From Bitcoin to Litecoin, Ripple to Ether more digital coins are now available than fiat currencies. So what is the top cryptocurrency on the market?
The crypto coin market has taken off in a big way since its godfather, Bitcoin, was launched in 2009. The market has had its ups and downs, but as Bitcoin has proudly celebrated the tenth birthday many thought it would never see, cryptocurrenciesare here to stay.
Incredibly, there are now more than 1,000 currencies on the cryptocurrency stock market, with more being added all the time. Some are modelled on the public blockchain-based platform used by Bitcoin, while others use different methods. While many are Bitcoin copycats, some have unique selling points (USPs) that make them interesting to investors for different reasons.
Which is the top cryptocurrency? We look at some of the most popular coins on the crypto market today.
1. Bitcoin (BTC)
USP: The original
The original and still the best known, Bitcoin is a blockchain-based, public ledger that uses cryptography to secure its transactions. Its volatility has proved exciting and disastrous for probably equal numbers of investors and many watch with interest to see where its price heads next. Indeed, having been around for a long time, Bitcoin has earned its place in the real world, with increasing numbers of retailers and service providers allowing payments directly in the coin.
However, while it was ground-breaking technology at the time, some say Bitcoin has been surpassed in functionality and speed by competitors. Yet it’s still the trusty old workhorse that many investors predict will be around when others have bitten the dust.
2. Litecoin (LTC)
USP: Faster transactions
Launched in 2011, by founder Charlie Lee, Litecoin is the altcoin most often compared with Bitcoin. Former Google employee Lee wanted to design an improved version of Bitcoin, modifying the code to improve efficiency and make transactions faster. Litecoin can confirm the legitimacy of a transaction in a quarter of the time Bitcoin takes and transactions are cheaper.
In the same way that Bitcoin requires miners to solve complicated mathematical problems to verify transactions of blocks in the blockchain, so does Litecoin. Miners are rewarded with Litecoins in the same way. But Bitcoin miners considering switching to Litecoin should know that not only does Litecoin use a different algorithm, known as “scrypt”, but the hardware required is also completely different.
As with Bitcoin, there will be a finite number of Litecoins. However, as this cryptocurrency is designed to be four times faster than Bitcoin, the total number will be four times more – 84 million, compared with Bitcoin’s 21 million. So far, just over 18m have been mined.
3. Ether/Ethereum (ETH)
USP: Smart contracts
Initially described in a whitepaper in 2013, by Canadian-Russian programmer Vitalik Buterin, Ethereum is another public blockchain-based platform. Despite being often confused, Ethereum is not the currency – that is is called Ether (ETH).
Ethereum also requires miners to solve complicated mathematical problems to verify transactions in the blockchain and miners are paid in Ether. It too faces problems in scalability as it uses a proof-of-work mechanism to verify transactions that causes network congestion.
Ethereum’s unique selling point is that it allows users to create “smart contracts” through its blockchain technology. Agreements coded on the blockchain can execute themselves, provided certain conditions are met. Developers keen to use the technology for a project can build it on Ethereum’s blockchain, rather than having to develop their own. As a result, Ethereum has been used to launch numerous alternative Initial Coin Offerings (ICOs) as well as other projects.
Ether is becoming more accepted as a method of payment – the global children’s charity Unicef now accepts donations in Ether or Bitcoin.
4. Ripple (XRP)
USP: Cheap international payments
While traditional international money transfers can take between two and five days, sending money by Ripple not only means it arrives in seconds, but is far cheaper too. Launched in 2012, Ripple “enables financial institutions to send money across borders instantly, reliably and for fractions of a penny”.
While Ripple does use a consensus ledger, it doesn’t require mining, so far less electricity is used through excessive computing power. Ripple will eventually have a maximum of 100 billion coins in existence. However as 50 billion of these are owned by Ripple Labs themselves, some argue that it can’t really be considered decentralised.
Ripple is definitely unique in its approach and is the only cryptocurrency platform currently used in the real world – customers include Siam Commercial Bank, American Express, Santander, Moneygram and Interbank.
Although governments point out the potential problems caused by the anonymity of cryptocurrency transactions, in reality this can be far from true. Public blockchain ledgers are transparent, as transactions are openly verifiable and traceable by anyone.
Enter Monero, the first cryptocurrency that focuses on “private and censorship-resistant transactions”. Through a special technique known as “ring signatures,” it uses a group of signatures, of which only one belongs to the real participant. As all appear valid, the real signature can’t be isolated, achieving complete privacy. Monero “obfuscates sending and receiving addresses as well as transacted amounts” of every transaction, meaning “every Monero user’s activity enhances the privacy of all others”.
Of course, too much privacy starts alarm bells ringing and Monero has been criticised for potentially facilitating global crime. Yet for those who prefer their transactions confidential and untraceable, Monero is very appealing and has gained great support among the cryptography community as well as sponsorship from many businesses.
USP: Chinese Ethereum
NEO, launched in 2014 by Da Hongfei and Erik Zhan, is China’s first decentralised, public, blockchain-based, community-driven platform with its own cryptocurrency.
Like Ethereum, NEO aims to automate the management of digital assets through smart contracts. However, unlike Ethereum, every individual, business or other entity using its platform must have a verifiable digital identity, making it regulatory compliant. NEO is much faster than Ethereum at completing transactions and allows coding in many more programming languages.
Importantly, in a country that banned various decentralised cryptocurrencies in 2017, NEO appears to have the support of the Chinese government, which has recently promised to accelerate development of blockchain. However, depending on future crypto policies, NEO may find this works against it.
Which cryptocurrency to invest in?
If there was a definitive answer which is the best cryptocurrencyinvestment, we would all dive in. Of course things aren’t that simple. Some may prefer the longevity of Bitcoin, while others are more interested in the faster transaction speeds of Litecoin, or the superior privacy of Monero. All one can do is research the coins of interest and monitor the crypto stock market to analyse the price.
If you are considering investing in crypto coins, make sure you do your research. “All that glisters is not gold” and numerous Bitcoin lookalikes have turned out to be scams. Treat them like any other volatile investment and don’t spend more than you can afford to lose; most experts advise that you should devote no more than 5 per cent of a (well diversified) portfolio to them. Also, check the exchange you choose can legally sell you the coin you are keen on. One thing is certain – cryptocurrencies will be around for a while yet.
FURTHER READING: What is Cryptocurrency Trading?
FURTHER READING: Bitcoin explained