Bitcoin spinoffs

How Bitcoin Is Inspiring Spinoffs Outside The Realm Of Money

Background image courtesy of the Bitcoin wiki. Bitcoin logo via Wikipedia, DataCoin and EduCoin from respective websites.

Since its rise to popularity, Bitcoin’s has inspired a range of cryptocurrencies. But the latest imitators go beyond money.

There are small variations between how each virtual currency works, such as how long it takes to mine a coin, or what kind of encryption it uses.

But at the basic level, they all use a variation of the Bitcoin protocol, the process with which cryptocurrencies securely exchange information across a distributed network.

Essentially, information (in Bitcoin’s case, transactions) is packaged into blocks, which are protected by a complicated math puzzle.

Computers connected to the network crack these puzzles, and once it’s solved the solution is quickly spread through the network, thereby verifying the validity of this information. The collection of packages is called the blockchain.

For more on how Bitcoin works, see our explainer here.

The data being distributed across the network is not limited to currencies, however. Here are three examples of how cryptocurrency protocols are being repurposed by innovators:

Datacoin

Similar to a torrent service, Datacoin takes large files uploaded by users and splits them into smaller files that are distributed across a peer-to-peer network.

Unlike torrents, however, every bit of information is stored with every user. All data is contained within the blockchain, which serves the dual purpose of validating transactions, and distributing data.

Users purchase the right to storage space with Datacoins, which can be acquired either by mining, like all other cryptocurrencies, or through purchasing.

The coins can then either be used to buy the right to upload data to the blockchain, or sold to other users who want to do the same.

As of writing, it takes roughly 50 Datacoins to upload a megabyte, and one US dollar will buy you about 35 Datacoins.

Anything uploaded with Datacoin is encrypted, and can only be accessed by the user who uploaded it, who accesses it with a private key.

One caveat, though: because all data is contained on every client, the blockchain will be take up a lot of storage, and it’s slow to download. If the maximum amount of yearly uploads is achieved, it can reach 500 gigabytes a year.

But the data is stored for as long as at least one user has the blockchain, making it virtually impossible to censor or delete.

EduCoin

While most Bitcoin spinoffs are created simply to create a new currency, EduCoin has a higher purpose: to become the default way students pay for education.

Technologically, it’s not very different from other emerging cryptocurrencies, using newer innovations such as scrypt proof-of-work (a different “puzzle” from Bitcoin) and the Kimoto Gravity Well, which regulates the difficulty of solving blocks. It’s also mined in the same way other currencies are.

But instead of seeking the kind of mass adoption that has caused such wild fluctuations in the value of other virtual currencies, EduCoin is trying to build a usage base around a core constituency of college students, by sponsoring hackathons and other university events.

Accurate information on the market price of EduCoin is currently hard to obtain because of a listing site mistake, but prior to this it had a market capitalization of more than $250,000.

Side note: there is another startup named Educoin, which aims to create a virtual currency for trade schools, allowing people to earn coins for teaching their skills. However, it’s not clear whether it will actually use a cryptocurrency protocol to do so.

Coinmessage

When you spend a Bitcoin, the address you send the coin from is saved in the blockchain, which is publicly available.

With this software, users can send encrypted messages to Bitcoin addresses, and they can only be opened by the person who owns that bitcoin address.

This provides secure, encrypted messaging that can be accessed through Bitcoin wallet services, and theoretically also a new way of logging into websites, by sending a message to this secure address.

The project, which be available to anyone who’s spent bitcoins and there fore have an address,  is still in its infancy, but the code can be found on GitHub.

Know any other Bitcoin protocol spinoffs we should include in this article? Let us know @curiousmatic.

Ole Skaar