I have previously written about how I think alternative coins like Litecoin, Namecoin, and Primecoin are important to the cryptocurrency community and to Bitcoin itself. My argument is that evolution is awesome and we should embrace it. A multitude of coins can keep cryptocurrencies from falling prey to the single point of failure.
Don’t get me wrong; Bitcoin is awesome on its own. For serving its purpose, it is almost perfect and there is no realistic alternative right now. If all we wanted to do with Bitcoin is what we currently do, alternative coins are a waste of time.
However, alternative cryptocoins, or altcoins as they are often called, have completely different uses too, and uses that Bitcoin cannot possibly expect to cover. In fact, although these uses are incredibly useful (and I start to realize the overuse of the word use), adopting them into Bitcoin would be a huge mistake.
Let me show you some examples.
The biggest altcoin by far, Litecoin has been argued as being nothing but Bitcoin with a few minor changes and thus not adding anything of value. In fact, where some coins actually have useful features, the argument goes, Litecoin is simply Bitcoin with a slightly different algorithm. Faster transaction times isn’t really required and it isn’t really that much more secure, if at all. Nothing new to see here, move on.
However, look at what’s happening with the community. Over the previous few months, the Litecoin developers have given Bitcoin a completely new wallet program. The Bitcoin developers probably couldn’t have done this without inciting confusion, but Litecoin has been experimenting with this for a while and gave the result to Bitcoin for use as it sees fit.
In fact, being so close to Bitcoin in terms of features allow Litecoin to be the perfect test bed for new features for Bitcoin. Not only that, but other coins can also learn a lot from what Litecoin does, which may in turn yield even better alternatives than this current more-or-less replica.
Still, Litecoin is probably the coin that is easiest to just write off as a nice idea but not really required. Let’s move on, though.
Believe it or not, but a big problem today is the control that the US has over the domain name system. By court order, the US government can shut down or take over a .com domain, and because .com is operated by a US entity, that is a concern for those most paranoid about privacy and liberty.
It doesn’t even affect .com domains either; pretty much any country in the world has similar laws that allow someone to take over the operation of their domain names. This is one reason why you see a lot of ‘weird’ domain extensions; it is often an attempt of someone to gain some kind of protection from the scrutiny of governments.
Namecoin proposes to change all that by decentralizing the distribution of domain name management.
It has failed so far, but the potential to completely revolutionize and democratize the internet is there. Namecoin may be the first version of something that will eventually take domain names out of the control of government or ‘big corporations’ to democratize the process of managing domain names.
If you’ve read my articles on understanding Bitcoin mining difficulty, you may know that what Bitcoin and Litecoin miners generate is essentially thrown out the window. You may say that they are turning electricity into money, but for absolutely no other benefit beyond heating the room.
Primecoin is another example of how cryptocurrencies can have real life impact. If you don’t know, Primecoin is an attempt to turn the power generated by mining into something useful. In the case of Primecoin, it is generating chains of prime numbers, which is way beyond what I currently understand about math, but is potentially useful.
So far, Primecoin is only potentially useful, though, but it shows how cryptocurrencies can have the potential to yield real scientific benefit. Distributed computing, like the Folding at Home or SETI at Home projects, could be completely revolutionized by efforts like Primecoin.
Bitmessage, Colored Coins, and Mastercoin
Don’t like alternative coins at all? Fine, Bitcoin itself can also be utilized for other purposes than just as a store of value.
Three examples are Bitmessage, Colored Coins, and Mastercoin. Bitmessage is, or was, an attempt at building a messaging framework on top of Bitcoin. Colored coins can be used to make special Bitcoins that represent a different value like stock in a company, a car loan, or other valuables. Mastercoin can potentially allow anyone to create their own currency that is propagated through the Bitcoin block chain.
Bitmessage failed, or at least haven’t succeeded yet, because it simply doesn’t scale well, but imagine a messaging system where all messages are seen by everyone but encrypted so that only the intended recipient can decode the message. It may not replace email, but it could serve as a public verification and records of things like contracts, bids, agreements, and so on; an open and free notary public if you will.
Colored coins hasn’t been implemented by anyone yet, but imagine a system where a special Bitcoin could represent the shares in a company. Suddenly, you have an ability to trade that coin, or fractions of that coin, just like you trade shares in a company at a stock exchange today, except it would be open and transparent and not controlled by anyone.
Mastercoin is a new undertaking that seeks to build a protocol on top of Bitcoin to create custom currencies. Imagine a chain like Wal-Mart or Trader Joe’s issuing their own currency that you can buy and trade and use in their stores only. Governments could give custom coins for social welfare for use at a certain store only to prevent recipients from using them for drugs or gambling. Parents could give allowance money to kids without fear that they would use them for nefarious purposes. Airlines could give bonuses in terms of tradable currencies rather than ‘points’.
At this point, cryptocurrencies are in its most basic infancy. We think of Bitcoin as just another form of money, albeit issued through mining rather than by a central bank.
However, this is akin to looking at the web in 1994. It was extremely basic and rudimentary. The ability to submit a form via a web page was considered a major breakthrough. Animating GIFs were considered the multimedia of its day. You could easily wait a minute or two while your browser loaded a web page. Much of the web was just text. It was awkward for most normal people and a niche thing for geeks and crazy people.
Today, we can barely imagine a world without the web. Not just did it pave the way for awesome communication across web pages, but it brought the internet to all those normal people, spawning a range of additional services, like online games, real-time video conferencing, secure communication for the masses, YouTube, and all the other things we now can barely live without.
Imagine, if you will, what the world can look like in a few years, the equivalent of the web in 2000, when cryptocurrencies have been around long enough for the mainstream to adopt them and build awesome services, products, and features.
Embrace the Future.
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