At a glance...
A cryptocurrency is a digitally created currency. Transactions involve the exchange of virtual “coins” or tokens whose value is determined by the decentralised demand and supply of the market. The first cryptocurrency, Bitcoin, was developed in 2008. While many spinoffs have since sprung up all over the internet, Bitcoin continues to be the most popular today. Still, some newer cryptocurrencies have more advanced features, like higher transaction rates. Others are being used to build whole decentralised financial systems, providing unprecedented access to financial products for people in disconnected areas.
If you haven’t heard of Bitcoin by now, you may have been living under a rock. As the first of its kind, it opened the floodgates to a host of over 4,000 other virtual currencies, also known as altcoins – a figure that only keeps growing. Today, cryptocurrencies have earned their place on the list of investments that every financially savvy person should consider.
Okay, but what are cryptocurrencies?
A good place to begin understanding cryptocurrencies is in the name itself. “Currency” is pretty obvious; “crypto”, on the other hand, refers to the cryptographic methods involved in both creating these currencies and keeping them running. Putting them together, cryptocurrencies are forms of virtual money that are coded into existence. Many of them stay that way, although a small number have manifested in the physical world in credit cards or other forms.
One defining feature of cryptocurrencies is that they’re decentralised and independent of government control (or at least, that was the intention in the beginning). To verify transactions without a third party, traditional cryptocurrencies (such as Bitcoin) run on a proof-of-work consensus mechanism, but this consumes a large amount of computational power. More recent currencies have adopted the proof-of-stake algorithm instead, which allows faster transactions and is more energy-efficient.
Bitcoin (abbreviated as BTC) may be the biggest cryptocurrency around right now, but new ones can be created any time by anyone. We’ve picked out ten altcoins (plus one bonus!) that are gaining popularity among investors for some of their key features. That said, market share isn’t the only metric that analysts use to evaluate digital currencies, so this list is by no means exhaustive.
1. Ethereum (ETH)
It’s only natural that the second-largest cryptocurrency after Bitcoin would be high up on this list. The Ethereum software platform was launched in 2015 and trades in digital tokens called ether. It uses a proof-of-work mechanism, although it has announced plans to change to proof-of-stake this year. As of October 2021, Ethereum has a market capitalisation of $287 billion (about 37% of bitcoin) and is valued at $3,396.32 per coin.
Ethereum was developed with the goal of enabling free access by anyone in the world. That’s why it supports the development of decentralised applications which run without third-party interference or fraud. This makes it particularly appealing to people in regions where financial infrastructure is less developed, enabling them to access important financial products like insurance and bank loans. Demand for ether comes from two large sources: one, software developers interested in creating applications that run in Ethereum; or two, investors who transact in ether to buy other cryptocurrencies.
2. Litecoin (LTC)
Often associated with Bitcoin as the “gold and silver” of the crypto economy, Litecoin was modelled after Bitcoin and one of the earliest altcoins around. It was developed in 2011 by MIT graduate and former Google engineer, Charlie Lee. These days, though, Litecoin has been lying low; as of October 2021, it has a market capitalisation of $9.58 billion and is valued at $168.14 per coin.
Like Ethereum, accessibility is the name of the game for Litecoin. It’s built on a decentralised, open-source network that runs worldwide and can be decrypted by your run-of-the-mill computer. It also has a higher transaction rate than Bitcoin.
3. Cardano (ADA)
While we’re on the subject of Ethereum, it makes sense to mention its rival: Cardano. When the team behind Ethereum started having disputes over Ethereum’s developments, one of its members, Charles Hoskinson, eventually left the group to co-found Cardano. As of October 2021, it has a market capitalisation of $42 billion and a per token value of $2.28.
Cardano was set up to be a superior form of Ethereum from the beginning and was therefore designed on proof-of-stake principles. Its highly technical foundations can be attributed to its team of blockchain researchers, comprising mathematicians, engineers and cryptography experts. However, as a relatively new currency, Cardano has yet to polish its decentralised financial applications and unleash the full potential of its blockchain.
4. Polkadot (DOT)
Polkadot was spearheaded by another of Ethereum’s founding members, Gavin Wood. Unlike Ethereum, which exclusively requires transactions to take place using ether tokens, Polkadot’s main selling point is that it supports the creation of parallel blockchains, which run on their own coins, and interoperability between different networks. Developers aren’t limited to just creating decentralised applications off Polkadot and can therefore build their own blockchains entirely. Another attractive feature is Polkadot’s shared security, where it uses its large network to offer security to these smaller chains instead of leaving them to fend for themselves. As of October 2021, Polkadot has a market capitalisation of $16 billion and is valued at $31.91 per DOT.
5. Bitcoin Cash (BCH)
If you’ve dabbled around in some cryptocurrency circles, you may have stumbled across Bitcoin Cash and been confused by its similarities to the original Bitcoin.
We’ve established that cryptocurrencies are run on a decentralised basis, and the actual code that keeps each currency running is no exception to this rule. This means that in general, changes can be made as long as there is consensus.
In Bitcoin’s case, two camps were divided over whether to upgrade its network. Bitcoin’s maximum block size of one megabyte (MB) imposed a cap on the rate of transactions at a time when its popularity was skyrocketing, and slow transactions were becoming increasingly frustrating. The two camps couldn’t agree, and the spinoff Bitcoin Cash was born from that rift in 2017. It has a block size of 8 MB, amidst other performance improvements.
As of October 2021, its market capitalisation is $10 billion, and each BCH unit costs $551.32.
6. Stellar (XLM)
Unlike all the other coins so far on this list, Stellar has gone for a pretty unique pitch, marketing itself as a channel for large transactions between financial institutions. This is a major advantage to banks and investment firms, for whom previously high transaction fees and long processing times are now nearly zero.
Still, that’s not to say individuals can’t use it. Its open blockchain network allows access by anyone, and transactions can be done between its token, Lumens, and any other currency. As of October 2021, it’s at a market capitalisation of $6.5 billion and valued at $0.3157 per Lumen.
7. Chainlink (LINK)
Chainlink is another cryptocurrency that has ventured into new territory by doing as its name suggests – linking smart contracts made within blockchains to data in external applications. It does so securely through agents called decentralised oracles.
What sort of external data would a smart contract need? Chainlink’s answer is, well, all kinds of data. From supply chain RFID tracking to IoT sensors to personal identity authentication to secure voting, Chainlink’s blog contains a list of 77 examples where smart contracts could improve the way society works using Chainlink’s blockchain technology. As cities increasingly upgrade their infrastructure to improve connectivity through smart technology, Chainlink could well be the one to usher in that futuristic vision.
As of October 2021, its market capitalisation stands at $9.7 billion, with each LINK worth $27.00.
8. Binance Coin (BNB)
Binance Coin is a derivative altcoin created for the sole purpose of transacting on the popular crypto exchange platform, Binance Exchange. Transaction fees are lowered for users who trade using BNB. It’s a strategy that works – today, Binance Coin boasts one of the highest trading volumes and an impressive market capitalisation of $55 billion. Each Binance Coin is valued at $428.33 as of October 2021.
9. Tether (USDT)
Tether was one of the pioneers of a collection of cryptocurrencies known as stablecoins, whose market rates are tied to some reference point outside the cryptocurrency network to reduce volatility. This allows them to hedge against wild swings in price, catering to a more cautious segment of the market.
In this case, Tether’s value is… tethered… to exactly 1 US dollar (USD). This has the added benefit of allowing holders of other virtual currencies to effectively convert their assets into USD without actually leaving the cryptocurrency system. Its handy functions are no doubt the reason it comes in at number three in terms of market capitalisation, at $68 billion as of October 2021.
10. Monero (XMR)
The last coin to make the list, Monero is an open-source currency that offers unbeatable security and privacy… because it’s untraceable. It uses a ring signature system: each transaction is stamped with several cryptographic signatures, of which at least one is real but impossible to pinpoint. Unfortunately, this high-security function has given Monero a bit of a bad name as prime real estate for illegal activities, but it also harbours rebels working covertly against authoritarian regimes, quite literally by the same token.
Bonus: Dogecoin (DOGE)
Yes, that doge. Dogecoin was based on the Shiba Inu internet meme and started as a joke in 2013 to show up everyone who was taking cryptocurrency investing far too seriously. This light-hearted approach garnered a lot of online attention, which only grew when Tesla’s CEO Elon Musk began tweeting that it was his favourite coin. True to its social media roots, Dogecoin has often been used as a tipping currency on Reddit’s reward system for users who create or share quality content. Today, it prides itself on a committed subreddit community of HODLers (a charming misspelling of “holders”) who eagerly await the day it will hit $1. As of October 2021, it has a market capitalisation of $28 billion and is valued at $0.2195 per Doge.