Crypto isn’t just Bitcoin. It’s a diverse and thriving ecosystem with a cumulative market cap of over $2T.1 Each coin has unique characteristics and serves a particular role in the crypto ecosystem. They coexist, and in some respects, compete. This article is a primer on several of the leading coins in crypto— Bitcoin, Ethereum, Cardano, Solana, and Polkadot.
Invented in 2008, BTC is the original crypto coin. It’s both the oldest and the largest in capitalization and trading volume. Bitcoin is entirely decentralized without any central governing authority. BTC is created through a mathematical process known as mining. Transactions on the Bitcoin blockchain network are entirely peer-to-peer, with no intermediaries, and are recorded via cryptography. According to Deutchbank, Bitcoin is the 3rd-largest currency in the world.2
Stage of life cycle: Mature
Potential upside: Remains high— BTC market cap is $900 B. USD is $2 T. Gold is $12.2 T. BTC is the least risky crypto investment, and if it accomplishes its goal of becoming digital gold the upside will be quite high.
Launched in 2015, ETH is the second-largest crypto. Ethereum’s major innovation over Bitcoin is the addition of “smart contracts,” a transaction protocol that automates the execution of actions specified by said contracts. Ethereum is also differentiated from Bitcoin in that it allows developers to deploy permanent and immutable applications onto its network.
Stage of life cycle: Growth
Potential upside: Potentially higher than BTC, some analysts say.3 Mark Cuban recently stated that ETH had more upside, given its smart contracts and the adaptability of its platform. Aside from BTC, ETH is likely the least risky crypto coin investment. Analysts believe that the coming 2023 “Ethereum 2.0” upgrade will allow ETH to remain competitive with its most cutting-edge rivals.
Launched in 2017, Cardano was designed to be a more socially conscious blockchain network. Cardano advertises itself as the only coin with a “scientific philosophy and research-driven approach”4— this is in reference to the intensive peer-review process that academics, scientists, and programmers perform on the Cardano blockchain. It’s also one of the largest blockchains to successfully use proof-of-stake consensus mechanisms. Proof-of-stake is less energy-intensive than the proof-of-work mechanism used by Bitcoin and Ethereum, making Cardano likely more sustainable. Additionally, the ADA used on the platform allows its owners to vote on any proposed changes to the Cardano network. It also enables cross-chain transactions through side chains, similar to Polkadot (see below).
Stage of life cycle: Growth
Potential upside: Potentially high. Side chain functionality and the Cardano Foundation’s operating philosophy along with the governance features via the ADA token are unique among Ethereum competitors. Due to its standout features, and for diversification purposes, it may be worth including in a prospective crypto investor’s portfolio.
Released in 2020, Solana is a public blockchain network with smart contract functionality. It’s faster than Ethereum and has lower transaction costs, and shares Cardano’s sustainability with its use of proof-of-work (in addition to its own proof-of-history protocol). Solana claims to be the fastest blockchain network, and has been described as a potential long-term rival to Ethereum.5 However, Solana has been plagued by outages and is accused of favoring venture-backed applications on its network with more favorable tokenomics.6
Stage of life cycle: Early
Potential upside: High, given its present technology and the present state of Ethereum. However, current challenges facing SOL and the upcoming Ethereum upgrade may prevent it from dethroning ETH.
The Polkadot blockchain was released in 2020 as a decentralized open source blockchain platform that provides interoperability between blockchain networks. It enables independent chains to exchange messages and transactions, without relying on third-parties. The DOT token is the medium of exchange on the platform. Polkadot was designed to enable interoperability among nodes on an internet of decentralized applications, known as Web3.
Stage of life cycle: Very early
Potential upside: Potentially quite high, but contingent on two factors— Web3 evolves as predicted, and no competitor with better technology arrives on the scene.
A final note—
As one can see from the returns-to-date, crypto is an asset class with a lot of upside potential. However, it can be difficult to pick winners in the space given the plethora of options— 18,000 cryptos in circulation, as of March 20227— and highly-technical terminology. Thus, it’s critical to study the industry and look to industry experts and trusted authorities in the space before considering any crypto investments.
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