Cryptocurrencies are the new kid on the “block” and there’s a prospect that they may replace traditional currencies by 2030.
Bitcoin was the first cryptocurrency being created in 2008, following the global financial crisis. Photo source: Unsplash
According to Thomas Frey, cryptocurrencies are the future and they will soon be part of our daily life because they are more efficient in the way they run.
How can we explain the rise of cryptocurrencies in less than 10 years? How do they differ from digital currencies? What are the top 10 cryptocurrencies in 2018?
Cryptocurrencies are slightly different than mere digital currencies. First, most of them are not centralized by any nation or organization. Decentralization means that the community regulates them over a state or a central government. Second, like bonds and stocks, cryptocurrencies are pretty cyclical and volatile. Third, according to CoinTelegraph, since most cryptocurrencies are based on Blockchain technology, they are more reliable, trustworthy and transparent.
Bitcoin, the first ever cryptocurrency was launched in 2008 soon after the financial crisis as a response to inefficient financial institutions. In 10 years, adopters and traders of Bitcoin no longer question the future of the widely accepted cryptocurrency, which today has the highest market capitalization. Despite Bitcoin’s pitfalls, it’s still popular. A recent article on TechCrunch highlights that cryptocurrencies will soon reach a market valuation threshold of 1 trillion.
But it’s not without any risk. While Bitcoin crashed at the beginning of the year—dropping from USD 19,783 in December 2017 to USD 10,000 a few days later—ICOs (Initial Coin Offerings) rose. Today, we count approximately 1,500 cryptocurrencies in the world and crypto finance has never been as dynamic with a plethora of ICO and crypto startups flourishing.
Here are the current top 8 cryptocurrencies by market capitalization according to prediction.vc.
1. BITCOIN / BTC — The Leading Cryptocurrency
Bitcoin needs no introduction. With a market capitalization of USD 122 million on May 30, 2018, it’s the most exchanged cryptocurrency on the market. As Bitcoin supply is limited, the token value is subject to increase. There are currently over 16 million BTC in circulation against a cap of 21 million. Many countries have added Bitcoin ATMs such as Switzerland, the US, and the Netherlands. But despite quick popularity and adoption, the high volatility of the cryptocurrency constitutes its main weakness.
On the other hand, many advantages are associated with Bitcoin such as price transparency and very low fees, and users are in control of their transactions within the Bitcoin blockchain.
2. ETHEREUM / ETH — Bitcoin’s Main Competitor
Ethereum was created in 2014 and within just 4 years took the second place after Bitcoin in terms of market capitalization. Ethereum was launched to provide more functionality to users over Bitcoin. The cryptocurrency is based on a custom built blockchain that runs smart contracts allowing parties to make agreements. We estimate that approximately 70% of blockchain projects are currently based on Ethereum, promising a greater flexibility and execution.
However, one of the disadvantages of Ethereum is that the cryptocurrency is still very new. Compared to Bitcoin, there’s still a long journey for Ethereum to be known by the mainstream. Finally, as there no limit to the token price unlike Bitcoin, the price of Ethereum may not rise that much in the future.
3. Ripple/ XRP — One of a Kind Project
Ripple is more than a cryptocurrency. Released in 2014, the technology provides both a digital transaction platform for international payments and a token, XRP, to transfer these payments in multiple forms (whether Bitcoin or USD). As it runs on its own protocol, Ripple is different than any other Blockchain projects and is built for enterprises and banks use, similar to SWIFT. One of the greatest benefits of Ripple over Bitcoin and Ethereum is the scalability of payments and fast execution. Ripple can execute up to 1,500 transactions per second and payments can be sent within 4 seconds, while Ethereum can take up to 2 minutes and Bitcoin up to 1h. Ripple’s token XRP overall value has risen steadily and the founders are optimistic about its future. Experts believe that it may become bigger than Bitcoin if its price reaches USD 7.
4. Bitcoin Cash / BCH — The AltBitcoin
On August 1, 2017, Bitcoin Cash was born from a split—named a “fork” in blockchain terminology—in the Bitcoin blockchain. As a peer-to-peer electronic cash for the Internet and a continuation of the Bitcoin project, Bitcoin Cash aims at improving where Bitcoin is weak: in the fast execution of transactions. Bitcoin Cash was developed as an alternative Bitcoin with an upgraded block size to 32MB, allowing larger transactions to occur in a fast and timely manner, with low fees. With a wide market acceptance from the Bitcoin Blockchain community, experts are positive about the future of Bitcoin Cash.
However, today most services that support a transaction are based on the Bitcoin infrastructure, such as remittance or payments. Therefore, the use of Bitcoin Cash is mainly speculative.
5. EOS / EOS — The Child of Crypto entrepreneur Dan Larimer
Created by world-famous engineer Dan Larimer—known for having launched Steemit, the popular Blockchain-based social network and blogging platform—EOS was meant to replace Ethereum. EOS owns a powerful architecture based on Blockchain that enables a larger number of transactions compared to Ethereum. Two promising features make EOS a serious Ethereum competitor which are the elimination of transaction fees and scalability. Millions of transactions can be processed per second through EOS with weaker fees than Ethereum.
But does EOS really have a chance to beat Ethereum? Since EOS is still conceptual and based on Ethereum blockchain, it’s unlikely to replace Ethereum in the short and mid-terms. However, EOS seems to be a good investment opportunity with a growing market capitalization of over USD 10 billion and price of USD 12.27 on May 30, 2018.
6. Stellar / XLM — Ripple’s Little Sister
Stellar is a decentralized global financial network launched in 2014 by Ripple co-founder Jed McCaleb. While Ripple targets banks, Stellar’s vision is people. Indeed, Stellar provides an all-in-one technology for people, payment systems, and banks, and focuses on the developing world. Its free, open source network let anyone build low-cost financial products easily. The XLM cryptocurrency has impressive features such as remittances, micropayments, and services for the underbanked—hence a perfect use for smaller transactions as seen in some developing countries. Another difference with some major cryptocurrencies is that Stellar is fast to proceed smaller transactions, unlike Bitcoin, making it a great choice for small businesses. IBM recently mentioned Stellar as one of the most explored spaces in the blockchain, meaning there’s room for expansion. With a market capitalization fast approaching USD 8 billion, XLM has a great future.
7. LiteCoin / LTC — BitCoin’s Little Brother
Created in 2011 by Charlie Lee while working at Google, LiteCoin is a peer-to-peer cryptocurrency referred by crypto specialists as Bitcoin’s little brother. Inspired by the world’s first cryptocurrency, the idea behind LiteCoin was to provide a faster and cheaper alternative to Bitcoin. With promising features, LiteCoin provides faster transaction confirmation times and SegWit integration—a process by which a block size is increased. However, since BitCoin recently caught up on SegWit, LiteCoin today is slightly less differentiated than Bitcoin. So why there’s still some hype about LiteCoin? In a volatile world, as seen with the Bitcoin crash, alternative cryptocurrencies such as LiteCoin represents a diversified investment opportunity. Proof of this, the price of LiteCoin increased by over 7,000% in 2017 over 1,730% for Bitcoin.
8. Cardano / ADA — The Scientific Cryptocurrency
Cardano is a blockchain and cryptocurrency project created by a team of researchers and engineers in 2015. With a decentralized open source blockchain that runs smart contracts like Ethereum, Cardano is on the way to revolutionize the cryptocurrency ecosystem as it has improved features of the major coins. At the epicenter of the third blockchain phase, Cardano has removed the old issues in the cryptocurrency world: scalability, transparency, efficiency, and trust. In fact, some experts think that Cardano could be the next big thing. With a steady price and a ramping interest from investors, ADA registered a market capitalization of over USD 5 billion on May 30, 2018. With the future introduction of a debit card to foster mass adoption and a solid team of forward-thinking scientists backing the project, there’s no doubt that Cardano and ADA will stay ahead of the curve.
Will cryptocurrencies revolutionize the way people consume and exchange cash? Are cryptocurrencies still a fantasy or hype? The future will tell. However, it’s better to watch them carefully as the market remains volatile. For investors, the next part of 2018 will represent greater investment opportunities than ever with a fresher, cleaner market in a post-Bitcoin crash environment and the introduction of third-wave cryptocurrencies like ADA. With updated technology allowed by the blockchain and great prospects for the economy, cryptocurrencies represent an asset for governments and companies. Soon enough, banks and institutions would work in pair with crypto investors to make financial decisions on a larger scale.
Also published on Medium.