Not only has Bitcoin set the trend, ushering in a wave of decentralized peer-to-peer cryptocurrencies, but it has also become the de facto standard for cryptocurrencies, motivating an ever-growing legion of followers and spinoffs.
- In broad terms, a cryptocurrency is a digital currency that exists in tokens or “coins” and is based on a distributed and decentralized ledger.
- Apart from that, the field of cryptocurrencies has grown exponentially in the decade since Bitcoin was created, and the next great digital token may be published tomorrow.
- Bitcoin remains the market capitalization, user base, and popularity leader among cryptocurrencies.
- Other cryptocurrencies, such as Ethereum, are being utilized to develop decentralized financial systems for those who lack standard financial products.
- Certain altcoins are being endorsed because they offer capabilities not available in Bitcoin, such as processing more transactions per second or employing alternative consensus techniques such as proof-of-stake.
How Are Cryptocurrencies Defined?
Before we get deeper into any of these Bitcoin alternatives, let’s take a step back and define the terms cryptocurrency and altcoin. In the broadest sense, a cryptocurrency is a digital or virtual money in the form of tokens or “coins.” While some cryptocurrencies have entered the physical world via credit cards or other ventures, the vast majority remain intangible. The term “crypto” refers to the complex encryption required to create and process digital currency and its transactions across decentralized systems. Along with this critical “crypto” component, these currencies share a dedication to decentralization; cryptocurrencies are often produced as code by teams that incorporate mechanisms for issuance (usually, but not always, via a process termed “mining”) and other regulations. Cryptocurrencies are almost always built to be immune to government manipulation and control. However, this fundamental component of the business has come under question as it has risen in popularity. The cryptocurrencies fashioned after Bitcoin are collectively referred to as altcoins. In some cases “shitcoins,” have frequently attempted to position themselves as updated or improved versions of Bitcoin. While some of these currencies may have some fantastic features that Bitcoin does not, an altcoin has yet to achieve the level of security that Bitcoin’s networks do. Below, we’ll take a look at some of the most popular digital currencies that aren’t Bitcoin. To begin, a disclaimer: A list like this can’t be exhaustive. One cause for this is the existence of over 4,000 cryptocurrencies as of January 2021. While many of these cryptocurrencies have a small to no following or trading volume, a select few enjoy enormous appeal among committed groups of supporters and investors. Additionally, the field of cryptocurrencies is constantly evolving, and the next great digital token could be launched tomorrow. While Bitcoin is usually regarded as the pioneer of the cryptocurrency world, analysts use various methodologies to evaluate tokens other than BTC. For example, experts frequently place a premium on rating coins in terms of market capitalization. While we have taken this into account, there are more reasons why we may put a digital token on the list.
1. Etherium (ETH): Ethereum, the first Bitcoin alternative on our list, is a decentralized software platform that enables the creation and execution of smart contracts and decentralized applications (DAPPS) without the need for downtime, fraud, control, or third-party interference. Ethereum’s goal is to establish a decentralized suite of financial goods that anybody on the planet can access regardless of nationality, ethnic origin, or religious affiliation. This feature underscores the ramifications for persons living in certain countries. Those lacking governmental infrastructure and identification can obtain bank accounts, loans, insurance, and several other financial items. Ethereum applications are powered by ether, the platform’s native cryptographic token. Ether acts as a medium of exchange on the Ethereum platform and is primarily sought by developers wishing to develop and run apps within Ethereum or use ether to purchase other digital currencies.
Ether, which began in 2015, is currently the second-largest digital currency by market capitalization, trailing only Bitcoin by a substantial margin. As of January 2021, ether’s market capitalization is approximately 19% of Bitcoin’s. Ethereum held a presale for ether in 2014, which got a tremendous reaction, ushering in the era of initial coin offerings (ICO).
Ethereum, according to the company, may be used to “codify, decentralize, secure, and trade almost anything.” Following the 2016 attack on the decentralized autonomous organization (DAO), Ethereum was split into Ethereum (ETH) and Ethereum Classic (ETHC) (ETC). Ethereum (ETH) has a market capitalization of $138.3 billion and a per token value of $1,218.59 as of January 2021. Ethereum intends to switch from proof-of-work to proof-of-stake consensus in 2021.
This move enables Ethereum’s network to operate on significantly less energy and with increased transaction speed.
Proof-of-stake enables network users to “stake” their ether. This procedure contributes to the network’s security and transaction processing. Those who do so are rewarded with ether, equivalent to interest on a savings account. This is an alternative to Bitcoin’s proof-of-work mechanism, which rewards miners for processing transactions with additional Bitcoin.
2. Litecoin (LTC): Litecoin, introduced in 2011, was one of the first cryptocurrencies to follow Bitcoin’s lead and has been dubbed the “silver to Bitcoin’s gold.” It was created by Charlie Lee, an MIT graduate, and former Google developer. Litecoin is based on an open-source global payment network that is not centralized and employs a proof of work known as “script” that can be decoded using consumer-grade CPUs. Although Litecoin is similar to Bitcoin in many ways, it has a quicker block creation rate and thus a faster confirmation time for transactions. Apart from developers, an increasing number of shops accept Litecoin. Litecoin now has a market capitalization of $10.1 billion and a per token value of $153.88, making it the world’s sixth-largest cryptocurrency.
3. Cardano (ADA): Cardano is an “Ouroboros proof-of-stake” cryptocurrency developed by engineers, mathematicians, and cryptography professionals using a research-based approach.
Charles Hoskinson, one of Ethereum’s five early founding members, co-founded the project.
He quit Ethereum and later assisted in creating Cardano after having some differences with the way Ethereum was headed. Cardano’s blockchain was developed by considerable experimentation and peer-reviewed research. The experts behind the project have published over 90 papers on various aspects of blockchain technology. Cardano’s foundation is built on this research.
Cardano appears to stand out among proof-of-stake peers and other significant cryptocurrencies due to this rigorous procedure. Cardano has also been branded the “Ethereum killer” because of the capabilities of its blockchain.
Cardano is still in its infancy. While it has surpassed Ethereum in terms of proof-of-stake consensus, it is still a long way from decentralized financial applications. Cardano aspires to be the world’s financial operating system by producing decentralized financial products comparable to Ethereum and addressing chain interoperability, voter fraud, and legal contract tracing. Cardano has a market value of $9.8 billion as of January 2021, and one ADA is currently trading for $0.31.
4. Polkadot (DOT): Polkadot is a novel proof-of-stake cryptocurrency designed to facilitate interoperability between different blockchains. Its protocol connects permissioned and permissionless blockchains and oracles, allowing systems to collaborate under one roof. Polkadot’s essential component is its relay chain, which enables interoperability across disparate networks. Additionally, it enables creating “parachains” or other blockchains with their native coins for specialized use cases. Polkadot differs from Ethereum because developers can design their blockchain while still utilizing the security provided by Polkadot’s chain. With Ethereum, developers can establish new blockchains. Still, they must implement their security mechanisms, which leaves new and smaller projects vulnerable to attack, as larger blockchains have greater security. In Polkadot, this approach is referred to as shared security. Polkadot was built by Gavin Wood, another of the Ethereum project’s principal founders. They held divergent views on the project’s future. Polkadot has a market capitalization of $11.2 billion as of January 2021, and one DOT is currently trading at $12.54.
5. Bitcoin Cash (BCH): Bitcoin Cash (BCH) is significant in the history of alternative currencies since it was one of the first and most successful hard forks of the original Bitcoin. A split occurs in the bitcoin sector as a result of debates and disagreements between developers and miners. Due to the decentralized nature of digital currencies, significant modifications to the code underpinning the token or coin in question must be approved by consensus; the mechanism for this process varies with every cryptocurrency.
When competing groups cannot agree, the digital currency is occasionally split, with the original chain remaining true to its original code and the new chain starting as a new version of the preceding coin with updated code. BCH was created as a result of one of these splits in August 2017. The discussion that resulted in the establishment of BCH concerned scalability; the Bitcoin network has a maximum block size of one megabyte (MB). BCH expands the block size from one to eight megabytes. The theory is that larger blocks can include more transactions, hence increasing transaction speed. Additionally, it makes other modifications, such as removing the Segregated Witness protocol, which affects block space. BCH has a market capitalization of $8.9 billion and a value per coin of $513.45 as of January 2021.
6. Stellar (XLM): Stellar is an open blockchain network created to connect financial institutions to conduct massive transactions. Massive transactions between banks and investment firms, which formerly took several days, involved several intermediaries, and cost a significant amount of money, can now be completed practically instantly with no intermediaries and at the cost of minor to nothing to the parties involved. While Stellar has positioned itself as a business blockchain designed for institutional transactions, it remains an open blockchain that anybody can utilize. The system enables cross-border transactions in virtually any currency. Lumens are Stellar’s native currency (XLM). The network needs users to retain Lumens to conduct transactions. Jed McCaleb, a co-founder of Ripple Labs and the inventor of the Ripple protocol, launched Stellarly. He eventually stepped down from his post at Ripple and co-founded the Stellar Development Foundation. As of January 2021, Stellar Lumens have a market capitalization of $6.1 billion and are valued at $0.27.
7. Chainlink (LINK): Chainlink is a decentralized oracle network that connects smart contracts, such as Ethereum, to external data. Blockchains cannot link to external apps securely. Chainlink’s decentralized oracles enable intelligent contracts to interface with external data, allowing arrangements to be performed based on data that Ethereum cannot access. Chainlink’s blog discusses a variety of applications for their system. One of the numerous applications described is monitoring water supplies for pollution or illicit siphoning in specific cities. Sensors may be installed to track corporate use, water table levels, and the levels of nearby bodies of water. A Chainlink oracle might monitor this data and directly feed it to a smart contract. With the incoming data from the prophet, the smart contract might be set up to execute fines, issue flood warnings to cities, or invoice corporations that consume an excessive amount of a city’s water. Sergey Nazarov and Steve Ellis co-developed Chainlink. Chainlink’s market capitalization is $8.6 billion as of January 2021, and one LINK is worth $21.53.
8. Binance Coin (BNB): Binance Coin is a utility coin used to pay for trading costs on the Binance Exchange. Those who pay with the token can trade at a discount. Binance Coin’s blockchain also serves as the foundation for Binance’s decentralized exchange. Changpeng Zhao developed the Binance exchange, which is one of the most widely utilized in the world in terms of trade volume. Binance Coin was previously an Ethereum-based ERC-20 coin. It finally launched its mainnet. The network operates on a consensus model based on proof-of-stake. As of January 2021, Binance had a market capitalization of $6.8 billion, with one BNB worth $44.26.
9. Tether (USDT): Tether was one of the first and most popular stable coins or cryptocurrencies whose market value is pegged to a currency or other external reference point to limit volatility. Because most digital currencies, including big ones like Bitcoin, have undergone repeated bouts of extreme volatility, Tether and other stable coins aim to smooth out price fluctuations to attract consumers who would otherwise be wary. Tether’s price is directly correlated with the value of the US dollar. The mechanism enables users to make transfers from other crypto currencies to US dollars more easily and quickly than they could by actually converting to regular currency.
Tether, founded in 2014, presents itself as a “blockchain-enabled platform meant to ease the digital use of fiat currency.” Effectively, this cryptocurrency enables individuals to transact in traditional currencies using a blockchain network and related technologies while avoiding the volatility and complexity sometimes associated with digital currencies. Tether is the third-largest cryptocurrency by market capitalization as of January 2021, with a total market capitalization of $24.4 billion and a per token value of $1.
10. Monero (XMR): Monero is an untraceable, safe, and private cryptocurrency. This open-source cryptocurrency was developed in April 2014 and quickly gained widespread interest among cryptography experts and fans. The development of this coin is entirely funded through donations and community involvement. Monero was created with a heavy emphasis on decentralization and scalability in mind. It provides perfect secrecy through the use of a mechanism known as “ring signatures.”
This technique generates a collection of cryptographic signatures, each of which contains at least one genuine participant. Still, the genuine ones cannot be isolated because they all appear authentic. Monero has gained an ugly reputation due to its unique security mechanisms—it has been tied to illicit enterprises throughout the world. While this is an excellent option for anonymous illegal transactions, the secrecy afforded by Monero is also beneficial to dissidents of oppressive regimes worldwide. Monero has a market capitalization of $2.8 billion and a per token value of $158.37 as of January 2021.