As the world’s oldest cryptocurrency and the largest by market share, it’s clear that Bitcoin reigns supreme as king of the crypto universe.
Nevertheless, investors should not underestimate the runners-up. These other cryptocurrencies are collectively known as “altcoins”. There are thousands of altcoins, thanks to the low barrier to creating new crypto tokens.
Some altcoins were designed as alternatives to Bitcoin, others are radically different. Regardless, every successful altcoin brings something interesting to the table.
Which are the most successful altcoins?
The crypto market is ever-changing, but as of 14 September 2021, here are the top 10 cryptocurrencies by approximate market capitalisation. The data is from CoinMarketCap.
As you can see, Bitcoin dominates the market with its US$849b market cap. It has at least twice the market share of the next most popular cryptocurrency, Ethereum.
Interestingly though, cryptocurrencies #2 to #10 add up to about US$794b in market cap, almost the market size of Bitcoin. Altcoins have obviously captured the imagination of investors too.
Below, we’ll take a closer look at the most popular cryptocurrency altcoins.
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1. Ethereum (ETH)
If you only have time to learn about one altcoin, make it Ethereum. First launched in 2015, ETH leads the pack as the most popular altcoin by far and is currently about five times as popular as the next contender, Cardano.
It is a completely different beast to Bitcoin. While Bitcoin was created as a form of decentralised money, Ethereum appears decidedly non-financial in nature.
Instead, Ethereum is a network of decentralised software applications — an alternative to apps managed by tech behemoths like Apple, Facebook and Google.
These giants have grown increasingly powerful in recent years, and the worry is that they may not always act in their users’ interests. Ethereum’s developers seek to correct this power imbalance by applying Bitcoin’s decentralisation framework to apps.
Ethereum’s decentralised apps (or “dApps”) allow users and stakeholders to connect and transact on a peer-to-peer basis. Decisions are made through programming logic (known as “smart contracts”), not by human intermediaries.
The Ethereum token, ETH, is the currency used within the platform. Each smart contract requires a small amount of ETH to execute. So the higher the take-up rate of dApps, the higher the demand for ETH.
To sum it all up, Ethereum’s proponents hope to do for consumer apps what Bitcoin is doing for money — to take power away from intermediaries and place it back in users’ hands.
2. Cardano (ADA)
Created in 2017, Cardano is a relative newcomer to the cryptocurrency space — which makes its rapid climb to the top all the more remarkable.
Conceptually, Cardano is very similar to Ethereum. (In fact, it was founded by some of Ethereum’s founding members.) Both Cardano and Ethereum go beyond the original monetary aspect of Bitcoin, applying blockchain technology to their networks of decentralised apps.
Where they diverge is in the consensus mechanism. From day one, Cardano had set out to be a more scalable and secure alternative to Ethereum, and was developed with that end in mind.
As such, Cardano eschews Bitcoin and Ethereum’s Proof of Work blockchain validation method for the Proof of Stake consensus method.
With the Proof of Stake mechanism, Cardano’s token, ADA, is used as collateral in order to successfully verify transactions (and in the future, potentially execute contracts) on the blockchain. This is less energy- and resource-intensive than Proof of Work.
Interestingly, ADA token owners can also vote on changes to the Cardano blockchain protocol, similar to how company shareholders can have a say in business decisions.
3. Binance Coin (BNB)
Whereas Bitcoin, Ethereum and Cardano each aim to solve huge problems and disrupt power structures, Binance Coin, or BNB, is not associated with any lofty goals.
It is strictly a transactional token, meant to be used within the Binance International cryptocurrency exchange. Users enjoy lower fees when they transact in BNB on the exchange, making it more cost-effective for those who trade cryptocurrencies frequently.
Binance Coin is the most notable “utility token” or “utility coin” in the cryptocurrency space. Utility tokens are simply exchanged for services within a specific network, but do not come with any ownership stake.
Though perhaps not directly of interest to investors, BNB’s market share may indicate the crypto market’s health and activity levels.
4. Ripple (XRP)
Ripple Labs’ XRP token has some common ground with Bitcoin — both were designed with monetary purposes in mind.
Specifically, XRP is a remittance and payment settlements solution that competes with SWIFT (Society for Worldwide Interbank Financial Telecommunication), the dominant international money transfer ecosystem used by banks and financial institutions.
XRP promises to make international money transfers both cheaper and faster. It certainly impresses on both counts — one transaction costs just 0.0001XRP and five seconds.
XRP is one of the few cryptocurrencies that have found institutional acceptance by banks and financial firms, but its reputation is somewhat marred by an SEC lawsuit in December 2020.
5. Dogecoin (DOGE)
Created as a joke in 2013, Dogecoin was named after the popular “doge” meme and features the same Shiba Inu dog as its logo. Seven years later, it still stands as one of the most notorious crypto tokens, a satire on both cryptocurrency and internet culture.
Dogecoin is the original “memecoin”, a genre of crypto tokens with no real-world value or utility. Instead, memecoins derive their market value almost purely from social media hype, going viral and gaining popularity in a short amount of time.
It first gained attention when Elon Musk tweeted about it in 2019. “Dogecoin might be my fav cryptocurrency. It’s pretty cool,” he wrote, causing DOGE prices to skyrocket. It was the first of many DOGE-related comments on Twitter.
Memecoin prices can rise overnight and crash just as quickly. But in the case of Dogecoin, it’s quite remarkable that investors are still interested in it today, more than two years since Musk’s first tweet. (After all, most internet memes last only a few weeks.)
Though DOGE squarely falls under speculation rather than investment, it’s a potent reminder to investors that the crypto market is still immature (in more ways than one).
6. Polkadot (DOT)
Most blockchain networks, including the ones covered here, are self-contained ecosystems. Think of them as “walled gardens” akin to Apple’s iOS ecosystem.
But, with a growing number of blockchain networks gaining traction, the cryptocurrency community now faces a new problem: how to transfer data or transact between networks.
Enter the Polkadot network, a solution that unites multiple blockchains, allowing cross-blockchain transfers of information or assets. So, with Polkadot, an Ethereum user can transact with a Cardano developer, for example.
Although still a fledgling technology, Polkadot is of growing interest to investors looking for scalability solutions. Holders of Polkadot’s token, DOT, can vote on changes and new features on its network.
7. Solana (SOL)
Founded during the ICO (Initial Coin Offering) boom in 2017, Solana is essentially a direct competitor of Ethereum. Like Ethereum, Solana is a blockchain network for dApps, especially for decentralised finance (DeFi) apps.
However, Solana offers a unique model that combines Proof of Stake (PoS, the same method used in Cardano) with its own innovation, “Proof of History”.
Theoretically, Solana’s hybrid model allows for an immutable record of past events, like Bitcoin, but at impressive scale and speed. It claims to support over 50,000 transactions per second (compared to Bitcoin’s five and Ethereum’s 13).
Solana’s SOL token functions as in-platform currency used to pay for transactions and smart contracts, just like Ethereum’s ETH. Like DOT, SOL appeals to crypto investors interested in scalability.
Stablecoins: Tether (USDT) & USD Coin (USDC)
Some of the biggest cryptocurrencies by market cap are, strictly speaking, not true cryptocurrencies. These include Tether (USDT) and USD Coin (USDC), which are regularly found in the top 10 list.
USDT and USDC are both known as “stablecoins”, which are the crypto equivalents of fiat currency or other real-life assets. Both USDT and USDC are supposedly backed by an equivalent amount of USD cash, although this claim has recently been called into question. Regardless, 1 USDT or USDC remains (more or less) equivalent to US$1.
Other stablecoins can be pegged to other currencies like the euro or Chinese yuan, or physical commodities such as gold.
Stablecoins can be used for regular transactions, to exchange for other cryptocurrencies, or held as a less-volatile asset to balance out one’s crypto portfolio.
Bonus: Noteworthy Bitcoin spinoffs
If you’re a fan of Bitcoin, you might be struck by how different altcoins are from the original. But the grandfather of cryptocurrency has inspired countless derivatives and alternatives, which we’ll spend some time on here.
Two of the most successful Bitcoin spinoffs are Bitcoin Cash (BCH) and Litecoin (LTC), which are often found in the top 20 cryptocurrencies by market cap.
Bitcoin Cash is a direct descendant of the original Bitcoin and is probably the most famous Bitcoin “hard fork”. A hard fork happens when a group of users decide to adopt a new set of rules, essentially branching off into a new cryptocurrency.
In Bitcoin Cash’s case, it was originally started in 2017 by miners concerned about Bitcoin’s future ability to scale. They chose to reduce the size of each Bitcoin transaction to allow for faster processing time, thus parting ways with the original Bitcoin.
Litecoin, on the other hand, is not a Bitcoin fork. It was created in 2011, two years after Bitcoin was founded, by a former Google engineer, as a supplement (not competitor) to Bitcoin.
Both Bitcoin and Litecoin use the same basic (Proof of Work) mechanism and have similar applications, but Litecoin has a much higher supply cap, positioning itself as the “silver to Bitcoin’s gold”.
Both BCH and LTC remain relatively resilient to this day in terms of market cap, though neither coin’s market share is anywhere near that of Bitcoin’s.
Altcoins: a marketplace of ideas
The most popular altcoins represent a snapshot of current ideas in cryptocurrency trends and adoption. They tell us what issues, capabilities, and innovations are important to the market, and allow us to make informed guesses about what might matter in the future.
Whether or not you choose to invest in altcoins, learning about them can help professional investors become more discerning and future-oriented in their decision-making.