Bitcoin continues to attract enormous attention from investors, who keep driving the price to new records, but it is not the only "cryptocurrency" in existence. As fears grow that Bitcoin will prove to be a bubble, more and more people are starting to consider its rivals.
There are now hundreds of cryptocurrencies and, while they have significant differences, all are based on “blockchain” technology.
The top five largest currencies change regularly as prices of individual currencies fluctuate, but these are some of Bitcoin's main rivals.
Bitcoin's main competitors :
Bitcoin is still the dominant digital currency, but Ethereum and "Bitcoin Cash", an offshoot of Bitcoin, are significant competitors - and the gap has been closing.
Bitcoin
Launched in 2009, Bitcoin is the original digital currency. It was created as an alternative to existing forms of currency, as it relies on a blockchain network rather than any bank or government.
A record of all transactions is held by every member of its network, and participants called “miners” work to solve complex mathematical equations to verify new transactions. This require large amounts of computing power and the "miners" are rewarded with new Bitcoins; they also earn Bitcoin from transaction fees.
Only 21 million Bitcoins can ever be created.
Bitcoin’s success has led to problems with the speed at which the network can confirm transactions, the cost of transactions, and the amount of energy consumed through computing power per transaction.
Differences in opinion about these issues have led to offshoots such as Bitcoin Cash, which prioritises fast, cheap payments, with more coherent control over upgrades, over Bitcoin proponents' core goal of remaining a public system with no central control.
Rather than just hosting a cryptocurrency, Ethereum’s network also allows computer applications to run on it. Advocates say it is a more useful development of Bitcoin
Ethereum’s “currency” is called Ether, which can again be “mined” by solving equations to validate new transactions on the network. Transactions can be processed more quickly and efficiently than with Bitcoin.
Bitcoin Cash
Bitcoin Cash is an offshoot of Bitcoin. It resulted from a split, called a “hard fork” in cryptocurrency circles, earlier this year.
It has many similarities with Bitcoin, but its software is able to process transactions more quickly, at lower cost, and to maintain that speed by altering the difficulty of “mining”.
Critics argue that in order to achieve these aims Bitcoin Cash has to be more centralised and less secure than Bitcoin.
Bitcoin Cash cannot be spent at all of the places that accept Bitcoin. Its price doubled between November and December this year, and more than quadrupled between its July launch and December.
Ripple
Ripple is significantly different from the other currencies here. It still uses a blockchain network to validate transactions, but that network consists of participating financial institutions.
Transactions are instant, and in place of a transaction fee a small amount of XRP is destroyed every time a transaction is made. This is for security reasons – to make it very expensive for someone to attempt to overload the network by putting through lots of transactions.
Unlike Bitcoin, Ripple isn’t aiming to replace the world’s existing financial system, just to upgrade it.
Litecoin
Litecoin began life in 2011 in an attempt to improve on Bitcoin. It has been described as the “silver to Bitcoin’s gold”. It is a cryptocurrency that involves "mining", but has some technical differences.
These include the ability to confirm transactions more quickly and the use of different algorithms when it comes to mining.
Source: telegraph.co.uk