What Will Be the Next Bitcoin?
In case you missed it, 2017 was the Year of Bitcoin, a cryptocurrency whose market value approached that of McDonald’s by December. Bitcoin is one of thousands of cryptocurrencies on the market today, most of which use a technology called “blockchain”—a giant database or ledger that allows users to make and receive payments and to store money anonymously without an intermediary. All transactions on the blockchain are encrypted; they cannot be altered or erased without leaving a record, so this makes it virtually hack-proof. Supporters believe that cryptocurrencies are the future of money.
2018 has started out rough for Bitcoin and its crypto competitors, but industry experts nonetheless predict that the cryptocurrency market may be worth $10 trillion within the next ten years. That’s a lot of hash power—and cash for early investors that pick the right horse/coin.
But before you get your blockchains in a row, consider that, as with the nascent days of the internet, there will be a few big winners and plenty of losers. Like Facebook and Google, companies who score the dominant protocol will benefit enormously.
Is Bitcoin on Its Way Out?
Though it’s easily the most recognizable cryptocurrency on the market today, Bitcoin is not without its faults. The high costs of mining the coins, which requires specialized software, sucks up electricity. This is driving the centralization of the mining process to China— which defeats the idea of a decentralized global system or “world computer.” Canada, with our cold climate and relatively cheap electricity is becoming another mining hub.
There are only 21 million mineable Bitcoins, and this amount will be fully mined by 2140. As the prices of Bitcoins rise, investors are tempted to use them as a store of ever-increasing value, instead of as a means of exchange. Hoarding chokes liquidity, which is never a good thing for a currency. When a payment network becomes sluggish, no one wants to spend or invest. This then leads to deflation and a shrinking economy.
Scalability is another concern. Currently, it takes ten minutes to confirm a Bitcoin transaction on the blockchain, so you can forget about using the coin to grab a quick macchiato. Bitcoin Cash, a fork or “chain split” now allows for faster transaction times, but also has created warring factions within the Bitcoin ecosystem.
These perceived weaknesses have encouraged a number of other cryptocurrencies to jump in the game.
Cryptocurrencies to Watch in 2018
The ICO (Initial Coin Offering) market is a $650 billion market overrun by a Wild West of cryptocurrencies with a slew of new entrants like Dentacoin for, you guessed it, paying dentists, as well as Kodakcoin and Potcoin. Out of the 1,000 cryptocurrencies available about 100 are actively traded on exchanges and about 25 have viable economic prospects.
At the risk of making your head spin, for your consideration, here are the cryptos we’re watching in 2018. But, before you take the plunge, ask yourself, “Which of these will be around in ten years?” (Anyone remember the 8-track tape?)
In addition to bitcoin and bitcoin cash, Ripple, Ethereum, and Litecoin round out the top 5 cryptos. The current market capitalization of all cryptocurrencies is around $136 billion; 75% of that is represented by Bitcoin and Ethereum.
Ripple – Launched in 2012 and based in San Francisco with global offices among 27 countries, Ripple focuses on multi-currency transactions which are cheaper and faster than Bitcoin’s. The company already has more than 100 international banks signed up to its platform, RippleNet. Last year, the value of Ripple rose 35,500% (not a typo) to have a market capitalization of $7.6 billion. Its token is called XRP.
Ethereum – Developed by Russian techie Vitalik Buterin in 2015 with a current market capitalization around $28.9 billion. Ethereum was built for creating “smart contracts,” which are ‘If/Then’ commands. It could be something like, “If Sally is never late for work, then she gets paid $xx” or if you input certain data, you’ll get a soft drink. When you put many smart contracts together you get something called a dApps, decentralized applications. dApps are tamper-proof as they directly connect the user and provider, cutting out the middle-agent who stores and has control over the information (think gmail). The vast majority of cryptocurrencies are actually dApps that run on the Ethereum blockchain.
Ethereum is the go-to source for the savviest ICOs. JP Morgan, Microsoft, and other companies are so keen on Ethereum that they’ve formed an alliance to research its potential applications. For example, IBM and Samsung are experimenting with a washing machine that orders its own detergent.
Litecoin – Litecoin was launched in 2011 and co-founded by a former Google engineer. It allows for fast, low-cost global payments through its decentralized network. It is supposed to be a faster version of Bitcoin with a larger supply of coins. It rose 7,000% last year and has a market capitalization of $14 billion.
Cardano – Cardano began in 2015 and it also focuses on smart contracts, making it a rival to Ethererum. Its recent market capitalization is around $10.4 billion. It claims to offer deeper functionality than Ethereum as well as better transaction speed and a lower cost while providing a store of value like Bitcoin through its ADA coin.
Filecoin – Filecoin is a decentralized data storage network that turns cloud storage into an algorithmic market powered by blockchain technology. That’s less complicated than it sounds, so stay with me.
Today, 50% of the world’s cloud storage remains unused. By putting it to work, storage costs will decrease even as global storage demand increases. Miners earn Filecoin (native tokens) by providing storage to clients; clients spend Filecoin by hiring miners to store or distribute their data. The firm raised $205 million in a recent ICO.
IOTA – The only cryptocurrency that does not use blockchain technology or miners that allows for fee-free micropayments. Instead, IOTA relies on a network inspired by the Internet of Things called “The Tangle” and is thus impossible to hack because each transaction requires at least two previous transactions in order to be validated. Microsoft and Samsung have partnered with IOTA to create a marketplace for the Internet of Things. Estimated market capitalization of $10.4 billion.
Stellar – Founded in 2014 by Ripple co-founder Jed McCaleb, Stellar is an open-source blockchain that settles global financial transactions, like a currency exchange, within 2-5 seconds (much faster than Bitcoin). Market capitalization of $10 billion. Its coin is called the Lumen.
NEM – Launched in 2015, NEM seeks to address the perceived failings of Bitcoin in that it requires less computational power and has a proprietary feature that sifts out “bad actors” in the network. NEM rewards miners based on their involvement in the “community”, not on their computational capacity or size of stake. Its token is called XEM. Market capitalization is $2.7 billion.
Monero – Created in 2014 with no maximum cap for mining, unlike Bitcoin. It’s regarded as one of the most private and anonymous cryptocurrencies, and gained public notoriety when Mariah Carey and Toby Keith sang its praises. Salon magazine is allowing its readers free access to their content in return for allowing readers’ computers to mine Monero.
NEO – Launched in China and an Ethereum rival, NEO facilitates smart contracts that also combine digital assets and digital identities. It has a total supply of 100 million tokens and gives holders the right to manage the network and vote for team members. Blocks are generated every 10-20 sections and cannot be forked or withdrawn once validated.
ZCash – Unlike its rival Bitcoin, ZCash aims to keep users’ financial histories completely private. It has partnered with JP Morgan as a start-up rival to Monero that focuses on privacy on blockchain networks. Current market capitalization is $1.6 billion.
And the one you haven’t heard much about…yet
FunFair – With a market capitalization of only $60 million, FunFair (Fun) is a relative baby among cryptos but, unlike some others, it has a clear use case. It’s a decentralized casino platform on the Ethereum blockchain. Because it’s open-source, there’s no possibility of cheating as anyone can audit the code. And, being decentralized, no government or institution can regulate it.