Bitcoin is by far the most popular digital currency. However, its capitalisation in the entire cryptocurrency market is less than 50%. This means that more funds are currently held in altcoins than in BTC. Therefore, anyone thinking about investing in virtual currencies cannot pass by the alternative that is altcoins. For a long time now, they have not been niche currencies for a small group of enthusiasts, but a majority part of the cryptocurrency market. In this material, we present some popular altcoins.
From the point of view of any more advanced investor, it is impossible to move on to discussing niche cryptocurrencies without learning about the specifics of Bitcoin. Bitcoin is what comes to mind first when one thinks of cryptocurrencies. The most popular of cryptocurrencies was created over 10 years ago as a response to the global crisis that deeply affected financial markets (created in 2008 and launched in 2009). Since then, the cryptocurrency market has grown tremendously, and Bitcoin's popularity has surpassed even very bold predictions.
The purpose of creating BTC was to move away from a centrally controlled currency that is issued by central banks. The alternative was to be money that is directly exchangeable between users via the blockchain network. In other words, the operation of the bitcoin network was not to be based on trust towards a central issuer (as is the case with fiat currencies).
The use of peer-to-peer topology and the lack of central administration makes it impossible to manipulate the value of BTC (e.g. by adding more units of the coin at any time). Bitcoin has been designed in such a way that it is not threatened by inflation. A rigid issuance limit of 21 million units has been set. This creates strong deflationary pressures, making BTC, according to numerous opinions, a currency with a probable lack of inflation.
Bitmonets are mined through the process of cryptocurrency mining. This is a process that involves lending computing power to a computer in order to validate (confirm) transactions on the BTC network. Simplifying the issue, we can say that the people (so-called miners) who lend their computers' computing power, as compensation, are rewarded with a certain fraction of the value of the transaction they enabled.
It is worth noting that it is becoming increasingly difficult to mine cryptocurrencies regularly as every 4 years or so the reward paid for mining is halved. It is estimated that 99.8% of bitmonets will be mined around 2030. However, it will not be possible to mine all units (21 million) until around 2140.
The transfer of funds between accounts is done using cryptography. Transactions are publicly visible and stored in a distributed database. Everyone who participates in the bitcoin network has a wallet in the form of a public key. An example address is similar to the following format 11mfTR2HMw9zELLNezq2xvCnqRiPBLqwUB.
So far, the adoption of BTC as a means of payment used for everyday purchases is a process that still takes time. While it is true that we can increasingly pay for products or services with bitcoin, it is still not a common means of payment in use. Much more often bitcoin is used as a way to store the value of money over time, or simply as an investment asset.
To fully understand how bitcoin, and many other cryptocurrencies, work, you need to know a little about how the blockchain works. This is an architecture for storing information in a way that ensures that historical data is immutable. A blockchain network can be called a decentralised, distributed database or simply a transaction register.
The key point is that the data is encoded using cryptographic algorithms that are impossible to modify. A register, also called a block chain, allows new blocks to be added only at the end of the register. Each subsequent block is linked to the previous block. The blocks contain a timestamp (time stamp) and a hash (reference to the previous block). As a result, it is not possible to manipulate the data.
Firstly, users who are online can see what transactions are being made. Everyone has equal, fully transparent access to the data of the transactions made. Secondly, independence is an important aspect - blockchain technology does not need an intermediary. All transactions are performed exclusively between network participants.
As a result, it is possible to be independent of any intermediary institutions. Thirdly, the cryptography used ensures a high level of security. Blockchain technology is considered resistant to cyber attacks or attempts to introduce an unauthorised transaction.
The last 10 years have seen the development of thousands of cryptocurrency projects. Some of them are decentralised software environments (e.g. EOS.io or ethereum), others are technologies used by Banks (e.g. ripple or stellar) and still others are coins without much use and are purely speculative (e.g. dogecoin).
It should be noted that altcoins, which are alternatives to bitcoin, take a very diverse form. In this material we take a closer look at a few altcoins that are worth hearing about.
The most popular altcoin is Ether, whose capitalisation is roughly twice that of bitcoin (as of August 2021). This shows how extremely popular ETH is, which is undoubtedly the most important altcoin.
Next on the list of cryptocurrencies with the largest capitalisation, is Tether, Binance Coin, Cardano, XRP, USD Coin, Dogecoin, Polkadot, Uniswap, Binance USD, Solana, Chainlink, Bitcoin Cash and Litecoin. Most of the above cryptocurrencies are recognizable projects to those familiar with the crypto market.
Getting to know altcoins is best started with ethereum. It is a decentralised blockchain platform that primarily stands out because it supports smart contracts and decentralised applications. Ethereum was created in late July 2015. It is an initiative initiated by programmer Vitalik Buterin. The project was launched thanks to a group of investors (based on the founding fund, which was raised through crowdfunding).
The main cryptocurrency based on the ethereum platform is Ether (ETH). In addition to being a cryptocurrency that enables transactions, it is commonly used to pay fees, in projects that are built on smart contracts on the ethereum platform. It is worth noting that ether is sometimes incorrectly referred to as
ethereum and in practice the two names are treated interchangeably.
Ether, like bitcoin, is based on a Proof Of Work system and uses a model of generating new units through cryptocurrency miners. However, it is important to keep in mind that there are plans to move to a Proof Of Stake model in the future. Etherum is an open network that operates on a peer-to-peer basis.
Within this network there are at least two types of accounts. The user account, which is used to make transactions, and the smart contract account, which allows decentralised contracts and applications to run.
Ethereum has at least a few important differences compared to bitcoin. With BTC, we are talking about a digital currency that is mainly used to store value and make transactions. In contrast, ethereum is a platform that can additionally be used for smart contracts.
This fact opens up a veritable sea of possibilities. As a result, with ethereum it is possible to create your own tokens, which can be separate altcoins. Furthermore, smart contracts can be used for many interesting projects based on blockchain (for example, it is possible to create a crowdfunding application or an application to certify contracts).
The main differences from bitcoin are as follows:
It is important to remember that it is not only the most popular altcoin but, above all, a powerful platform for smart contracts which, according to industry experts, is characterised by extremely high usability.
Many cryptocurrency enthusiasts predict a bright future ahead for ethereum. It seems that apart from smart contracts, ethereum has more characteristics of a means of payment compared to bitcoin. In contrast, bitcoin's characteristics more closely resemble virtual gold.
Staying with altcoin to bitcoin comparisons we present litecoin, which is presented as a faster version of bitcoin. This project was created by former Google employee, programmer Charlie Lee, in 2011. So it was created just 3 years after bitcoin and has been presented as a twin project to BTC from the start.
It is a cryptocurrency built on open source code. On the technical side, litecoin is almost identical compared to bitcoin. However, some differences are very significant.
Litecoin, like most cryptocurrencies, saw its biggest gains in early 2018 and the first half of 2021. It is a digital currency with quite a large market capitalization, allowing it to rank around 15th in the ranking of cryptocurrencies with the largest capitalization (as of August 2021).
It is important to know that litecoin is used as a testing ground and is used to test various solutions. For example, to optimise block sizes and algorithms for processing transactions. This is important information for investors, who should rather treat litecoin with more caution than its big brother bitcoin.
Either way, undoubtedly the main advantage of litecoin is much faster transactions. It is a digital currency that is more suitable as a means of payment. It is less prone to scalability issues.
Ripple is a platform older even than bitcoin itself. Initially, the project started in 2004 under the name RipplePay. The platform along with the cryptocurrency XRP was created by Canadian programmer Ryan Fugger. Initially, XRP was intended to serve as an exchange system for the local community. The system changed the rules of operation slightly in 2012, when it was decided to create a standalone settlement unit using blockchain technology.
Simply put, XRP is a comprehensive system that enables banks and financial service providers to transfer money quickly and globally.
In the case of XRP, the transaction protocol, does not necessarily have to support cryptocurrencies. You can also process transactions based on a fiat currency, a commodity or any other unit of value (e.g. points or minutes to use for a specific service).
Token XRP is a solution dedicated to banks and financial institutions. The problem it solves is the fast, global and secure transfer of money. Financial service providers, thanks to ripple, can significantly shorten the time it takes to post transfers and reduce the cost of cross-border transfers.
A real-time settlement system called ripple, has its cryptocurrency XRP. The main task placed on XRP is a protection function in the transaction settlement system. Each settlement irretrievably destroys a certain number of XRP units. As a result, when the number of transactions increases, the cost of transactions increases at the same time.
In practice, this means so much that if someone wanted to launch a DDOS attack they would quickly go bankrupt. Other than that, XRP simply acts as a means of settlement, as like most other cryptocurrencies XRP can also be transferred between wallets.
The supply was planned to be 100 billion XRP, there are currently 46 billion in circulation. One XRP unit is divided into many decimal parts, e.g. 0.000001. This means that in the future, when there is, for example, only 1 XRP left, the future of the cryptocurrency will not be at risk.
The XRP exchange rate scored a huge boost in late 2017 reaching the ATH of $3.40 in January 2018. However, the valuation quickly declined thereafter. Further spectacular increases were seen in 2021. It is important to note that XRP is definitely not a niche cryptocurrency, as it is the sixth cryptocurrency in the world according to market capitalisation.
What are the forecasts for XRP? According to some opinions, the course of this cryptocurrency is largely linked to the adoption of ripple technology in banking. Currently, many large banks are using XRP. Moreover, it is estimated that more than 90 banks from around the world are actively using it. Enthusiasts around XRP are certainly hoping for further expansion among clients in the financial sector.
It should be noted that on the one hand, it is very encouraging that so many major banking institutions are behind XRP. On the other hand, it must be borne in mind that the ripple platform can function without XRP cryptocurrency, so the impact of the increasing adoption of the technology proposed by ripple on the XRP exchange rate remains debatable for some.
The ripple project definitely stands out from other platforms built on blockchain technology. It provides huge scalability and instant settlements. On the other hand, it does not provide the decentralisation that is the hallmark of many cryptocurrencies.
However, it is important to note that it is a project with a completely different purpose of creation than, for example, bitcoin. Ripple has aspirations to compete with the SWIFT banking system or with other transaction systems. So we should not expect another digital gold here. Which does not change that many users speculatively invest in XRP.
Dogecoin is a cryptocurrency with a straightforwardly cinematic story associated with its creation. Two software engineers Billy Markus and Jackson Palmer created Dogecoin in late 2013, treating it as a joke in response to investors' speculative approach to other cryptocurrencies.
The whole thing looks even funnier, because the cryptocurrency is signed with an image representing a
dog known from internet memes. It would seem that such a humorous project cannot break through on the financial market, but in the case of Dogecoin the effect is the opposite. DOGE is in the top 10 cryptocurrencies with the highest market capitalisation.
Initially, dogecoin was primarily intended to be used for an online tipping system (particularly on sites such as Reddit and Twitter). The cryptocurrency with the popular
dogecoin quickly became strongly popular and, as a result, many people started to treat it as an investment asset.
However, it is important to note that what makes doge different from bitcoin is that there is no set maximum number of units. This means that dogecoin is vulnerable to inflation. Besides, it is worth knowing that doge is not a developed project. Users are unlikely to expect updates, which is normal for those projects with a strong development team behind them (such as ethereum or cardano).
When acquiring information about dogecoin, it is very easy to come across information about American entrepreneur Elon Musk According to many people, it was the publications on Twitter made by Tesla CEO Elon Musk that had a big impact on the dogecoin exchange rate. It only took short posts for the exchange rate to rise by several tens of percent.
Interestingly, Musk's influence on dogecoin also worked the other way, as the 'dogecoin' suffered a steep drop in valuation of up to 40 per cent following an appearance on the Satruday Night Live entertainment show on 8 May 2021.
It is important to remember that the price of dogecoin is highly volatile. Volatility obviously comes with increased risk. However, some people use volatility as an advantage by playing short positions (e.g. buying and selling within one day).
Dogecoin is a cryptocurrency-mem that was a joke. Meanwhile, it is certainly no joke these days. It is an altcoin that has an extremely large and above all enthusiastic community.
Some have invested in the
doge for the sake of jokes others see it as an opportunity for an above average return on investment. Whatever the purpose for which people from all over the world bought DOGE, the result is that it is one of the top altcoins with a huge market capitalisation.
EOS is a project created by experienced developers gathered around the company Block.One, which deals with IT solutions based on blockchain technology. The organisation raised funds to develop the project through an ICO platform. When the ICO was launched, the price was 99 cents (USD) per EOS unit. The collection almost for 12 months until 31 May 2018.
During this time, a truly record-breaking sum of USD 4.2 billion was raised. Initially, the tokens purchased by investors (ERC20) were based on the ethereum blockchain. However, token holders were later required to register their funds with EOS as the 'old' ERC20 tokens no longer had any value. This was a rather complicated process that had some delays. As a result, the EOS network only went live in mid-2018.
EOS is a decentralised operating system that is used to program decentralised applications (dApps) and smart contracts. Thus, in some aspects EOS resembles Ethereum but there are important differences between the two.
The price in 2018, at its peak, was over $22 which implied a roughly forty-fold increase over the October 2017 price. Then the price suffered an equally steep decline. Another strong rise was recorded in May 2021, when the price exceeded USD 15.
What is worth knowing about the EOS network is that in its current form it cannot be considered fully decentralised. The network is not sufficiently distributed and for this there is a network governance model. There is an arbitrary instance that in case of disputes can react and settle disputes. Of course, this is an element that we will not see in fully decentralised cryptocurrencies.
Besides, the blockchain producer reserves the possibility of freezing certain addresses and the possibility of removing a wallet from which no transaction has been made for 3 years (in which case the funds are transferred to auctions). Either way still, EOS is considered a serious competitor to ethereum.
The origins of IOTA date back to 2015. Back then, the development team started a fundraiser, during which they managed to raise $525,000 worth of funds. The public network was launched in early 2017. The purpose of the creation was to preserve the integrity of data and industrial devices that are used in IoT (Internet of Things) projects.
IOTA solves a significant data and device integrity problem, which should be useful for many tech giants. Already in 2017, IOTA has established partnerships with corporations such as Microsoft, Samsung or Bosch.
This was clearly reflected in the exchange rate, which soared as high as $5.5. IOTA is an altcoin that is an innovative project that does not replicate what ethereum or bitcoin are famous for. It is based on the Tangle algorithm. It is a different technology, different from blockchain technology.
The historical maximum occurred in December 2017, when the valuation exceeded the USD 5 level. Already in 2018, the valuation returned to its previous level in the range of approximately USD 0.30. Further increases were recorded in the first half of 2021, when the valuation reached the USD 2 limit.
The goal behind this cryptocurrency is to provide users with fast data exchange, improved service customisation and enhanced device integration within IoT solutions. The use of the Tangle network addresses many of the problems that blockchain faces (limited scalability and high transaction fees). It is estimated that IOTA, is still in the early stages of development.
This is a fairly complex project whose architecture is not as recognizable as is the case with blockchain-based currencies. However, it is important to note that there is a strong development team behind this project. It can be expected that various corporations and institutions that deal with IoT technologies will be interested in supporting the IOTA project. An example is Fujitsu, which has announced an official collaboration with IOTA. This type of cooperation and reports of corporate interest certainly have a positive impact on the stability of the entire project.
The waves platform was launched on 12 April 2016. Its creator is Russian entrepreneur Alexander Invanov, who previously founded the Coinmat cryptocurrency exchange and collaborated on the development of the NXT platform. The funds to start the project were raised through an ICO. In this way, $16 million was raised already at the start. This was a very good result, as by comparison, during the pre-sale of ethereum tokens, $14 million was raised.
Waves is a decentralised platform that allows you to create your own investment funds. Thanks to Waves, each user can independently issue tokens, which, depending on the idea, can have various uses. The most common is to conduct crowdfunding campaigns, charity actions or produce your own coins in the loyalty program.
This means that waves can be seen as a competitor to Kickstarter (the ability to create crowdfunding campaigns) and a competitor to ethereum, as smart contracts can also be created here. The purpose of waves is to issue, transfer and exchange goods, services and even fiat currencies in a fully decentralised manner.
Waves scored a big gain on the first half of 2021, reaching an ATH of over $41 in May. Waves' market capitalisation is not very large compared to other top cryptocurrencies. Waves is ranked 67th in the market capitalisation ranking (as of August 2021).
In summary, waves allows you to create digital tokens without the need for complex programming work done with a smart contract as is the case with ethereum. This makes it much easier to create your own digital currency with waves. Moreover, waves is characterised by relatively attractive transaction costs and good speed of transactions.
Although the barrier of entry to creating your own digital currency with waves is much lower, (as no programming skills are needed) the popularity of ethereum is still much higher. Waves does not have such a large and dedicated community. Despite this, it can be expected that this is a project that will continue to grow as waves is overseen by a strong development team. This gives hope that it is a project that may yet surprise positively in the future.
The blockchain network cardano has its origins in 2015, while it was launched in 2017. The founder is Karol Hosikson, who co-founded ethereum. Currently, the cardano team consists of more than 30 developers. At the time of its debut, ADA had a capitalisation of $600 million. Just a year later, the capitalisation had grown to $33 billion.
Cardano is a platform that has its own ADA cryptocurrency. The purpose of creating Cardano was to create a platform for smartcontracts, decentralised applications and tokens distributed during ICOs.
Cardano is a project with strong ties to academia, and that is exactly how it presents itself - as the first blockchain project that is based on academic methods and research. According to its creators, Cardano aims to be a platform with above-average scalability that maintains decentralisation and the highest security standards.
Since we are talking about a project aimed at enabling the creation of smart contracts, it is important to note that the main competitors are EOS and ethereum.
All cardano development activities are publicly available and subject to academic peer review. The development of cardano is planned in great detail in the form of a precise timetable. It is divided into five stages. Which stage of development cardano is in can be found on the Internet by searching for 'cardano roadmap'.
Cardano's exchange rate rose very strongly in 2021, when it shot up to $2.45USD from $0.17. It is worth bearing in mind that it is the fifth cryptocurrency by capitalisation (as of August 2021).
Cardano is a project that can be considered extremely ambitious. Certainly, the goal is to realistically compete with ethereum. A very strong team with a long-term mindset is working on the project. The work plan is made public and further highlights cardano's ambitious plans. These and other features described above make cardano seem like a promising project.
What can possibly be faulted is the cryptocurrency's high degree of centralisation by concentrating much of the ADA on the largest wallets. Some additionally accuse Cardano of being created using programming languages that are not very popular, which according to some opinions may prove to be a hindrance in competing with ethereum in the smart contracts area.
Stellar was released in 2014 by the non-profit Stella Development Foundation, behind which are programmer Jed Caleb and lawyer Joyce Kim. Initially, the network was made on the source code of the Ripple platform. The project's launch was quite a success, with a market capitalisation of $15 million and 3 million users acquired in six months.
Stellar is a platform based on the blockchain network with its own currency Lumen. The main goal behind stellar was to facilitate access to financial services. With a particular focus on those people who currently do not have access to banking services for various reasons. Stellar is distinguished by immediate confirmation of transactions and very low transaction fees.
A key element of the stellar network is the ability to issue any asset in the form of tokens. This, of course, opens up a number of possibilities - currencies or other assets can be exchanged and ICO collections can be created. Skeptics of the stellar network accuse it of being only partially decentralised. It is therefore a similar example to ripple.
XLM is another altcoin that has performed very well in early 2021. Despite strong gains, it has not surpassed its 2018 ATH when it reached $0.87. XLM is not a very niche cryptocurrency however, at the same time it is not at the top, as it is ranked around 20th in the ranking of cryptocurrencies with the largest capitalisation (as of August 2021).
To sum up the information about the Stellar network and the XLM cryptocurrency, it is important to remember that this is a project made with a lot of momentum, with a strong team behind it. However, interestingly, stellar has its own decentralised exchange (DEX), which supports popular cryptocurrencies led by bitcoin and some fiat currencies (including EUR and USD).
However, some may see among the downsides the fact that the stellar network itself is only partially decentralised. Either way, it is a solution that can fight for market advantage with other projects of this type (e.g. ripple) and in the future maybe even with banking clearing systems such as SWIFT.
TRON was founded by a former member of the ripple team and began fundraising through an ICO in August 2017. The planned $70 million was quickly raised.
TRON is a competing solution to EOS and ethereum. It is another platform that enables smart contracts and decentralised applications. TRON wants to stand out for its high scalability, enabling up to 2,000 transactions per second. Moreover, the vision behind the developers is to create a free and decentralised internet.
The whole idea is to enable access to content using blockchain technology. The key aspect is to be decentralisation, thanks to which the ecosystem described as Internet 3.0 is to ensure a high level of privacy. Users would have access to various types of entertainment material (e.g. films, music or games).
It is worth knowing that a bit of controversy has grown up around TRON, as the published white papers were said to be plagiarised from other projects. Moreover, the code of the TRON project allegedly has fragments taken from ethereum, which has also been met with controversy.
The TRX stock price scored big gains in early 2021. However, they did not break through the ATH of 2018, when the share price reached a ceiling of USD 0.23. Interest in TRON, despite the earlier controversy, is not weak. TRX has achieved a certain position in the TOP 30 list of cryptocurrencies with the largest capitalisation.
TRON is a project that has not escaped controversy. In any case, it is still an ambitious project, which, not without exaggeration, is called the Internet 3.0. Interest in TRX is also not the weakest, as during its short history it has achieved a very high market capitalization, which has allowed TRX to stand in one line next to the most ambitious cryptocurrency projects. It is worth knowing that TRON is particularly well-known in Asia, particularly in Korea.
A well-known advantage of cryptocurrencies is anonymity. However, the use of cryptocurrencies is not as private as some people think. Firstly, transactions carried out using the most popular cryptocurrencies (BTC and ETH) are completely transparent and public. Admittedly, the personal details of the people who perform the transaction are not always obvious.
However, it should be borne in mind that cryptocurrency exchanges apply the KYC principle and therefore, in many cases, this aspect does not remain anonymous either. This is one of the reasons why some are interested in so-called anonymous cryptocurrencies (privacy coins), which are dedicated to users who value anonymity.
The most popular cryptocurrency in this segment is Monero. The operation of this currency is based on so-called ring signatures, hidden addresses and the proof of work algorithm RandomX. The result is a high level of privacy. Monero is seen by many experts as the most anonymous cryptocurrency.
Dash is not a typically anonymous cryptocurrency but it does have the ability to send money using the PrivateSend feature so that funds are sent in a way that increases anonymity. In simple terms, funds sent using PrivateSend are broken into fragments and are sent to different wallets which mix funds from different sources and send them to different addresses. The whole process can be repeated even a dozen times, making it very difficult or even impossible to link the transaction with its recipient and sender.
There are many more similar anonymous cryptocurrencies. Among them Zcash, Verge, Grin, DAPS Coin and many others. The large development of anonymous cryptocurrencies should not particularly surprise anyone. Anonymity is a feature strongly desired, contrary to appearances, not necessarily only by people who want to hide something. Simply put, the privacy of personal information is something that seems to be everyone's right.
There is no denying that the vision of a private completely anonymous cryptocurrency is something that will remain a hot topic. Either way, it is important to remember that no cryptocurrency or financial system can provide 100% anonymity. Cryptographic records may be unbreakable today, but who's to say that in the future, for example, quantum computers won't be able to decrypt anonymising algorithms. Anonymous currencies are an attractive freedom vision, but it is important to remember that anonymity should not be abused.
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