What Are Cryptocurrencies?

Before we go into some of these Bitcoin (BTC) alternatives, let’s take a step back and define concepts like cryptocurrency and altcoin. A cryptocurrency, in general terms, is virtual or digital money in the form of tokens or “coins.” Though some cryptocurrencies have entered the real world through credit cards or other schemes, the vast majority remain completely intangible.

The term “crypto” refers to the complex encryption that enables the creation and processing of digital currency and its transactions across decentralized platforms. Along with this crucial “crypto” aspect is a shared commitment to decentralization; cryptocurrencies are often developed as code by teams that include methods for issuance (often, but not always, through a process known as mining) and other regulations.

Cryptocurrencies are nearly always supposed to be free of government manipulation and control, though as the sector has risen in popularity, this fundamental characteristic has come under scrutiny. Altcoins, and in some cases, shitcoins, are cryptocurrencies that are based on Bitcoin and have frequently attempted to promote themselves as updated or improved versions of Bitcoin. Though some of these currencies may have some amazing features that Bitcoin does not, an altcoin has yet to meet the level of security that Bitcoin’s networks attain.

Other than Bitcoin, we’ll look at some of the most important digital currencies below. But first, a disclaimer: it is impossible for a list like this to be completely comprehensive. One reason for this is that, as of March 2022, there are over 18,000 cryptocurrencies in circulation. Despite the fact that many of these cryptocurrencies have little to no following or trading volume, some are quite popular among committed groups of backers and investors.

Aside from that, the area of cryptocurrencies is always evolving, and the next big digital token might be issued tomorrow. Despite the fact that Bitcoin is usually regarded as a pioneer in the realm of cryptocurrencies, analysts use a variety of methodologies to evaluate tokens other than BTC. Analysts, for example, frequently place a high value on ranking currencies compared to one another in terms of market capitalization. We’ve taken this into account, but there are other reasons why a digital token may be on the list.

Why Are Cryptocurrencies Important?

Blockchain-based cryptocurrencies, as decentralized platforms, let users conduct peer-to-peer financial transactions or enter into contracts. There is no requirement for a trusted third-party mediator such as a bank, monetary authority, court, or judge in either situation. This has the potential to destabilize the current financial system while also democratizing finance. Over the last decade, the cryptocurrency field has evolved dramatically, with new inventions and a total market valuation of more than $1.75 trillion.

Why Are There So Many Cryptocurrencies?

The bulk of today’s cryptocurrencies are developed in some way from Bitcoin, which employs open-source programming and a censorship-resistant architecture. This implies that anyone may copy the code and modify it to produce their own new currency. This also implies that anybody is free to join or transact in its network.

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Types of Altcoins

Cryptocurrencies

Cryptocurrencies are intended for payments, transmitting value (akin to digital money) across a decentralized network of users. Many altcoins (i.e., those that are not Bitcoin or sometimes Ethereum) are classified in this way and may sometimes be called value tokens.

Tokens

There are other blockchain-based tokens that have a function other than monetary value. A token issued as part of an initial coin offering (ICO) that represents a stake in a blockchain or decentralized finance (DeFi) initiative is one example. Security tokens are tokens that are connected to the value of a company or project (as in securities like stocks, not safety).

Other tokens provide a specific purpose or perform a specific function. Storj tokens, which let individuals transfer files over a decentralized network, or Namecoin, which provides a decentralized Domain Name System (DNS) service for Internet addresses, are two examples. These are referred to as “utility tokens.” While many crypto users recognize and appreciate these distinctions, traders and lay investors may miss them since all types of tokens tend to trade in the same way on crypto exchanges.

1. Ethereum (ETH)

Ethereum (ETH), the first Bitcoin alternative on our list, is a decentralized software platform that allows smart contracts and decentralized apps (dApps) to be written and run without downtime, fraud, control, or intervention from a third party. The purpose of Ethereum is to establish a decentralized suite of financial goods that anybody in the world may freely access, regardless of nationality, race, or creed. This element makes the consequences for individuals in certain nations more appealing because those who lack state infrastructure and official identity may obtain bank accounts, loans, insurance, and a number of other financial items.

Ethereum apps are powered by ether, the platform’s proprietary cryptographic currency. Ether (ETH) is a vehicle for moving about on the Ethereum platform, and it is mostly sought by developers trying to construct and operate apps within Ethereum, as well as investors wishing to acquire other digital currencies using ether. Ether, which debuted in 2015, is now the second-largest digital currency by market value behind Bitcoin, albeit it lags well behind the dominating cryptocurrency.

In 2014, Ethereum held an ether presale, which garnered a massive reaction, ushering in the age of the ICO. Ethereum claims that it can be used to “codify, decentralize, secure, and exchange just about anything.” Following the 2016 attack on the decentralized autonomous organization (DAO), Ethereum was divided into two coins: Ethereum (ETH) and Ethereum Classic (ETC).

In December 2020, Ethereum’s consensus mechanism will switch from proof-of-work (PoW) to proof-of-stake (PoS). (PoS). This change is designed to allow Ethereum’s network to function with considerably less energy and faster transaction speeds, as well as to create a more deflationary economic climate. PoS enables network users to “stake” their ether on the network. This procedure aids in the security of the network and the processing of transactions. Those who do so are rewarded with ether, much like an interest account. This is an alternative to Bitcoin’s PoW algorithm, which rewards miners with additional BTCs for processing transactions.

2. Litecoin (LTC)

Litecoin (LTC), which debuted in 2011, was one of the first cryptocurrencies to follow in Bitcoin’s footsteps and has been dubbed the “silver to Bitcoin’s gold.” Charlie Lee, an MIT graduate and former Google developer, designed it. Litecoin is built on an open-source worldwide payment network that is not governed by any central authority and uses scrypt as a PoW that can be decoded by consumer-grade central processing units (CPUs). Litecoin is similar to Bitcoin in many aspects, except it has a higher block production rate and, consequently, a faster transaction confirmation time.

Aside from developers, there are an increasing number of shops that take Litecoin.

3. Cardano (ADA)

Cardano (ADA) is a “Ouroboros proof-of-stake” cryptocurrency developed by engineers, mathematicians, and cryptography professionals using a research-based methodology. Charles Hoskinson, one of Ethereum’s five original founding members, co-founded the project. He left Ethereum after some issues with the way it was headed, and eventually helped to build Cardano.

Cardano’s blockchain was established through considerable testing and peer-reviewed research by the Cardano team. The project’s researchers have published over 120 papers on blockchain technology covering a wide range of issues. Cardano’s is built on this study.

Cardano appears to stand out among its PoS counterparts as well as other significant cryptocurrencies as a result of this rigorous approach. Cardano has also been branded the “Ethereum killer” due to its blockchain’s ability to do more. Cardano, on the other hand, is still in its early phases. While it has surpassed Ethereum in terms of PoS consensus, it still has a long way to go in terms of DeFi applications. Cardano aspires to be the world’s financial operating system by developing DeFi products comparable to Ethereum’s, as well as solutions for chain interoperability, voter fraud, and legal contract tracking, among other things.

4. Polkadot (DOT)

Polkadot (DOT) is a unique PoS cryptocurrency aimed at delivering interoperability among other blockchains. Its protocol is designed to connect permissioned and permissionless blockchains, as well as oracles, to allow systems to work together under one roof. Polkadot’s core component is its relay chain, which allows the interoperability of varying networks. It also allows for parachains, or parallel blockchains with their own native tokens for specific-use cases.

Where Polkadot differs from Ethereum is that, rather than creating just dApps on Polkadot, developers can create their own blockchain while also using the security that Polkadot’s chain already has. With Ethereum, developers can create new blockchains but need to create their own security measures, which can leave new and smaller projects open to attack because the larger a blockchain is, the more security it has. This concept in Polkadot is known as “shared security.”

Polkadot was created by Gavin Wood, another member of the core founders of the Ethereum project who had differing opinions about the project’s future.

5. Bitcoin Cash (BCH)

Bitcoin Cash (BCH) is significant in altcoin history since it was one of the first and most successful hard forks of the original Bitcoin. A split occurred in the bitcoin realm as a consequence of disagreements and arguments between developers and miners. Because digital currencies are decentralized, wholesale changes to the code underpinning the token or coin at hand must be made by broad consensus; the method for this process differs depending on the cryptocurrency.

When various groups cannot agree, the digital currency is occasionally split, with the previous chain remaining faithful to its original code and the new chain starting as a new version of the preceding coin, replete with code modifications.

As a result of one of these splits, BCH was born in August 2017. The discussion that led to the formation of BCH was over scalability; the Bitcoin network has a block size restriction of 1 megabyte (MB). With BCH, the block size is raised from 1 MB to 8 MB, with the theory that larger blocks may carry more transactions and hence boost transaction speed. Other changes include the elimination of the Segregated Witness protocol, which has an impact on block space.

6. Stellar (XLM)

Stellar (XLM) is an open blockchain network that connects financial institutions to provide corporate solutions for massive transactions. Massive transactions between banks and investment firms, which used to take several days, involve a number of middlemen, and cost a lot of money, may now be completed very instantly with no intermediaries and at little to no cost to the parties involved.

Despite its positioning as an enterprise blockchain for institutional transactions, Stellar is still an open blockchain that anybody may utilize. Cross-border transactions in any currency are possible using the technology. Stellar Lumens are Stellar’s native currency (XLM). To transact on the network, users must have Lumens in their possession. Jed McCaleb, a founding member of Ripple Labs and the creator of the Ripple protocol, launched Stellar. He eventually quit his position at Ripple to co-found the Stellar Development Foundation.

7. Dogecoin (DOGE)

Dogecoin (DOGE), considered by some to be the first “memecoin,” caused a sensation in 2021 when its price surged. The coin, which features an image of a Shiba Inu as its avatar, is accepted as payment by a number of big corporations, including the Dallas Mavericks, Kronos, and, probably most importantly, SpaceX, an American aerospace manufacturer owned by Elon Musk.

In 2013, two software programmers, Billy Markus and Jackson Palmer, invented Dogecoin. Markus and Palmer apparently designed the coin as a joke, reflecting on the cryptocurrency market’s rampant speculation. During the week that Musk was set to appear on Saturday Night Live, the price of DOGE reached an all-time high of around 0.74 cents.

8. Binance Coin (BNB)

Binance Coin (BNB) is a utility cryptocurrency that serves as a payment option for trading fees on the Binance Exchange. By market capitalization, it is the third-largest cryptocurrency. Those that utilize the token as payment for the exchange can trade at a reduced rate.

Binance Coin’s blockchain also serves as the foundation for Binance’s decentralized exchange. Changpeng Zhao launched the Binance Exchange, which is now one of the world’s most popular exchanges in terms of trading volume. Binance Coin began as an ERC-20 token that ran on the Ethereum network. It finally had its own mainnet. The network employs a proof-of-stake (PoS) consensus methodology.

9. Tether (USDT)

Tether (USDT) was one of the earliest and most popular of a class of cryptocurrencies known as stablecoins, which try to limit volatility by tying their market value to a currency or other external reference point. Because most digital currencies, even big ones like Bitcoin, have undergone regular bouts of extreme volatility, Tether and other stablecoins aim to smooth out price variations in order to attract users who may otherwise be wary. Tether’s value is directly proportional to the value of the US dollar. The mechanism enables users to make transfers from other cryptocurrencies back to US dollars more quickly than by converting to regular money.

Tether, which was founded in 2014, presents itself as “a blockchain-enabled platform… to make it simpler to utilize fiat currency digitally.” This coin, in effect, lets users use a blockchain network and related technologies to deal in traditional currencies while limiting the volatility and complexity that are sometimes associated with digital currencies.

10. Monero (XMR)

Monero (XMR) is a private, secure, and untraceable cryptocurrency. This open-source cryptocurrency was established in April 2014 and quickly gained popularity within the cryptography community and its supporters. This cryptocurrency’s development is entirely donation-based and community-driven.

Monero was established with a heavy emphasis on decentralization and scalability, and it provides perfect privacy through the use of a specific technology known as “ring signatures.” With this strategy, a collection of cryptographic signatures appears, each of which has at least one genuine participant, but the genuine one cannot be identified because they all look to be authentic. As a result of its extraordinary security mechanisms, Monero has earned an ugly image as a result of its being tied to illicit enterprises all over the world. Though this is an excellent option for anonymous illegal transactions, the secrecy inherent in Monero is also beneficial to dissidents in repressive governments all over the world.

What Are Some Other Important Cryptocurrencies?

Many cryptocurrencies have acquired prominence or have the potential to do so. Dogecoin, for example, was a meme-based joke coin that rose to prominence after Tesla CEO Elon Musk pushed it on social media. Aside from Dogecoin and the others mentioned above, there are other additional Bitcoin forks, such as Bitcoin Gold and Bitcoin SV. Ripple (XRP), Solana, USD Coin, and Tezos are also major currencies.