80 percent. So has Dogecoin.
This might be cyclical, however. Litecoin lost value for most of 2013 only to have its value spike in December. The same thing might happen again.
New altcoins keep popping up
In recent months mature altcoins have been losing value more rapidly than Bitcoin. However, every few months a new altcoin catches the public imagination and leaps into the top 10. The latest example is Darkcoin, a privacy-focused cryptocurrency that was officially announced in January. Its market value skyrocketed in May from $1.50 to $11.75. Today, the value of all Darkcoins in circulation is about $45 million.
The market is still figuring out the future of cryptocurrency
Why do we keep seeing cryptocurrencies appear, skyrocket in value, and then steadily decline? There's a ton of uncertainty about the future of cryptocurrency. Bitcoin has dominated the market since its inception five years ago, and most likely it will continue to do so. But it's possible that people will find a technical flaw in Bitcoin that will lead to its collapse. Or someone might invent a competitor that has crucial features Bitcoin lacks.
Most new altcoins try to offer technical advantages over Bitcoin. Darkcoin is focused on privacy. Litecoin is focused on faster transaction times and more democratic rules for processing transactions, a process known as mining. Nxt is designed to have a more energy-efficient mining system that's also resistant to attacks. Dogecoin emphasizes its friendly and enthusiastic community.
Will any of these innovations provide a decisive advantage over Bitcoin? It's not very likely — Bitcoin's popularity gives it a huge advantage. But if a Bitcoin competitor does dethrone Bitcoin, whoever owns a share will become wealthy. So every time a promising new cryptocurrency comes along, a certain number of people make speculative bets on it in hopes it's a Bitcoin killer. So far none of them have been, but people keep hoping.