Bitcoin and beyond an overview of the most important cryptocurrencies. Cryptocurrencies are gaining more and more ground in the current economic scenario, becoming an increasingly popular form of investment and an increasingly used technology in various sectors. But what exactly are cryptocurrencies and which are the most important? In this article, we will give an overview of the most relevant cryptocurrencies, from the famous Bitcoin to the emerging Cardano, Polkadot, and Chainlink.
What are cryptocurrencies
Cryptocurrencies are digital currencies that use blockchain technology to ensure the security of transactions and the creation of new monetary units. The blockchain is a distributed digital ledger, which securely and immutably records the transactions of a cryptocurrency. Cryptocurrencies are decentralized, i.e. they are not controlled by a central authority, but by the people who participate in the network. Furthermore, their creation occurs through a process called mining, which requires a large amount of electronic computing and energy resources. These characteristics make cryptocurrencies an innovative and potentially revolutionary technology.
As far as conservative investments in the cryptocurrency industry go, there are few that can compete with Bitcoin. The world’s first cryptocurrency, Bitcoin remains the dominant player in the industry, with a market capitalization of over $560 billion at the time of writing.
Bitcoin uses the SHA-256 security protocol for creating new units and securing transactions. Thanks to its decentralization and its security, Bitcoin has become an increasingly used financial instrument, both as an investment and as a means of payment. Furthermore, Bitcoin has spawned an entire industry, made up of exchanges and trading platforms such as the popular one Bitcoin Revolution, wallets, miners, and other cryptocurrency-related services.
With several bank failures behind them, including the most recent First Republic failure last week, it is clear that investors are looking to hedge their portfolios against systemic risks previously thought impossible. Furthermore, as the debt ceiling crisis approaches, currency risks increase, prompting many to look for asset classes that can perform well in such an environment.
First, it is the second largest cryptocurrency out there, after Bitcoin. Second, Ethereum’s massive smart contract network is the hub of decentralized finance for a plethora of cryptocurrency projects. I don’t think this will change anytime soon.
Ethereum is the second most important cryptocurrency after Bitcoin, created in 2015 by Vitalik Buterin. Compared to Bitcoin, Ethereum offers a more advanced technology, called a “smart contract”, which allows you to create decentralized applications on the blockchain. This has enabled the development of a wide range of decentralized applications and services, such as Decentralized Finance (DeFi) and Non-Fungible Tokens (NFT). Ethereum has become an increasingly used financial instrument, both as an investment and as a means of payment, thanks to its security and its ability to create tailor-made solutions for its users.
Ethereum’s rise is almost entirely attributable to the network’s early adoption of smart contracts. Which allows decentralized applications to be built on top of blockchains. The growing popularity of cryptocurrencies over the years. Has made possible a number of use cases that were not previously thought possible.
Other major cryptocurrencies
Besides Bitcoin and Ethereum, there are other major cryptocurrencies that have had a significant impact on the cryptocurrency market. Litecoin, created in 2011 by Charlie Lee, was one of the first cryptocurrencies to adopt the Segregated Witness (SegWit) protocol to increase transaction speed and reduce fees. Dogecoin, created as a joke cryptocurrency in 2013, has recently achieved great success thanks to the influences of social media and the attention of Elon Musk. Other important cryptocurrencies are Bitcoin Cash, Binance Coin, Cardano, Polkadot, and many others.
Bitcoin and Ethereum are here to stay
There are many reasons why many investors don’t want to touch cryptocurrencies. From twists and turns to outright scams and price drops exceeding 90%. This sector is clearly seen as a very high-risk proposition. Which may not bode well for cryptocurrencies in tough economic times.
That said, Bitcoin and Ethereum have proven their staying power and have the size and scale to continue to support industry growth. For those looking to diversify into this asset class, these are the two tokens I would own right now.
The cryptocurrencies of the future
In recent years, some cryptocurrencies have emerged that could play a significant role in the future of the cryptocurrency market. Among these, Cardano differs from other cryptocurrencies in the scientific approach to the creation of its blockchain and its modular architecture, which allows you to integrate new functions in a simple way. Polkadot, on the other hand, aims to create an interconnected blockchain network, facilitating the transfer of data and enabling new features through interoperability. Finally, Chainlink seeks to solve the Oracle problem by allowing blockchains to access trusted external data. In general, these emerging cryptocurrencies offer new features and solutions to existing problems in the cryptocurrency world.
Cryptocurrencies have gained immense popularity over the last decade, attracting investors from all over the world. However, the excellent profit potential comes with significant risk. Cryptocurrencies are known for their high volatility. Making them a risky investment for many. For this reason, many investors choose to maintain a more traditional, 60/40 portfolio of stocks and bonds, respectively, or a mix of the two that makes sense.
Personally, I believe that a banking crisis could be the so-called tide that lifts all cryptocurrencies. If this were the case, these two cryptocurrencies should see a significant inflow of capital, both from institutional and retail investors.