Not only Bitcoin: Cryptocurrencies to Keep an Eye On

Tommy Wyher  |


Bitcoin, the first decentralized cryptocurrency was launched in April 2009. However, cryptocurrencies only started to get attention in 2013 when the price of Bitcoin approached $1,000. At the time, that seemed like a lot of money to pay for a cryptocurrency. Since then, the cryptocurrency market has taken off.

The technical foundation of what we know as digital currencies started in the 1980’s when David Chaum, a cryptographer, developed an algorithm that enabled the secure exchange of information between parties that couldn't be altered, called Blind Signature. From there, Chaum went on to found DigiCash, which created units of digital currencies that were based on this sort of algorithm.

Fast forward a few decades, and you have a booming cryptocurrency market with more than 4,000 different cryptocurrencies. The crypto market has continued to evolve to include brokers offering professional cryptocurrency analysis as well as tips on Bitcoin and Ethereum trading.

These are the leading cryptocurrencies according to market capitalization (mid-2018)

The values depicted above are rough estimates as the cryptocurrency market is extremely volatile. As you can see, Bitcoin is the king of the crypto market cap race, but other cryptocurrencies are fast approaching. The usurpation could take place overnight if one of the smaller cryptocurrencies begins to expand exponentially because of a technical or engineering breakthrough Or, it might never happen.

Here are a few contenders we feel have a chance of overtaking Bitcoin as the crypto king:

IOTA is an interesting cryptocurrency which was launched in 2014. You can't mine IOTA as it was created on a single transaction when it was launched. IOTA was mainly designed as a very cheap or free way for small micropayments between counterparts. While the main cryptocurrencies use the blockchain technology to get the latest transactions into a new block, IOTA uses its coin holders to verify the transactions. Every user has to verify the last two transactions. IOTA does this through Tangle which is a Directed Acyclic Graph. The more IOTA grows, the more users who verify transactions grows. This means that the payments are more secure since more users verify the transactions. This is a very clever way to offer free transactions for small payments.

Litecoin was launched a few years after Bitcoin by Charlie Lee, one of Google's engineers. Litecoin's market cap is around $4.5 billion while the maximum amount of coins that can be mined is 84 million. One of the main advantages of Litecoin is its transaction speed. Litecoin transactions take less time than Bitcoin and are therefore cheaper. The algorithm used by Litecoin apparently runs faster than Bitcoin’s. Each new Litecoin block transaction takes about 2 minutes, while a Bitcoin block takes around 10 minutes.

Additionally, Litecoin teamed up with TenX to make cryptocurrency payments easier in the real world. Together they launched a debit card, called UQUID, which can be used as a normal debit card for everyday purchasing and depositing.

Bitcoin Cash launched in the summer of 2017 due to conflicting interests between Bitcoin miners and core developers. Bitcoin developers were interested in decentralizing payments to improve Bitcoin. On the other hand, Bitcoin miners have been concentrating hash power in a relatively small group of people. That means that a number of mining companies now hold a large portion of Bitcoins, going against decentralization. As the number of Bitcoin users grow, transaction time has slowed considerably, meaning scaling is not working properly for Bitcoin.



Miners want to see an increase in the blockchain capacity and smaller transaction times, but the SegWit2x patch that Bitcoin introduced in the summer of 2017 didn’t solve these issues. This led to the creation of Bitcoin Cash. Bitcoin Cash transactions are faster since it has a larger block size (8MB) and is often more profitable to mine than Bitcoin. For these reasons, Bitcoin Cash could overtake Bitcoin, but ultimately it will come down to the developers and miners.

Many people are aware of the benefits of cryptocurrencies, building its popularity.

As with all new inventions, there are two sides to the (crypto)coin.

Privacy and Security – One of the top priorities of cryptocurrencies has been privacy. Transactions can be verified but they cannot be traced.

Low Transaction Costs – Another reason cryptocurrencies were invented is the low transaction costs. As mentioned above, transferring funds via cryptocurrencies is considerably cheaper when compared to payments through PayPal or banks. Some altcoins, such as IOTA, even offer free transactions.

Profitable – Using cryptocurrencies offers rewards, especially if you are a miner. Many people got into this game due to the high reward that mining cryptocurrencies offer. If the Bitcoin price is $6,000, it means that the miner receives $6,00 for mining a single coin. Although, the more coins are mined, the longer it takes to mine the next one. You can still make a considerable profit, hence the mining companies that have popped up like mushrooms.

No Inflation – Cryptocurrencies are not governed by a central bank or a certain country, making them immune to inflation. There will always be price fluctuations as with all currencies, but there is no inflation or hyperinflation.

International Without Taxation – Cryptocurrencies can be used globally. Although not universally accepted at the moment, the number of entities accepting them has increased dramatically in the last few years. As cryptocurrencies are decentralized you cannot be taxed for receiving or making payments with them, even if you make a profit by mining cryptos.

Volatility – While there is no inflation for cryptocurrencies, volatility is a bit of a setback for investors. Sure, you can benefit from volatility but your altcoins can also lose value. Although the volatility has decreased in recent months, cryptocurrencies are considerably more volatile than fiat currencies.

Criminal Activity – Since cryptocurrencies are untraceable, they are prone to criminal activity. Criminal organizations can use them for illegal transactions. While many cryptocurrencies are pretty safe, the companies that provide exchanges or crypto wallets might not be as secure.

Cashing out – The number of exchanges or outlets (ATM’s) to exchange your cryptocurrency to fiat currency are limited. This number is increasing, but considering how volatile cryptos are, you can lose value while looking for a place to cash in.

Government Crackdown – As the number of cryptocurrencies grows so does the possibility that they become more available to criminals. They could be used for transactions related to criminal activity or for money laundering. As a result, governments have started to tighten their grip. China and Brazil have banned cryptocurrencies altogether. In Mexico, Saudi Arabia, Russia and South Korea the relationship with digital currencies is complicated and restricted. In India, they are not accepted as legal tender and might even get banned. In the US, cryptocurrencies are legal but ICOs (initial cryptocurrency offering) are prohibited.

Flash Crash – The ultimate con for cryptocurrencies is the fact that they might crash altogether. The reasons could be different, maybe some governments will outlaw one of the cryptocurrencies and the value will fall to zero or maybe all governments will outlaw the entire cryptocurrency market. In the 2017 G20 meeting cryptocurrencies were not outlawed. Another possibility is that some new technology is invented and a new form of very cheap payment comes up, which would undermine cryptocurrencies.

As you can see, there are many upsides and downsides to cryptocurrencies. They might crash in no time and to be honest, they have already lost a lot of value in 2018. Bitcoin was trading a few pips below $20,000 at the end of December 2017 and is trading at around $6,000 in mid-2018, which is a big drawdown for investors. But, it is undeniable that cryptocurrencies offer a lot of possibilities. Cryptocurrencies are a great form of payment and investment and are, therefore, so popular.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

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