Peercoin was launched in August 2012 and was one of the first projects to use the Proof of Stake consensus mechanism, which was first described in a whitepaper co-authored by Sunny King, a pseudonym for the founder of Primecoin, and Scott Nadal. It is a peer-to-peer digital currency similar to Bitcoin. A key differentiator is that transaction fees are burned, rather than paid to miners. This puts downward pressure on the supply, thereby increasing the value of existing PPC tokens. PeerCoin is the basis for several existing projects and many high-profile forks have emerged, Emercoin being one of the most popular.
Namecoin was an early fork of Bitcoin and began as a project called Bitdns, which wanted to improve the decentralization, security and censorship resistance of certain components of the Internet infrastructure, such as domain name servers and identities. Namecoin is used to register names and store associated information in its blockchain. The project is important from a historical perspective because it was the first token to use merged-mining, a protocol that allows users to mine different tokens at the same time. It was also the first token to solve Zooko’s Triangle, a longstanding problem of creating a naming system that is simultaneously secure, decentralized and easily used and understood by humans. In March 2014, OneName, an identity system built on the Namecoin blockchain, was released and enabled the storing of usernames and personal profile data on the blockchain. In September 2015, OneName switched from the Namecoin blockchain to the Bitcoin blockchain.
CloakCoin is a privacy focused protocol released in June 2014. The architecture of CloakCoin is similar to Dash as it relies on staked full nodes that perform specialized services. CloakCoin differs from most privacy-preserving cryptocurrencies as it employs a shielded Proof-of-Stake consensus mechanism. The project uses a native mixing mechanism called ENIGMA for the creation of private transactions. Coin mixing, or tumbling, is a common blockchain obfuscation mechanism that mixes the senders (inputs) and receivers (outputs) within the same transaction. CloakCoin differs from other protocol-based mixing services by providing its full nodes a TOR-like onion routing system for intercommunications. Like Dash, this mixing service is provided by a group of masternodes in the network. ClockCoin transaction fees are 1.8% of the sent amount, making it one of the most expensive privacy-preserving cryptocurrencies. As of February 2018, the identities of all core developers are unknown.
Analyst’s Note: There is an unusually small amount of information about this project and the information that is available largely comes from its website and is not otherwise verifiable. Many online reports claim that Bitdeal is a scam.
Bitdeal is a project that aims to make purchase suggestions to the users of its platform based on their geographical location. Stores registered in the platform offer their own unique discounts to you. The project attempts to do this by using a QR code system, but it does not address the potential challenges of making purchases using a volatile digital token. The entire team behind Bitdeal is anonymous and, like BitConnect, its website also has news related to digital tokens.
PIVX is a privacy-preserving digital token released in February 2016 under the name of Darknet. The token’s ticker is an acronym for “Private Instant Verified Transactions.” The project hopes to enable fully private, near instant, peer-to-peer transactions. Originally released as a fork of the Dash protocol, PIVX is one the first digital tokens to offer private transactions in conjunction with a Proof of Stake consensus algorithm. New blocks are added to the PIVX blockchain every 60 seconds and privacy is achieved by clustering transactions, making it difficult to identify the senders and receivers of any transaction. Token holders may participate in protocol governance and vote on technological improvements. In June 2017, PIVX successfully implemented a secondary token, zPIV, on top of its blockchain to further increase its privacy. zPIVs are pegged to PIVX and use Zero Knowledge Proofs (or zkSNARKS), the technology underlying Zcash.
Emercoin is a fork of Peercoin, one of the earliest alternative coins based on the Bitcoin protocol. Emercoin, like Peercoin, uses a hybrid consensus system so that blocks can be mined using both Proof-of-Work (PoW) and Proof-of-Stake (PoS). Apart from this change in the consensus layer, both Emercoin and Peercoin operate very similarly to Bitcoin. Since its launch in 2013, Emercoin has attempted to tackle very different use cases for its protocol. In 2016, it announced an Emercoin-based product for AML/KYC compliance, followed by an ad-tech solution for pay-per-click advertising. As of this date, the Github repositories for both projects appear to have been abandoned by their respective core development teams and the main GitHub repository for EmercoinCore is also stale.
Factom is a BaaS (Blockchain-as-a-Service) database built on top of the Bitcoin blockchain. It provides a data layer that leverages the blockchain to timestamp and store a variety of records, including medical records, voting systems, and real-world contracts. The Factom Foundation is responsible for protocol development and offers two record management products. The first, Harmony, is a service that stores the documentation of mortgage-backed securities. The second, sLoc, is a physical document verification service offered through a strategic partnership with SMARTRAC, a developer, manufacturer and supplier of Radio-Frequency Identification (RFID) systems. sLoc enables users to apply RFID stickers with unique identifiers to physical documents, such as land titles, birth certificates and public records. The unique hash, along with the ownership data, is then stored in a blockchain database.
DigiByte is a digital token designed specifically for mining using different algorithms. It was created in 2014 as a fork of the Bitcoin protocol. It attempts to improve the security features of Bitcoin and decreased the 10-minute block creation time to enable faster transactions. In addition to Huntercoin, DigiByte pioneered the concept referred to as “multi-algorithm mining,” which enables the validation of network transactions using different mining software; including Bitcoin’s SHA-256 hash algorithm and Litecoin’s Scrypt. This feature at times made the protocol attractive to many miners since they can leverage their existing hardware to mine DigiByte blocks. The project was able to secure deals with some platforms to use DigiByte as their native token, including DiguSign, a smart contract platform for payments. Although four digital tokens were forked from DigiByte, core development continues to flourish. In April 2017, DigiByte became the second major digital token to implement SegWit, or Segregated Witness, an update initially intended for Bitcoin that optimizes what is stored in the blockchain.
Decred is a digital token designed for payments that has a built-in, on-chain protocol governance system. It employs both Proof of Work (PoW) and Proof of Stake (PoS) consensus mechanisms to validate transactions and establish governance in its network. The project is technically a fork of btcsuite, an alternative full node bitcoin implementation written in the Go programming language. However, while blocks in the Decred network are verified and generated via a conventional PoW consensus mechanism, a PoS system is used for protocol governance decisions as well as network validation every five blocks. This hybrid model enables network maintainers to earn DCR from either hash-based mining or by staking their tokens. Decred is the first protocol to carry an exogenous constitution that defines its principles and governance not in the form of computer code. In order to participate in governance decisions, stakeholders need to be a part of the Decred Assembly, which requires approval from the Decred Assembly. Decred was launched in December 2016 by a group of anonymous developers.
Dogecoin (DOGE) was created in 2013 and named after the “Doge,” a popular internet meme. The project’s initial goal was to break the stigma of digital tokens following the shutdown of the Silk Road, an online black market, by appealing to a broader demographic than Bitcoin and associating itself with the popular internet icon. Dogecoin’s protocol is based on Tenebrix and Litecoin, two digital currencies that pioneered the use of Scrypt-based Proof of Work. Scrypt was developed to enable any computer to participate in the mining process and became popular around the time that Bitcoin mining was becoming unprofitable without specialized hardware. By using a nascent mining algorithm that even generic computers could use, Dogecoin catered to the developer community, which was also fond of the “Doge.” Dogecoin has been used for many philanthropic endeavors and has also been extensively used for “internet tipping,” which is when an internet user tips another for an informative or funny comment. In January 2018, when the token had a market capitalization of more than one billion dollars, Dogecoin's founder, Jackson Palmer, wrote a blog post that he created the token as a joke and the project had not had any development in more than a year.
Bytecoin is the first digital token to use the CryptoNote protocol, a framework for creating privacy-oriented digital tokens. The CryptoNote whitepaper described the concept of Ring Signatures, which is an obfuscation mechanism that masks the identity of the senders of a transaction by combining signers from past transactions. It also introduced CryptoNight, which is an ASIC-resistant consensus algorithm designed for CPU-mining. Bytecoin used both features in its protocol and evidence suggests that the creators of Bytecoin may have been the authors of the CryptoNote white paper. It is important to note that although the technology underpinning Bytecoin’s privacy-preserving mechanism is truly remarkable, many in the community believe that Bytecoin is an elaborate scam. As much as 82% of the token’s true supply is believed to have been pre-mined. Additionally, embedded in Bytecoin’s source code is an algorithm that makes it appear as though the token was launched in 2012, even though evidence suggests it was in fact launched in 2014. Since Bytecoin’s pre-mine fundamentally made it centralized, a group of developers decided to use the same technology described in the CryptoNote white paper to launch another cryptocurrency under more fair terms. This other cryptocurrency was initially named bitmonero, but later changed to Monero. In addition to the fair launch, Monero differentiated itself from Bytecoin by (1) decreasing transaction confirmation times and (2) decreasing CryptoNote's native inflationary rate by 50%. These differences, along with a fair launch, enabled Monero to quickly capture much of Bytecoin's market share. In addition to Monero, at least 12 other privacy-preserving tokens have been forked from Bytecoin.
Bitcoin Cash was the result of a forceful split in the Bitcoin network, an event referred to as a hard fork. As Bitcoin’s user base gained traction in 2015, the network became very congested and transaction confirmation times increased significantly. That triggered what has been described as the “block size debate” — an ongoing discussion about the trade-offs related to increasing Bitcoin’s block size in order for more transactions to be allocated into one block. Since mining BTC is a capital intensive activity, miners want to maximize the number of transactions on a per block basis to increase their level of profitability from transaction fees. The easiest way to achieve that is by increasing Bitcoin’s block size, which has been 1MB since the coin’s inception. Although the core development team understands the need for faster transactions, they fear that merely increasing block size could affect the underlying safety of the protocol. Another recurring argument against a simple block size increase is the possibility of further mining centralization, which in itself is concerning for the community, whose general philosophy revolves around decentralization. In light of these challenges, Bitcoin core released in November of 2016 a solution to increase transaction speed without necessarily increasing block size. This came to be known as SegWit or Segregated Witness — a change in Bitcoin’s code that optimizes block size by removing unnecessary information from each Block, leaving more space for transaction data and ultimately reducing confirmation times. The update was welcomed by most of the community, but several prominent figures of the Bitcoin mining industry characterized SegWit as an inefficient solution. In April of 2017, mining hardware manufacturer Bitmain was the first to suggest a hard fork and the idea for Bitcoin Cash begun getting support. In the following month, the Bitcoin ABC Project (Adjustable Block Cap) announced it was developing a full node implementation of the Bitcoin protocol that is compatible with Bitcoin Cash. The project’s goal was to support a version of Bitcoin that rejects SegWit, and that increases the block limit to 8MB. The fork happened on August 1, 2017, and the first Bitcoin Cash block was mined 6 hours after Bitcoin block 478558 by ViaBCT, a Chinese digital token exchange and mining pool. Since most exchanges did not provide support for Bitcoin Cash immediately after the fork, only 2% of the total supply of Bitcoin Cash tokens was in circulation, and prices were based on the limited supply in circulation. Bitcoin Cash reached its all-time-high on August 2, when it topped $747, but as exchanges started adding support for the token, prices have decreased significantly. As of this date, a total of 84 exchanges support Bitcoin Cash. However, it is important to note that the majority of Bitcoin holders that store their tokens in desktop-based wallets are still unsure as to how to get an equivalent balance of Bitcoin Cash. As more information about that process becomes available, we expect further downward pressure on the price of Bitcoin Cash.