Now that you know what Bitcoin and Dogecoin are, we’d like to zoom out and give you a fuller picture of crypto’s top projects. Here, you’ll learn about the top ten cryptocurrencies, what makes them special, and even, what risks they carry.
- Bitcoin. There wouldn’t be anything crypto, without Bitcoin. If you haven’t already read our explainers on crypto’s pioneer, head here. While Bitcoin began as a currency, today it is largely used as a store of value, referring to the fact that it has held a powerfully high, long-term return-on-investment since its initial launch and despite its volatility. This is, in turn, the main reason why it’s popularly termed, “digital gold ,” and the primary institutional case for its value.
- Ether. Bitcoin will always be the first cryptocurrency, but Ether will always be the first crypto commodity. In 2014, a young software developer named Vitalik Buterin came up with the initial idea for Ethereum through where he believed Bitcoin fell short. While Bitcoin excels at being a decentralized asset, it doesn’t do well with supporting apps and services on its blockchain. That’s largely where Ethereum came in. Today, Ethereum is the backbone for much of the development being done on crypto apps and platforms, and Ether currently serves as the key payment mechanism for those services. If there’s one key risk that Ethereum needs to address, it’s the fact that its fees become prohibitively expensive any time the platform experiences a major influx in users. EIP-1559, which is a set of technical improvements meant to account for that weakness, is currently slated to launch in August 2021.
- Tether. Judging by public opinion, the anti-hero of crypto stablecoins and yet, it persists. Having been launched in 2014, Tether was the first stablecoin that spawned the stablecoin space and largely persists due to its’ first-mover status and the network effects that come with that, as well as the fact that it is available for usage almost anywhere. Tether’s greatest risk is its inability or unwillingness to publish full audits of its reserves, which may continue to hinder much more of its adoption beyond crypto-natives and experienced traders. Be aware of this reputation of opaqueness before you consider such a coin.
- Cardano (ADA). Cardano and its native coin ADA, make their name based on their dedication to peer-reviewed development and research as well as the fact that those who stake ADA, receive a percentage of all newly minted ADA coins. Cardano was developed by one of the Ethereum network’s co-founders, Charles Hoskinson, and reached above $1 a coin for the first time this year. ADA is used as a staking mechanism or something you hold on the network to achieve a greater role on it, such as the responsibility of validating transactions. Furthermore, like Ether and others we mention here, it’s also used to pay network fees. Due to Cardano’s commitment to peer-review, or academic-style research and development, the introduction of new features can take much longer than with other projects.
- XRP. XRP is the native cryptocurrency of the Ripple ecosystem, serving as its primary fee mechanism. Though Ripple has always claimed to be aiming to become an effective “replacement for SWIFT,” for international money transfers, most of its traction thus far has been through pilots of limited tests of its products. To make matters more convoluted, it was recently placed under investigation by the United States-based Securities and Exchange commission and charged with conducting a $1.2 billion unregistered securities offering. Currently, that lawsuit is still ongoing. Because of this, XRP’s future spot in the top 10 cryptocurrencies is arguably up for debate based on the conclusions that the courts make.
- Dogecoin. It’s crypto’s chief meme coin and if there’s one key driver of its value, it’s the Doge meme itself, coupled together with its historic status as a sort of rebel in the crypto industry, going against many trends. If you know of Burton Malkiel’s Castles-in-the-Air theory[4] , it’s a good model to use here. Basically, what it says is some tradable assets gain their value from investor hopes alone and don’t really generate any value beyond that. In Dogecoin’s case, its own founder has said time and time again that it’s meant to be a joke with no value. Still, these “jokes” tend to take the populace by storm from time-to-time.
- USDC. USDC, or US Dollar Coin, is the leading stablecoin next to Tether. Where it differentiates itself is in the fact that it does publish audits and statements on its reserves and it is regulated in its domicile, the United States. Since it has been able to maintain the value of $1 a coin over the long-term thus far, some speculate that it’s a leading candidate to at least influence the development of a US-based Central Bank Digital Currency(CBDC).
- Polkadot. If it sounds similar to Ethereum, that’s because it is. From the get-go, Polkadot has had the goal of being the network where anyone can easily launch their own blockchain and host blockchain-based apps and services without placing too much pressure on a single chain, as has frequently happened with Ethereum. Transactions are validated by “validators,” which hold “DOT'' Polkadot’s native cryptocurrency, on the network to earn their roles. DOT also serves as the payment method for all transactions. Therefore, like Ether, it may be considered a crypto commodity that can fluctuate in value based on how much it is being used and how much of it is free-flowing versus locked away in validator wallets. Polkadot’s(DOT’s) chief risk is that it is so new, it has only a fraction of the usage and security that Ethereum does.
- Uniswap. Late last year, Uniswap re-defined community ownership through giving out a token to all of its past users. The UNI token, which is this token, gives voting rights on all improvements to the Uniswap decentralized exchange and related offerings and aims to incentivize true, long-term community ownership. The key idea behind UNI as with many governance tokens is that as the product it’s tied to, Uniswap, grows, a share of that growth will be distributed to UNI holders and stakers. If there’s one key risk of UNI, it’s that regulators may eventually decide that because of this revenue-sharing aspect, it’s a security. Still, if you trade such assets in a regulated environment, the industry consensus is that you will likely be in good stead.
Wait, why did you only list nine coins here? To put it simply, we chose to exclude Binance Coin, which is an exchange token. What that means is it’s engineered for and primarily used within Binance’s platform of services, including its exchange site and partners. With this, it’s important to remember that all of the top 10 spots, except for the top two, change quite frequently based on trading activity. Crypto markets, by-and-large are behaviorally-driven just like any other financial market, which means they experience high volatility based on investor whims. Even so, with this list in mind, you’ll find yourself armed with an excellent toolset to begin studying the rest of the space and continue your crypto journey.
This text is intended to inform and is not an investment recommendation.
