Even though the cryptocurrency market is still mostly a niche and unknown to many people, the category has certainly been gaining significant momentum. Of course, the most well-known cryptocurrency is Bitcoin (CCC:BTC-USD). Launched in 2009 during the financial crisis, this digital asset has seen huge returns during the past year.
But there are over 2,000 cryptocurrencies. And given the growing interest, there will likely be more and more. (As well as more successes and failures.)
Generally speaking, the belief in cryptocurrencies is based on the idea that they can provide protection against government-controlled transactions. With easy monetary policies and seemingly open-ended fiscal stimulus, there are concerns that inflation will make a comeback.
And it’s not just the average Joe who is interested in crypto. Some of the world’s top investors, like Bill Miller, Paul Tudor Jones and Stanley Druckenmiller, consider cryptocurrencies as a great hedge. Here’s what Druckenmiller said about this in an interview with CNBC: “Frankly, if the gold bet works the bitcoin bet will probably work better because it’s thinner, more illiquid and has a lot more beta to it.”
With this in mind, what are some of the other interesting cryptocurrencies out there besides Bitcoin? And which ones are poised to go mainstream and breakout?
Let’s take a look seven:
- Ethereum (CCC:ETH-USD)
- Polkadot (CCC:DOT1-USD)
- Cardano (CCC:ADA-USD)
- Chainlink (CCC:LINK-USD)
- Tezos (CCC:XTZ-USD)
- Zcash (CCC:ZEC-USD)
- Cosmos (CCC:ATOM1-USD)
Cryptocurrencies That Are Ready to Go Mainstream: Ethereum (ETH)
Ethereum has been around for about six years and it is the main rival to Bitcoin. The technology system has its own language for creating crypto applications and is open source. The focus on developers has been a key to its wide distribution.
Another nice benefit of Ethereum is its speed. Because of this, it has been useful for virtual wallets and other payment systems. Although, the costs for the transactions is one the high side.
“The entire protocol is currently upgrading to ETH 2.0 over several stages and forks, improving the whole network’s overall scalability and convincing developers to create more sophisticated dApps on top of the blockchain,” said Marie Tatibouet, who is the CMO at Gate.io. “With several institutional investors swooping in and DeFi becoming a multi-billion dollar market, we can expect Ethereum to grow even more throughout 2021.”
The former chief technology officer for the Ethereum Project, Gavin Wood, is the creator of Polkadot. It definitely has benefited from his deep experience with cryptocurrencies. With Polkadot, Gavin wanted to develop a platform that could better handle complex distributed environments, such as by allowing improved sharing.
At the core of this is multiple blockchains that operate simultaneously, which is no easy feat. This is all about something called “parachains.”
Polkadot was launched in May 2020 and it has since seen major growth. Keep in mind that it is already ranked No. 4.
“Polkadot provides a long-run competition for Ethereum,” said Michael Geiger, who is the CEO at Libertex.
One of the cofounders of Ethereum, Charles Hoskinson, started the development of Cardano in 2015 (he named it after the Renaissance genius, Gerolamo Cardano). He was looking at a way to have something more scalable than Ethereum and faster than Bitcoin. Interestingly enough, Cardano takes some of the features of both but also layers on some new innovations.
For this year, the plan is for a major update to the system. This means that there will be inclusion of smart contracts, which should allow for even more interest in the cryptocurrency.
Cardano has the backing of an impressive group of researchers and academics. In other words, this is one of the most dynamic platforms for cryptocurrencies — and this should allow for a promising long-term future.
A typical cryptocurrency will run on its own blockchain. But this is not the case with Chainlink. Instead, it can run on a variety of blockchains for smart contracts (these are self-executing and do not require supervision because of the security). Think of it as being agnostic in the crypto world.
Why is this important? A key reason is that there is near real-time access to data in different networks. This allows for more powerful applications.
One of the knocks against Chainlink is its complexity. For the most part, the system will probably need a major sponsor.
But despite this, Chainlink has continued to grow at a rapid pace, as it has doubled for the year so far.
The origins of Tezos go back to the summer of 2014. At the time, the founder wrote several papers that set forth the structure of the system.
A few years later, Tezos raised $232 million and got the backing of Tim Draper, a top Silicon Valley venture capitalist. Yet there was struggle among the leadership. But last year, the parties agreed to a settlement.
As of now, Tezos has seen strong growth. The cryptocurrency also allows for peer-to-peer transactions and smart contracts.
“The major difference between Tezos and Ethereum is how new coins are created,” said Matthew Goeckel, who is the CEO of Lunavulcan.com. “Ethereum runs on a proof-of-work framework which requires cryptocurrency miners who provide computational power to validate transactions for each block and the miners receive rewards for validating. On the other hand, Tezos uses a proof-of-stake model which requires validators to create or use a baking node with a secure deposit of Tezos funds in order to come to a consensus on the network for each block validation. This proof-of-stake model is less energy intensive and provides users a way to earn more Tezos over time.”
Privacy is a must-have for many investors in cryptocurrencies. And this is why Zcash has been so popular.
This crypto asset got its start back in 2013. The creator, Matthew Green, was a professor at Johns Hopkins and recruited some of his students for the project! Then he was able to get the support of several Silicon Valley venture capitalists.
The Zcash system is based on the Bitcoin infrastructure. As a result, it has similar features, such as a fixed supply.
As for the privacy capability, this is not complete. In fact, it is quite flexible and can allow for selective disclosure. For the most part, this is to allow for being in compliance with regulations and tax requirements.
In 2016, Ethan Buchman and Jae Kwon created Cosmos. The underlying architecture involved a myriad of blockchains, which are referred to as zones. This has been critical as it has helped reduce the freezing of digital tokens.
In a sense, the vision is to create an “internet-of-blockchains,” in which there is seamless interoperability.
“One of the enormous problems is how there are so many blockchains that can’t communicate with each other and require their own tokens and infrastructure,” said James Stothard, who is a Crypto Analyst for the Cryptopig Trading Group. “Cosmos aims to allow different blockchains to communicate using its networking layer and because it leverages the security of dozens of chains, transactions are fast, cheap and don’t have a big environmental cost like mining bitcoin. We believe that getting blockchains to work with each other is the future of the industry.”
On the date of publication, Tom Taulli did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Tom Taulli (@ttaulli) is the author of various books on investing and technology, including Artificial Intelligence Basics, High-Profit IPO Strategies and All About Short Selling. He is also the author of courses on topics like the Python language and COBOL.