Alternatives to Bitcoin: What are the best altcoins?
25 Oct 2018
Even today, with more than 1,600 different digital currencies for investors to choose, Bitcoin still accounts for around 39% of the total market capitalization of the cryptocurrencies of $283B (according to coinmarketcap.com). In many ways, Bitcoin has taken the cryptocurrency market behind them. For years, before March 2017, bitcoin comprised between 75% and 95% of the aggregate total of the virtual currency market.
The shortage of Bitcoin (due to its limit of 21 million coins) has also played a role in boosting its valuation higher than all other virtual currencies. Investors have enjoyed the advantages of Bitcoin in the market (trading began in March 2010), as well as its numerous partnerships with various commercial platforms.
But what happens if Bitcoin is not the best among all virtual currencies anymore? For example, its blockchain network has been bogged down by the community's inability to reach a consensus on what updates should be implemented. The result has been transaction validation and settlement times significantly slower than their peers.
The blockchain concept has now been replicated and is being used to drive hundreds of different altcoins that can be bought and sold in digital exchanges. Bitcoin is not the only digital currency and it is not the only way to invest. In fact, the technology behind Bitcoin has always been intended to be open source.
That creates a lot of new opportunities. You may not have taken advantage of the sudden price rise of Bitcoin, but there are other cryptocurrencies that could be on the verge of reaching the top.
The following is a list of some of the most prominent altcoins. The blockchain experiments that use the sale of tokens to finance their project and feed the network are many.
This article is intended as a quick overview. You should definitely research more if you intend to buy cryptocurrencies. It is also worth noting that buying some of the virtual currencies mentioned here is not exactly easy. In many cases, you probably need to buy Bitcoin or Ethereum first. As with all investments, but especially those in the crypto-world, avoid investing money that you do not feel comfortable losing given the volatility of the market.
Ethereum is considered by almost everyone to be the second most valuable cryptocurrency for about a year. It could very well be considered as the most important cryptocurrency in the world thanks to the use of its blockchain technology. Blockchain is the digital, distributed and decentralized ledger responsible for recording transactions in a transparent and immutable manner.
There are two factors that really allow Ethereum to stand out. First, its blockchain technology allows monetary and non-monetary uses, while the Bitcoin blockchain and token must be used only as a means of exchanging goods and services. Banks can use the Ethereum blockchain to streamline the validation and settlement of transactions with the same ease that retailers can use the Ethereum blockchain to track goods that move through a supply chain in real time. Although not all industries and sectors will necessarily benefit from blockchain, Ethereum's underlying network offers enough versatility to attract attention. In fact, the Enterprise Ethereum Alliance, the world's largest open source blockchain initiative, now has more than 400 strong organizations.
Second, the incorporation of smart contracts by Ethereum is crucial. Smart contracts are protocols integrated into a blockchain network that act as guidelines for execution. Let's say that a company wants to buy more products when its sales reach a certain level; smart contracts can do that when executing the order. They help to facilitate, verify and enforce the negotiation of a contract, which in this case would be the legally binding terms that the parties, which may be persons or companies, have agreed upon.
The intelligent contracts and the utility of the Ethereum blockchain give it a strong argument to overcome Bitcoin at some point in the future.
Most virtual currencies have something to do with their underlying blockchain technology. However, Litecoin seeks to overcome Bitcoin in its own game as a medium of exchange.
According to BitInfoCharts.com's daily transaction data, Bitcoin has been stuck between 150,000 and 300,000 transactions per day since early 2016. Meanwhile, Litecoin has gone from handling just under 10,000 transactions per day on average a year ago to between 25,000 and 35,000 transactions per day in the recent months, with an average block processing time of only 2 minutes 30 seconds. (A block is a term that describes a group of transactions validated as correct.) In comparison, the Bitcoin network performs the same task in 10 minutes. Litecoin offers significantly faster validation and settlement times than its competition. Litecoin aims to partner with as many traders as possible and has done a good job to reduce the gap behind Bitcoin in terms of total daily transactions.
But Litecoin is not perfect either. although its founder, Charlie Lee, is working full time to promote the development of Litecoin and facilitate the registration of new traders. Unfortunately, it has had some problems in doing it. For example, Lee promoted the development and expected launch of LitePay, a payment platform designed specifically to support Litecoin, although developed independently of Litecoin. Unluckily, LitePay never lived up to its promotion. In fact, it was never launched. As a result, LitePay CEO Kenneth Asare informed Litecoin of his intention to stop working on the platform and sell the company.
However, even with these setbacks, few or no cryptocurrencies have demonstrated the ability to process transactions faster than Litecoin.
Ripple, also known as XRP, is Bitcoin's latest rival to enjoy success after an increase in value at the end of 2017 turned it into the third most valuable cryptocurrency by market capitalization. Unlike highly decentralized Bitcoin, Ripple is linked to financial institutions. It was launched in 2012 for legitimate banks to make worldwide monetary transfers. It is more difficult to obtain than other cryptocurrencies since to obtain it you have to pay with Bitcoin or Ethereum.
Monero is another cryptocurrency alternative that has the opportunity to dethrone Bitcoin as the most important virtual token in the world. The substantial difference is that Monero focuses on privacy.
Monero speaks to libertarians who want to avoid traditional banking networks, as well as people who simply do not want to stay under the radar. This attractiveness may well be sufficient to increase their market capitalization in the long run.
A cryptocurrency of privacy is a virtual token that reinforces the expectation of the anonymity of the transaction completely. In fact, most Blockchain networks are not as private as one might think. Blockchain analysis can often reveal the sender and receiver of the funds. With the privacy currencies like Monero, protection is established to hide the sender and recipient of the funds, as well as to mask how much money was sent. With respect specifically to Monero, this is done with ring signatures. It would never be known who the real sender was and the only one to be alerted is the recipient of the funds.
This alternative is not that far from Bitcoin. When the market value of Bitcoin soared last year, everyone wanted and started investing at the same time. This created a delay in transactions because the miners could not add enough blocks in time. Bitcoin Cash was separated from the original currency in August 2017 to solve the problem. Known as hard fork, Bitcoin Cash works in the same way as Bitcoin except that its blocks were increased from 1MB to 2MB to help speed up transactions and keep the rates low. However, since Bitcoin fell, the Bitcoin Cash price has followed the same trend.
Another cryptocurrency that has the opportunity to replace Bitcoin is Stellar, which has made a name for both its blockchain and its Lumens currency.
The blockchain of Stellar is revered by two aspects. First, it's really fast. Most transactions can be validated and resolved in a matter of two to five seconds. While it may not sound as impressive as a real-time transaction, it is considerably faster than the up to five business days that payments can take on traditional banking networks. Second, like Ethereum, Stellar incorporates the use of smart contracts, which allows companies to customize legally binding contracts to meet their business needs.
Stellar has specified some associations that deserve attention. Currently, Lumens currency is being used in an IBM blockchain project at a dozen major banks in South Pacific to expedite the settlement of payments. Before this partnership was announced, Stellar and the ICICI Bank of India worked together to create blockchain solutions to increase transaction processing speeds in that country. Considering that India's population does not have the most effective banking, blockchain could play an especially changing role in emerging market economies like this one.
Although Stellar has yet to demonstrate its ability to grow, its growing group of associations and its relatively fast processing blockchain network should worry Bitcoin investors.
If we had to focus strictly on blockchain applications that are not currency, VeChain Thor could be the most likely alternative to eliminate Bitcoin as the most valuable digital currency in the world.
VeChain Thor is a blockchain-as-a-service company that focuses primarily on the logistics of the supply chain. Along with the developed smart chips, VeChain Thor uses essentially blockchain and Internet of Things to track products in real time, keep counterfeit products out of supply chains, and allow retailers and wholesalers to take a look at how the products are made in various quality control tests.
What puts VeChain Thor on the map are his recent associations. First, it partnered with the global assurance service, DNV GL, to allow retailers to track products in real time. But the big screenshot was the announcement in late February that the German automotive giant BMW would join as well. In particular, VeChain Thor and its unchangeable blockchain will help BMW track its car parts supply chain.
In addition, VeChain Thor was also the first digital currency to approve the Cryptocurrency Disaster Recovery Plan (CDRP). The CDRP acts as a stress test for the market that has serious and probable threats for the owners. It was determined that VeChain Thor's responses to these threats were sufficient to protect the assets of the tokens' owners.
Digital Cash (DASH)
Dash had a positive 2017 as the rest of the most important altcoins, going from $10 per token to a maximum of $1,200 at the end of the year. It has been established since then, but still represents a large increase in the last 12 months and places it directly in the top 20 cryptocurrencies by market cap.
Originally called Xcoin and then Darkcoin, Dash has existed more than the majority, officially launched in 2014. It quickly gained popularity at the beginning of its life cycle and has maintained much of it since then, thanks to its defense of the owner's privacy through the PrivateSend function. PrivateSend effectively acts as an official insurance, making it possible for Dash transactions to become even more obfuscated and, therefore, providing an additional layer of privacy for owners.
Despite the new and exciting things happening in the cryptocurrency space apparently every week, there is still no guarantee that these virtual currencies, or even Bitcoin, have what it takes to survive and prosper in the long term. The fragmented regulation that varies according to the country, as well as the fact that investors do not have a really important participation in the asset, that is, the underlying blockchain, makes buying cryptocurrencies a sheer bet.
As we mentioned before, the purchase and direct sale of cryptocurrencies in the market is not the only and not always the best way to invest in this market. We suggest that you become familiar with CFD (contracts for difference) trading, which has a number of advantages (such as the opening of long and short positions) that are especially relevant for a market as volatile as cryptocurrencies. When trading with CFD's, you earn both when the price rises or falls, you do not need to buy an asset for its total value, so it is possible to make profitable transactions without having much money at hand.