Bitcoin is reaching new heights. But other cryptocurrencies may also emerge less dramatically. Those that do emerge will have a simple, tangible benefit to the target audience. Here are 10 altcoins to watch out for, based on the following five aspects.
The value of Bitcoin is soaring because large companies are interested in it and we forget, almost completely, that there are more than 2,500 cryptocurrencies.
This world is bubbly; but don't be fooled, for those who want to invest in them, cryptocurrencies are among the riskiest assets.
They are highly speculative and their high volatility can lead to the total loss of the invested capital. As with any investment, one should refrain from investing blindly or only motivated by the fact that others have decided to bet on them.
The universe underpinning cryptocurrencies is complex to understand, as it is strongly linked to new computer technologies and "blockchain". But one thing is certain: those that emerge will have a simple and concrete benefit for the target audience. There is no need to delve into technical details to understand what they can bring to everyday life.
How to evaluate the potential of a cryptocurrency?
Cryptocurrencies of importance can be divided into 2 main families. Those that have the ambition to become solely an exchange currency and those that serve primarily as a transaction tool on one or more blockchains.
To try to evaluate the potential of major alternative cryptocurrencies to bitcoins, 5 criteria can be examined:
Utility: what are the specific applications of the cryptocurrency, are there outlets, does it meet a need?
Security: is the technology used by the cryptocurrency reliable and scalable?
The extent of the network and the degree of decentralization: who are the actors validating the transactions and what are the rules?
Credibility: how is it perceived from the outside: is it interesting for recognized actors outside the blockchain or cryptocurrency world?
Its level of awareness: Is it already known to the target group?
According to these criteria, here are 10 cryptocurrencies you should watch in 2021.
Cryptocurrencies that want to establish themselves as a currency.
In addition to the 5 criteria mentioned above, the potential of these cryptocurrencies is strongly linked to the development of legislation that is coming up around the world.
Indeed, they will face the tightening of regulations in many countries and the creation of digital currencies by the central banks of the various countries.
Litecoin (LTC)
Litecoin was founded in 2011 by Charlie Lee, a former Google employee, and was the first alternative cryptocurrency to Bitcoin (now known as "altcoin"). It operates on a similar model to the "Star" coin. Due to its history, it has a very wide network and has also demonstrated the security of its transactions.
Litecoin, has a good credibility, as a large number of exchange platforms and some merchants are starting to accept it as a means of payment.
Once all the expected tokens are issued, there should be four times more Litecoin in circulation than Bitcoins. But its development is still quite slow, which could lead it to technically lag behind other cryptocurrencies.
The Dash (DASH)
Dash (a shortened form of "digital money") aims to become an exchange currency as convenient and easy to use as cash or Paypal.
One of Dash's main uses is to send money around the world. Other uses could follow, such as paying for products or services, online commerce, among others.
It started with the name "Darkcoin", the founders wanted to distinguish the cryptocurrency from Bitcoin by making transactions anonymous. At the time, it was suspected of being used to finance illegal activities. Since then, it has gained notoriety thanks to its simple model and the ability to send money confidentially and instantly at low cost. But the degree of centralization is still widely criticized.
Monero (XMR)
Monero is also a cryptocurrency that prioritizes anonymity. The system makes transactions untraceable, it is impossible to know the identity of those who have made an exchange, nor the amount transferred. This spirit of "fungible" assets is the opposite of Bitcoin.
One of Monero's strengths is its highly decentralized system and large network. But the confidentiality of transactions makes it opaque. Critics point to the cryptocurrency's possible links to illegal trading and the dark web.
In the future, "privacy coins" could be banned in several countries to prevent the funding of illegal activities.
Tether (USDT)
Tether is a rather unique cryptocurrency: it is issued on multiple blockchains (including Ethereum and EOS) and is backed by the value of the US dollar, making it the first "stablecoin". While cryptocurrencies have the characteristic of being volatile, Tether's price is always very close to $1.
This sort of "parity" gives it a utility for holders of other cryptocurrencies. It is used, for example, to convert the profits of other cryptocurrencies, avoiding the need to convert them into FIAT currency.
But this cryptocurrency lacks decentralization. Its instructions depend largely on the decisions of the issuing company, which can, for example, unilaterally decide to freeze an account. One wonders what would happen if this were to stop working.
Critics of this cryptocurrency also accuse the company Tether of a certain lack of transparency. The company has also been in trouble with the US judiciary for illegal use of funds and that they would not have enough reserves for the amount of transactions made.
Another weakness is that the status of a "stablecoin", i.e. a cryptocurrency backed by an official currency, puts Tether at risk.
The legislation is still quite confusing everywhere, and it is not impossible that this type of cryptocurrency will be formally banned in the near future.
Ethereum(ETH)
Founded in 2014 by Vitalik Buterin, Ethereum is a blockchain designed for the development of decentralized applications (Dapps). Ether is the cryptocurrency that serves as a means of payment on it.
For example, CryptoKitties is a video game developed on Ethereum that allows players to buy, breed and sell virtual kittens, with the currency being Ether (ETH).
But gaming activities are far from the only ones taking place on the blockchain.
Ethereum allows the processing of "smart contracts", which, are designed to establish the rules of a contract and then automatically execute it once the conditions are met certifying each step.
Quite a handy process when it comes to transferring assets. "The program executes the code and when it automatically validates a condition, it determines whether the asset should be sent to a person, or immediately returned to the person who issued it, or a combination of both," the founder explained at a Blockchain conference.
Ethereum is a strong and secure network that has stood the test of time. However, Ether's value also depends heavily on the underlying technology. However, one of the negative points raised by experts relates to the limited transaction processing capabilities. There is a need to improve the technology so that Ethereum does not lose its edge.
Tezos(XTZ)
Tezos a blockchain whose protocol was developed by the French Arthur and Kathleen Breitman in 2014. Similar to Ethereum, it allows the creation of "smart contracts" and the use of decentralized applications.
Tez(XTZ), its cryptocurrency, is mainly used to pay for network and application usage.
Tezos is based on a secure programming language, and its scalable structure avoids the protocol update issues that Ethereum struggles with.
Its biggest advantage, however, is the trust it enjoys from a growing number of major players. In 2019, the National Gendarmerie's Center for Combating Numeric Crime (C3N) selected Tezos to issue cryptocurrency payment orders with funds allocated by Europol. A year later, the blockchain was selected by Société Générale to help develop a digital euro project. Internationally, a US management company has tokenized $300 million worth of real estate through Tezos. A subsidiary of EDF has also joined the network as a "validator" of transactions.
However, its penetration is lower than Ethereum's and its system seems more sensitive to the concentration of power and decisions.
EOS
EOS is a blockchain that was also developed for the development of decentralized applications. It is known for being the subject of the largest ICO (cryptocurrency fundraising) of 2018, which allowed it to raise $4 billion.
The goal is to simplify the technology as much as possible and become mainstream thanks to its ease of use, free transactions and ability to support millions of users simultaneously, among other things.
EOS has big ambitions. But for now, applications remain few and focused on video games and gambling. There is also criticism of centralization, lack of user privacy and bugs discovered in the source code.
Cardano(ADA)
Cardano is a blockchain developed by Charles Hoskinson, one of the co-founders of Ethereum. Still under development, its goal is to create decentralized applications and smart contracts. Its cryptocurrency, called ADA, was created to serve as a means of payment.
Cardano would be developed using a "scientific" method, in which each technology would go through a research process to be validated by its peers. A system that is sometimes criticized for being too complex.
Often seen as a potential serious competitor to Ethereum, it is more agile and faster and uses a two-tier architecture. One for transactions made with the ADA cryptocurrency, the other for decentralized applications and smart contracts.
At the moment, the blockchain is not yet operational and Charles Hoskinson speaks very often on social networks to communicate the potential of Cardano, which would interest at least more than 100 companies and millions of users worldwide.
Critics of the project, however, doubt the veracity of the founder's claims, as nothing concrete has been seen to date. The development of ADA will depend on the consistency between the claims and the success of the project, which, if not real, will greatly affect public confidence.
PolkaDot(DOT)
Launched in 2020 by Gavin Wood (one of the co-founders of Ethereum), Polkadot is a blockchain project that aims to be scalable and open the possibility of connecting multiple blockchains to foster communication and exchange.
Driven by the general rise of cryptocurrencies, DOT has attracted the attention of a major asset manager that could include it in its investment products. That was all it took to give the blockchain project a little more credibility that would attract interest, even if nothing is done yet.
Ripple (XRP)
XRP is a cryptocurrency used in Ripplenet, an electronic payment platform based on a RTGS system (Real Time Gross Settlement System). The aim of this system, proposed by the Ripple company, is to offer an efficient alternative to the SWIFT network used by banks to transmit payment orders. Indeed, with SWIFT there is a delay of one day between sending and receiving funds, whereas Ripple allows a transfer in a few seconds.
More than a cryptocurrency, XRP acts as an exchange "bridge" between securities, enabling fast and cheap international payments. These functions are particularly interesting for banks and large institutions such as UBS, American Express or Crédit Agricole in France, which are already customers of the technology. However, Ripple's success is not a decisive factor for the development of XRP, as it can launch other cryptocurrencies aimed at its customers.
One of the main criticisms of XRP is that the cryptocurrency is highly centralized. Ripple issues the tokens and has broad "monetary policy" power. Only a few players validate transactions, and these tend to be institutional. Therefore, funders and money takers have to trust each other.
Another issue that has been raised is the legal vacuum surrounding the status of XRP (and many other cryptoassets). The U.S. Securities and Exchange Commission (SEC) recently charged Ripple with unauthorized sales of financial securities. The hybrid nature of this cryptocurrency is to blame.