As of today's count, 42 tracked bitcoin variants exist. If you take a look at the list, you see variants with names all over the map: "LuckyCoin", "GoldCoin", "StableCoin", "JunkCoin", and "CoinEndo" (okay, the last one was a joke). With so many different options, why would you invest in these alternative bitcoin currencies known as AltCoins (alternative currency coins)? Where would you even go to do so?
Bitcoin's value is largely driven by speculation, but originally driven by the scarcity of having to produce more of something that exists in a fixed amount and more difficult to produce the more bitcoin existed (Read the full Bitcoin birth story here). People have spent hundreds of thousands of dollars to "mine" these virtual currencies. "Mining" in this sense means having some computers sit somewhere crunching numbers until the value of a Bitcoin is extracted.
But going back to AltCoins: Not all of these virtual alternative currencies have a basis in the complexities of mathematics or even anything bound to the real world. Some traded currencies, like Ripple, are controlled by the person producing the coin itself and the mechanism of transactions that Ripple supports.
So how do you know where to invest? Frankly, you don't... unless you can control or manipulate the market. It's possible and been done before. Some people have been able to create their own currencies and drive the value up by creating artificial scarcity. But if you can't manipulate the market, investing in AltCoins is just gambling.
White label virtual currency exchanges will soon exist. I can start DanCoin with a simple exchange right now. Let's say I arbitrarily give it a value of 100USD per DanCoin. This is practically what you're investing in with some of these alternative currencies.
I would be very careful when considering these currencies as a valid investment vehicle. Paul Buchheit, creator of Gmail, has been cautioning people against Bitcoin by saying:
"I love the Bitcoin concept, but right now it's behaving more like a Ponzi scheme than a currency. Be careful."
So while alternative currency is still finding its place, there are still many unknowns. It has even some of the best in tech re-thinking and cautioning those investing.