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Bitcoin

Before we take a closer look at some of these alternatives to Bitcoin, let’s step back and briefly examine what we mean by terms like cryptocurrency and altcoin. A cryptocurrency, broadly defined, is virtual or digital money that takes the form of tokens or “coins.” While some cryptocurrencies have ventured into the physical world with credit cards or other projects, the large majority remain entirely intangible.

The “crypto” in cryptocurrencies refers to complicated cryptography that allows for the creation and processing of digital currencies and their transactions across decentralized systems. Alongside this important “crypto” feature of these currencies is a common commitment to decentralization; cryptocurrencies are typically developed as code by teams who build in mechanisms for issuance (often, although not always, through a process called mining) and other controls.

Cryptocurrencies are almost always designed to be free from government manipulation and control—although, as they have grown more popular, this foundational aspect of the industry has come under fire. The cryptocurrencies modeled after Bitcoin are collectively called altcoins, and in some cases shitcoins, and have often tried to present themselves as modified or improved versions of Bitcoin. While some of these currencies may have some impressive features that Bitcoin does not, matching the level of security that Bitcoin’s networks achieve largely has yet to be seen by an altcoin.

Below, we’ll examine some of the most important digital currencies other than Bitcoin. First, though, a caveat: It is impossible for a list like this to be entirely comprehensive. One reason for this is the fact that there are more than 8,000 cryptocurrencies in existence as of December 2021.1 While many of these cryptos have little to no following or trading volume, some enjoy immense popularity among dedicated communities of backers and investors.

Beyond that, the field of cryptocurrencies is always expanding, and the next great digital token may be released tomorrow. While Bitcoin is widely seen as a pioneer in the world of cryptocurrencies, analysts adopt many approaches for evaluating tokens other than BTC. It’s common, for instance, for analysts to attribute a great deal of importance to ranking coins relative to one another in terms of market capitalization. We’ve factored this into our consideration, but there are other reasons why a digital token may be included in the list.

About Cryptocoins

Bitcoin is a decentralized digital currency created in January 2009. It follows the ideas set out in a white paper by the mysterious and pseudonymous Satoshi Nakamoto.12 The identity of the person or persons who created the technology is still a mystery. Bitcoin offers the promise of lower transaction fees than traditional online payment mechanisms do, and unlike government-issued currencies, it is operated by a decentralized authority.

Bitcoin is known as a type of cryptocurrency because it uses cryptography to keep it secure. There are no physical bitcoins, only balances kept on a public ledger that everyone has transparent access to (although each record is encrypted). All Bitcoin transactions are verified by a massive amount of computing power via a process known as "mining." Bitcoin is not issued or backed by any banks or governments, nor is an individual bitcoin valuable as a commodity. Despite it not being legal tender in most parts of the world, Bitcoin is very popular and has triggered the launch of hundreds of other cryptocurrencies, collectively referred to as altcoins. Bitcoin is commonly abbreviated as BTC when traded.

Launched in 2009, Bitcoin is the world's largest cryptocurrency by market capitalization.

Unlike fiat currency, Bitcoin is created, distributed, traded, and stored with the use of a decentralized ledger system, known as a blockchain.

Bitcoin's history as a store of value has been turbulent; it has gone through several cycles of boom and bust over its relatively short lifespan.

As the earliest virtual currency to meet widespread popularity and success, Bitcoin has inspired a host of other cryptocurrencies in its wake.

The first Bitcoin alternative on our list, Ethereum (ETH), is a decentralized software platform that enables smart contracts and decentralized applications (dApps) to be built and run without any downtime, fraud, control, or interference from a third party. The goal behind Ethereum is to create a decentralized suite of financial products that anyone in the world can freely access, regardless of nationality, ethnicity, or faith.4 This aspect makes the implications for those in some countries more compelling, as those without state infrastructure and state identifications can get access to bank accounts, loans, insurance, or a variety of other financial products.

The applications on Ethereum are run on ether, its platform-specific cryptographic token. Ether (ETH) is like a vehicle for moving around on the Ethereum platform and is sought mostly by developers looking to develop and run applications inside Ethereum, or now, by investors looking to make purchases of other digital currencies using ether. Ether, launched in 2015, is currently the second-largest digital currency by market capitalization after Bitcoin, although it lags behind the dominant cryptocurrency by a significant margin.5 Trading at around $4,000 per ETH as of December 2021, ether’s market cap is just over half that of bitcoin.

In 2014, Ethereum launched a presale for ether, which received an overwhelming response; this helped to usher in the age of the ICO. According to Ethereum, it can be used to “codify, decentralize, secure and trade just about anything.” Following the attack on the decentralized autonomous organization (DAO) in 2016, Ethereum was split into Ethereum (ETH) and Ethereum Classic (ETC).

In December 2020, Ethereum transitioned its consensus algorithm from proof of work (PoW) to proof of stake (PoS).8 This move is intended to allow Ethereum’s network to run itself with far less energy and improved transaction speed, as well as to make for a more deflationary economic environment. PoS allows network participants to “stake” their ether to the network. This process helps to secure the network and process the transactions that occur. Those who do this are rewarded ether, similar to an interest account.9 This is an alternative to Bitcoin’s PoW mechanism, where miners are rewarded more BTCs for processing transactions.

Cardano (ADA) is an “Ouroboros proof-of-stake” cryptocurrency that was created with a research-based approach by engineers, mathematicians, and cryptography experts.13 The project was co-founded by Charles Hoskinson, one of the five initial founding members of Ethereum. After having some disagreements with the direction that Ethereum was taking, he left and later helped to create Cardano.

The team behind Cardano created its blockchain through extensive experimentation and peer-reviewed research. The researchers behind the project have written more than 120 papers on blockchain technology across a range of topics.14 This research is the backbone of Cardano.

Due to this rigorous process, Cardano seems to stand out among its PoS peers as well as other large cryptocurrencies. Cardano has also been dubbed the “Ethereum killer,” as its blockchain is said to be capable of more. That said, Cardano is still in its early stages. While it has beaten Ethereum to the PoS consensus model, it still has a long way to go in terms of DeFi applications.

Cardano aims to be the world’s financial operating system by establishing DeFi products similar to Ethereum as well as providing solutions for chain interoperability, voter fraud, and legal contract tracing, among other things. As of December 2021, Cardano has the sixth-largest market capitalization at $42 billion, and one ADA trades for around $1.25.

Dogecoin (DOGE), seen by some as the original “memecoin,” caused a stir in 2021 as the price of the coin skyrocketed. The coin, which uses an image of the Shiba Inu as its avatar, is accepted as a form of payment by some major companies, including the Dallas Mavericks, Kronos, and—perhaps most notably—SpaceX, an American aerospace manufacturer owned by Elon Musk.

Dogecoin was created by two software engineers, Billy Markus and Jackson Palmer, in 2013. Markus and Palmer reportedly created the coin as a joke, commenting on the wild speculation of the cryptocurrency market.

The price of DOGE hit an all-time high of $0.68 during the week when Musk was scheduled to appear on “Saturday Night Live.” As of December 2021, Dogecoin’s market capitalization is $22.8 billion and one DOGE is valued at around $0.17, making it the 12th-largest cryptocurrency.

Binance Coin (BNB) is a utility cryptocurrency that operates as a payment method for the fees associated with trading on the Binance Exchange. It is the third-largest cryptocurrency by market capitalization.24 Those who use the token as a means of payment for the exchange can trade at a discount.

Binance Coin’s blockchain is also the platform that Binance’s decentralized exchange operates on. The Binance Exchange was founded by Changpeng Zhao and is one of the most widely used exchanges in the world based on trading volumes.

Binance Coin was initially an ERC-20 token that operated on the Ethereum blockchain. It eventually had its own mainnet launch. The network uses a PoS consensus model. As of November 2021, Binance Coin has a $91.5 billion market capitalization, with one BNB having a value of $545.

Tether (USDT) was one of the first and most popular of a group of so-called stablecoins—cryptocurrencies that aim to peg their market value to a currency or other external reference point to reduce volatility. Because most digital currencies, even major ones like Bitcoin, have experienced frequent periods of dramatic volatility, Tether and other stablecoins attempt to smooth out price fluctuations to attract users who may otherwise be cautious. Tether’s price is tied directly to the price of the U.S. dollar. The system allows users to more easily make transfers from other cryptocurrencies back to U.S. dollars in a more timely manner than actually converting to normal currency.

Launched in 2014, Tether describes itself as “a blockchain-enabled platform...to make it easier to use fiat currency digitally.”25 Effectively, this cryptocurrency allows individuals to utilize a blockchain network and related technologies to transact in traditional currencies while minimizing the volatility and complexity often associated with digital currencies.

As of December 2021, Tether is the fourth-largest cryptocurrency by market capitalization, with a market cap of $73.4 billion and a per token value of (you guessed it!) $1.

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