In this lecture we're going to talk about Altcoins and the much larger Ecosystem of Cryptocurrencies in which Bitcoin actually just plays one important role. Let me start by giving you a sense of the sheer number and variety of Altcoins that have launched since Bitcoin began. Bitcoin was first launched in January 2009 and it wasn't for two years till the middle of 2011 that the first Bitcoin-like derived system Namecoin was launched. And in the following months a handful of other Altcoins were launched. And the rate of Altcoin launches didn't pick up til the year 2013. And at the current time, several Altcoins are launched every week. Now we're going to focus on only a few of the oldest and most well-established Altcoins. And talk about them more. Now there's between say 150 and 500 Altcoins that have been launched in total. This varies on what you consider a launch of an Altcoin. Some Altcoins are just announced and perhaps their codes released but they're genesis block hasn't been created yet. Some Altcoins have been launched but then died very quickly. After their launch, and we’ll talk a bit more about that in the future. Most Altcoins share a lot in common with Bitcoin. They begin with a genesis block and their own alternate view of transaction history from their beginning. Now to give you some sense of the relative size or impact of Bitcoin and the ecosystem of Altcoins. There are a variety of metrics we can use but I want to show you one, which is Market Cap. This refers to the price of an individual unit of coin, measured at the, perhaps, the most popular third-party exchanges multiplied by the total number of units of currency in an Altcoin thought to be in circulation. And by this metric, BitCoin is by far the largest counting for perhaps 95% of the overall Market Cap of all of the Cryptocurrencies combined. Bitcoin and Litecoin the second largest currency by this metric, account for more than 99% of the total Market Cap of all of Bitcoin and the old coins. The relative ranking of the other old coins tends to vary quite a lot and fairly rapidly. This diagram in particular is already a bit dated, it's from January 2014. The significance of this is that, when we talk about old coins many of them are very small in terms of their user base or their total impact Relative to the handful of most popular coins. Another way of getting a grasp for the ecosystem of Altcoins and their relation to each other is the concept of Altcoin genealogy. When an Altcoin or Bitcoin-like system is launched, it typically isn't designed and implemented from scratch. Typically, an Altcoin's launched by preparing a reference client, so the software for a node that actually connects to the network. And this is prepared by forking from an existing encode base of the reference client of a more established Altcoin or Bitcoin itself. So the top two most popular by Market Cap currencies, Litecoin and Bitcoin, are also the most widely forked. Code bases. Litecoin, itself, is also a fork of Bitcoin. It's actually Bitcoin's grandchild, in a sense. Litecoin was forked from tenabricks, which was a short-lived Altcoin, that itself, was forked from Bitcoin. Every AltCoin has some kind of story to tell, which makes these fun to talk about. Most Altcoins have something that distinguishes them from all of the others, or some reason for existing. In many cases, Altcoins are distinguished by having some different technical feature, such as additions to the script language that express different kinds of transactions, or additional security. In some cases, the security can come from a different mining puzzle that Discourages or encourages one kind of mining or another. Or features that for example at additional anonymity and privacy for users transactions. In many cases an alt coin simply changes some of the built in parameters to Bitcoin. This includes things like the average time between blocks. And a variety of parameters which altogether I'd call monetary policy, which include things like the schedule of rewards being created, the overall inflation rate of the Altcoin, and whether or not the inflation rate gradually caps out at some finite limit the way that Bitcoin does. In many cases, alt coins are also launched with a theme or some sense of a community that the Altcoin is targeted at or intended to support. Or simply an interest, or common interest, that the Altcoin should be associated with. I'll talk about some examples of these as I describe some of the major alt coins to date. The first Altcoin we're going to look at in detail is Namecoin. And this was the first Altcoin that was launched, again in the middle of 2011, April, roughly two years, a little more, after Bitcoin was launched. Namecoin's very interesting, because it has a very new technical feature which is domain name registration. Namecoin is actually intended to be a decentralized replacement for the domain name system, just as you know, it a central part of our internet and worldwide web infrastructure. The Namecoin actually works for that purpose. Now, you can't use this by default with an unmodified browser, but you can download a browser plugin for, say, Firefox or Chrome that would allow you to type in an address like example.bit, any website name that ends in .bit, and it'll automatically take you to the right location indicated by the registry stored on Namecoin. In order to register a name in Namecoin and maintain it, you send transactions to the Namecoin system much as you would send a transaction to the Bitcoin network in order to move Bitcoin currency around. Namecoin mirrors a lot of aspects of the current domain name system. For example you can register a name that currently isn't taken by anyone by paying a small fee. Now the fee to register an untaken name in Namecoin is only .01 of a Namecoin which works out to about 1 cent In U.S. dollars at the current price. This is a thousand times less than the cost of registering a domain name. Unlike the current domain system, in Namecoin there is no renewal fee but you do have to publish a transaction that pings your name every six months or so in order to keep your name under control. Also like the domain name system Namecoin features a hierarchy of names. So if you register a root domain like example.bit you can give out sub domains like sub domain one dot example dot bit to other people. You can also transfer domain names in Namecoin that you own to other people. And you can, in fact, make transactions that are a transfer in sale of a domain, so you can make a transaction that transfers ownership of domain to a buyer and at the same, transfers units of the Namecoin currency from the buyer to the seller. One other interesting property of Namecoin is that this was the first Altcoin to feature merge-mining which is a really clever technique that we're going to talk about a little later, and this has been part of its success. Next we're going to talk about Litecoin. This was launched also in 2011 sometime after Namecoin. And Litecoin has for the past several years been the number two Altcoin next to Bitcoin, in terms of overall popularity and user base. The main technical distinction between Litecoin and Bitcoin is that it features a memory hard mining puzzle, like the kind we talked about in lecture eight. Now, when Litecoin was launched, Bitcoin mining was mostly done by GPUs at that time, and so the point of Light coins used for the memory hard mining puzzle was to actually be GPU resistant. So at the time Litecoin was launched, you could still mine on Litecoin with a CPU that you might have used to use to mine for Bitcoins. Now the technology for mining in Litecoin has lagged behind the technology in Bitcoin. So once Bitcoin mining moved from GPUs to FPGAs and then ASICs, Litecoin mining also moved from CPUs, which it was originally intended to support up to GPUs, and now fairly recently, the first Litecoin mining ASICs are being delivered. Now, by most metrics, Litecoin is the second largest and most popular altcoin. In fact, it's the first most widely forked. And besides the memory hard mining puzzle and a couple of small parameter changes, for example, blocks in Litecoin arrive 4x faster than in Bitcoin. Every two and a half minutes. Besides that Litecoin borrows as much from Bitcoin as possible and differs in very few other ways. And, in fact, its development has followed Bitcoin, so as patches and improvements have been made to Bitcoin, Litecoin has also adopted these. So for this reason, Litecoin occasionally uses the slogan it’s the silver to Bitcoin’s gold. The next interesting altcoin to talk about is called Peercoin, sometimes called PPCoin. And this was launched a little bit later, towards the end of 2012. And Peercoin's very interesting because it uses a very different mining puzzle. This is the first altcoin that featured a proof-of-stake. Which if you remember from lecture eight is a form of mining that doesn't actually involve any computational work. Instead it involves mining by making transactions using coins that you're already holding and the coins accumulate stake over time as long as they aren't being moved. Now Peercoin actually is a little more complicated than that in it uses a hybrid mining approach. This means that it is possible to mine Peercoin blocks by using proof-of-work. You can mine for Peercoins by using a SHA-2 mining rig, the same kind you would use in Bitcoin. However, the catch is that this only works for minting new currency. You can mine one of these blocks and get a Peercoin reward. But the proofs-of-work in a mining block aren't actually included in the calculation to determine what's the longest or the main Peercoin block chain. This means that proof of work mining is used to distribute coins, but it doesn't have any impact on the security. More proof-of-work miners that join the Peercoin network don't add any security to it. It also means that an attacker who has a lot of SHA-2 mining equipment isn't able to have any advantage in launching an attack on Peercoin. There's a third aspect of the hybrid mining strategy, which is somewhat controversial, which is that Peercoin administrators have a trusted public key which they use to sign checkpoints of blessed blocks every so often. And this is intended to act as a safeguard against attacks. But, the controversy is that it leads to a simple argument that this isn't truly decentralized, because it has a position of trust in this administrator's public key. Now, this checkpoint system isn't inherent to its design. It could be removed in the future. The downside is that because of this, because it has the safety mechanism in place, we can't necessarily infer empirically that proof-of-stake has led to a very secure system. We don't know what would happen if this training wheel were removed. Next we're going to talk about dogecoin. This is a fun altcoin to talk about because it has a lot of fairly interesting and amusing differences to other altcoins that have come before it. Dogecoin's one of the newest altcoins. It's been launched less than a year ago at the end of 2013. Besides a few technical changes, the main thing that Dogecoin has that distinguishes it is the founders of Dogecoin set the tone for a very clear community set of values that include things like tipping and generosity and not taking cryptocurrency so seriously. So while Bitcoin has an ethos of providing decentralized alternatives to centralized infrastructure to change the world, Dogecoin's culture begins with the notion of a sense of humor and having fun with cryptocurrency. Dogecoin's had a bunch of interesting and successful marketing campaigns or public relations events. One of them is that they sponsored a NASCAR driver who participated in a race at Talladega. So there's a NASCAR car that's covered in the Dogecoin mascot which is the internet meme of a shiba inu and has Dogecoin logos over the car. Another interesting thing that the Dogecoin community did is they raised over $30,000 to support the Jamaican national bobsled team, so that they could travel and compete in the 2014 Winter Olympics. This is especially funny because it almost exactly mirrors the plot to the 90s Cool Runnings. All right, and because of these interesting things, Dogecoin has become very popular throughout its short time since launch. One of the interesting technical differences Dogecoin had is a notion of random block rewards. The idea is that rather than having a fixed block reward, or a reward that's predictable and changes over time, each block bonus in Dogecoin should be random. Now the way that this was implemented has a flaw. The way that it's implemented is that, the bonus given to the miner for each block depends on a pseudorandom function of the hash of the previous block. Now the problem here is that, miners of a Dogecoin block before they are mining or while they are mining on a block know in advance the reward that they would get if they happen to find a correct puzzle solution. This means that if you know that the next Dogecoin block is going to have a very low value, you have an incentive to switch to mining on some other altcoin instead which has a more predictable or ordinary value. Once this problem with the random block reward system was understood, the feature was eventually removed, really only a few months after it was launched. Another technical distinction of Dogecoin is that the rate of average block rewards decreases in half at a much higher rate than that of Bitcoin. So remember that in Bitcoin the block reward is scheduled to decrease by half periodically over time. Originally, Bitcoin blocks were worth 50 bitcoins each. Now they’re worth 25 coins each. The switch to cut in half at some point a year ago, and the next halving event won’t occur for a couple more years still. In Dogecoin, the reward rate is cut in half roughly every two months. So this is a timeline of Dogecoin's hash rate on its network. For a period of time of about four months, so spanning from April 2014 up to the current date of August 2014. And there's a couple of points, so in late April and in mid-July when the block reward for Dogecoin was cut in half and what happened is when it was cut in half each of these times the hashrate contributed to the network diminished quite substantially. From either an amount of about 30% to 50% of its decline. Now from this first having an event on this timeline, once the hashrate dropped it eventually picked up again and reached a peak around where it was previously and just in time for the next halving event after which it reduced by half. Now in comparison, over the same window, the hashrate in Bitcoin has essentially steadily increased at a slow exponential rate. Well, Dogecoin's hashrate has gone up and down. This indicates that the effect of having a much faster halving time has a significant impact on the contributed hashpower of an altcoin. Just to compare, not all coins go up and down. Here's a timeline also of an altcoin that was steadily in decline during the same period. This was a smaller altcoin, I'm not going to bother naming it for the sake of not embarrassing them. Oh. Hashpower can be compared directly between two different AltCoins that have the same mining puzzle. Say, for example, the five terahashes per second for the Altcoin depicted on the bottom is roughly more than 10,000 times less than the 100 petahashes per second of BitCoin's hashrate. On the other hand it doesn't make sense to directly compare the hashes per second between two different mining puzzle schemes because it doesn't take the same amount of computational effort of compute the hashes. A customized device for computing Shaw 2 mining puzzle solutions is it usable for computing S script solutions? Or if it's usable it might only be so out of reduced rate of efficiency. None the less besides comparing hashes per second, in absolute terms it does make sense to compare the relative change in hashpower over time because this is a reasonable measure of the amount of participation in the network. It's also possible to measure the price of units of currency in an Altcoin as they change over time, and in general this tends to correlate fairly well with the hashrate contributed to the network. So for example this top graph depicts the hashrate contributed to the Litecoin network over time, which again is steadily increasing at roughly an exponential rate. And Dogecoins hash rate over time, going up and down several times over the same time period is shown at the bottom of the top graph. In the bottom graph you see the relative exchange price at one of the largest third party cryptocurrency exchanges. What you can tell is that just as the relative hashrate contribution in the Dogecoin network has diminished relative to Litocoins so has the price of Dogecoin diminished relative to Litecoins. We've mentioned several metrics for comparing altcoins. I'm going to talk about it in a little more detail about a few of these, and describe their relative disadvantages or weaknesses to each other. The standard one or perhaps most commonly used one is market cap, which to recall is the price per unit of a currency at some current time, measured typically at a third party exchange, multiplied by the total number of units of this currency thought to be in circulation. Now this is almost certainly an over estimate but it's not clear how much. It's an overestimate for one reason because the price would change if you tried to sell coins. Suppose you had one million BitCoins this is around 10% of the current BitCoin circulation supply. You wouldn't be able to sell all of those coins at the current price. Once you started trying to sell a fairly large amount of them, the price would begin to drop as you introduced more coins to buyers who wanted to buy them. So it's not obvious how to account for the difference in available liquidity. Another thing that market cap's hard to account for is how many coins are actually in circulation, as opposed to out of circulation. One way that altcoin currency unit could go out of circulation is if the original holder of that coin loses their private key. They're no longer able to spend the coin so it's really become unusable but there isn't any way necessarily for the network to be able to tell whether or not this has happened. So a simple market cap calculation isn't able to account for this. One way of trying to measure the amount of activity on an Altcoin is to look at its exchange volume. Now to do this you have to look at one of the large third party currency exchanges and this introduces some uncertainty. It depends in some way on the nature of which exchange you're looking at. They sometimes have slightly different prices. It's also possible to move the price. It's possible to join a third party exchange and buy and sell units of the currency to yourself for a fairly low price, but this has the effect of influencing the apparent exchange volume. You could also look at the transactions that are done on the network. But a transaction on BitCoin or on most altcoins doesn't really mean that any change of value has taken place. It could just mean that users are automatically reshuffling the coins in their wallet, for example. And as we've looked at it, there are ways of comparing the hashpower of coins or looking at how the hashpower of the network changes over time. This is especially useful for comparing networks with similar mining puzzles, and it's difficult to compare, in absolute terms, puzzles with networks with different puzzles. Another more direct metric that you might wanna use is some measure of merchant support or commerce being done. How many users are actually using their currency in an altcoin to do things like buy products or exchange them for other things of value and so on. This is very difficult to measure because, it would rely quite heavily on some way of aggregating all this information from merchants. You would perhaps need the support from some of the large merchant tools or payment processors that handle both altcoins and BitCoins. And in general, large exchanges and payment processors are hesitant to accept new altcoins into their system, and they only do so once an altcoin has already reached some level of status, and it's perceived as being taken seriously. So far we've talked about just a small handful of altcoins. There are many more we could talk about and tell their stories as well. We're gonna move on for now, and we'll talk about a couple more altcoins as they come up.
