Having launched more than a decade ago in 2009, Bitcoin (BTC) is still at the forefront when it comes to cryptocurrencies, due to its lead in market capitalisation, popularity, and user base. It has paved the way for other digital currencies to be exchanged on decentralised peer-to-peer networks, away from global financial systems.
While Bitcoin is dominant now, this could change over time. So it’s worth looking at a few other cryptocurrencies that are competing with Bitcoin in the crypto market.
There are over 6,000 cryptocurrencies as of 2021, and while many of these are insignificant, there are five significant cryptocurrencies that will be mentioned in this article: Ethereum (ETH), Binance Coin (BNB), Cardano (ADA), XRP (XRP) and Litecoin (LTC).
Ranked second behind Bitcoin, Ethereum (ETH) has a market capitalisation of $385.63B and a per-token value of $3,292.38 as of August 2021.
Launched in 2015, Ethereum is a software platform that supports smart contracts and decentralised applications (dApps). A smart contract in this instance is code that exists on the Ethereum blockchain, and dApps are controlled by the logic written in this contract. The benefits of dApps running on smart contracts are the lack of downtime and interference from third parties. This in turn makes Ethereum a safer option for many to invest in.
The Ethereum blockchain can be used to create new tokens, launch decentralised finance (DeFi) projects and run applications using the ether, a cryptographic token tailored to this platform.
Ethereum has already received support from industry-leading companies like Amazon and Microsoft. In the coming years, users will be able to buy products and services on various sites that accept Ethereum.
Looking forward, many people have been eagerly anticipating the launch of Ethereum 2.0, an upgrade that transforms the Ethereum network from proof-of-work to proof-of-stake. Proof-of-stake allows participants to “stake” their ether to the network. Not only does this run on far less energy, but also helps secure the network and process transactions quickly. By staking, investors are rewarded interest in ether.
Binance Coin (BNB)
As of August 2021, Binance Coin (BNB) is third on the rankings, with $72.39B market capitalisation and one BNB valued at $430.56.
Binance Coin was launched in 2017, as a utility token primarily used for paying trading fees on the Binance Cryptocurrency Exchange, one of the most widely used exchanges in the world.
With Binance Coin, users can trades all different types of cryptocurrencies quickly and securely. They can also receive discounts when paying for their trading fees.
The Binance blockchain utilises the Byzantine Fault Tolerance (BFT) consensus mechanism, meaning that BNB cannot be mined, unlike bitcoin. The circulating supply of Binance Coin has reached the maximum supply of 168,137,036BNB.
As one of the bigger cryptocurrencies available, it is gaining wider acceptance in the marketplace, which means BNB can be used more often to pay for goods and services. With a wide investor interest for Binance Coin, this increased demand may drive the price up as the fixed supply is completely in circulation now.
In terms of market capitalisation, Cardano (ADA) is closely behind Binance Coin with $69.71B, being traded for $2.17 as of August 2021.
Cardano was released in 2017 as an ouroboros proof-of-stake cryptocurrency that was created by mathematicians, engineers and cryptography experts as a way to improve issues of:
- Scalability – the limited capability of blockchains to handle and process large amounts of transactions,
- Interoperability – the ability of one blockchain platform to communicate with another,
- Crypto mass adoption – when cryptocurrencies are accepted and used by the public on a large scale.
‘Ouroboros’ refers to the algorithm using a proof-of-stake protocol that is more democratic and less energy-consuming, i.e. a more sustainable cryptocurrency that everyone can use.
Often referred to as the third-generation cryptocurrency, Cardano’s two-layered network – the Cardano Settlement Layer (CSL) for settling transactions and payments, the Control Layer for smart contracts deployment – makes this cryptocurrency stand out against the others.
Cardano has been transparent in the reasons behind creating their cryptocurrency. Although they have a long way to go, Cardano is committed to establishing decentralised financial products and applications, as well as providing solutions to voter fraud and legal contact tracing.
Ranking sixth behind Tether, XRP (XRP) values at $59.76B for market capitalisation and priced at $1.29 as of August 2021.
Although XRP and Ripple have been used interchangeably, their recent separation due to centralisation concerns means this is not the case anymore. Ripple is the name of a company and network with a majority holding in XRP. XRP is an independent cryptocurrency used to facilitate transactions on the Ripple Network.
The cryptocurrency was created to mitigate slow transaction speeds and high transaction costs that were found in bitcoin. According to FX Empire, XRP can manage up to 1500 transactions per second, with each transaction being processed in as little as 4 seconds.
XRP Ledger is the technology behind this cryptocurrency, acting as a blockchain for XRP tokens. Whether a ledger succeeds or fails relies on users that are part of the community, due to XRP operating independently as an open-source, decentralised cryptocurrency.
XRP is used to facilitate cross-border payments between anyone dealing with different fiat currencies. A fiat currency is a national currency that is not pegged to the price of a commodity such as gold or silver.
Ripple Labs own 60 billion XRP of the 100 billion XRP created at inception in 2012, which puts into question their influence over the cryptocurrency. The remaining 40 billion XRO are traded freely in the market.
With a price of $183.72 and a market capitalisation of $12.26B, Litecoin (LTC) is ranked 14th against all cryptocurrencies as of August 2021.
Litecoin is a peer-to-peer cryptocurrency that launched in 2011. It was one of the first cryptocurrencies to follow Bitcoin. As an open-source payment network, Litecoin uses ‘scrypt’ as a proof-of-work, which can be decoded with the help of consumer-grade CPUs.
Although Litecoin is very similar to Bitcoin, one significant difference is the processing speed of transactions. According to Business Money, Litecoin’s processing speed is four times faster than Bitcoin. That being said, people have questioned whether this increased speed has put the security of Litecoin at risk.
While it is not controlled by any central authority, it is one of the most widely accepted cryptocurrencies in the financial sector. With a growing number of merchants accepting Litecoin, it serves as digital cash as well as cross-border payments.
Through its volatility over the years, Litecoin has become one of the most established cryptocurrencies in the crypto market. Lower transaction fees and not being resource-intensive have also made it favourable over other currencies.
Our final word
For those looking to diversify their portfolio, these cryptocurrencies should be considered as they are incorporating alternative systems into their digital currencies.
But investing in any cryptocurrencies, including Bitcoin, is highly speculative and risky. Rather than committing to a cryptocurrency from the get-go, check the price performance over time, as well as other important factors that shape your decision when it comes to investing.
With each person having a unique financial profile and situation, conduct your own extensive research and seek a qualified professional before making any significant financial decisions.
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Thinking about diversifying your portfolio by investing in cryptocurrencies? Speak to an expert at Count to learn how we can help you!