Bitcoin has not only been a trendsetter, ushering in a wave of best cryptocurrency to invest in 2021 based on a decentralized peer-to-peer network, but it has also become the de facto standard for cryptocurrencies, encouraging a slew of followers and spinoffs.
- A best cryptocurrency to invest in 2021 , in general terms, is a sort of currency that exists in the form of tokens or “coins” on a distributed and decentralized ledger.
- Aside from that, the area of cryptocurrencies has grown tremendously since the debut of Bitcoin over a decade ago, and the next big digital token could be issued tomorrow.
- In terms of market value, user base, and popularity, Bitcoin continues to lead the pack of cryptocurrencies.
- Other virtual currencies, such as Ethereum, are being utilized to build decentralized financial systems for people who do not have access to traditional financial products.
- Some altcoins are supported because they have newer features than Bitcoin, such as the ability to process more transactions per second or employ different consensus techniques, such as proof-of-stake.
What Exactly Are Cryptocurrencies?
Before delving deeper into some of these Bitcoin alternatives, let’s take a step back and define concepts like Next big cryptocurrency and altcoin. A best cryptocurrency to invest in 2021 , in general terms, is virtual or digital money in the form of tokens or “coins.” While some Next big cryptocurrency have entered the actual world through credit cards or other schemes, the vast majority remain completely intangible.
The term “crypto” refers to the complex cryptography that enables the creation and processing of digital currency and their transactions across decentralized platforms. Along with this crucial “crypto” aspect, these currencies share a dedication to decentralization; Best cryptocurrency to invest 2021 are often developed as code by teams that include methods for issuance (often, but not always, through a process known as “mining”) and other restrictions.
best cryptocurrency to invest in 2021 are almost always designed to be free of government manipulation and control, yet as the industry has risen in popularity, this fundamental characteristic has come under scrutiny. Altcoins, and in some cases “shitcoins,” are currencies fashioned after Bitcoin that have frequently attempted to promote themselves as modified or superior versions of Bitcoin. While some of these currencies may have some amazing features that Bitcoin does not, an altcoin has yet to meet the level of security that Bitcoin’s networks attain.
Other than Bitcoin, we’ll look at some of the most important digital currencies below. But first, a disclaimer: it is impossible for a list like this to be completely comprehensive. One reason for this is that, as of January 2021, there are over 4,000 Next big cryptocurrency in circulation. While many of these Next big cryptocurrency have little to no following or trading volume, others are quite popular among committed groups of backers and investors.
Aside from that, the field of best cryptocurrency to invest in 2021 is always evolving, and the next big digital token could be issued tomorrow. While Bitcoin is largely regarded as a pioneer in the field of Best cryptocurrency to invest 2021, analysts use a variety of methods to evaluate tokens other than BTC. Analysts, for example, frequently place a high value on rating coins in terms of market capitalization relative to one another. We have taken this into account, however there are other reasons why a digital token could be added to the list.
1. Ethereum (ETH)
Ethereum, the first Bitcoin alternative on our list, is a decentralized software platform that allows smart contracts and decentralized applications (dapps) to be written and run without the influence of a third party. The purpose of Ethereum is to establish a decentralized suite of financial goods that anybody in the world, regardless of nationality, ethnicity, or faith, can freely access. This element makes the consequences for those in some countries more appealing, as those who lack state infrastructure and official identification can obtain bank accounts, loans, insurance, and a number of other financial items.
Ethereum applications are powered by ether, the platform’s proprietary cryptographic token. Ether functions as a vehicle for moving throughout the Ethereum network and is mostly sought by developers trying to develop and run apps within Ethereum, as well as investors looking to purchase other digital currencies using ether. Ether, which debuted in 2015, is now the second-largest digital currency by market capitalization after Bitcoin, though it lags far behind the dominating best cryptocurrency to invest in 2021 . Ether’s market valuation is approximately 19% of Bitcoin’s as of January 2021.
In 2014, Ethereum announced an ether presale, which garnered a massive reaction, ushering in the era of the initial coin offering (ICO). Ethereum claims that it can be used to “codify, decentralize, secure, and trade just about anything.” Following the 2016 attack on the decentralized autonomous organization (DAO), Ethereum was split into two coins: Ethereum (ETH) and Ethereum Classic (ETC). Ethereum (ETH) has a market capitalization of $138.3 billion and a per-token value of $1,218.59 as of January 2021.
Ethereum intends to switch its consensus process from proof-of-work to proof-of-stake in 2021. This change will allow Ethereum’s network to run with significantly less energy and faster transaction speeds. Proof-of-stake enables network participants to “stake” their ether on the network. This procedure aids in the security of the network and the processing of transactions. Those who do so are rewarded with ether, which functions similarly to an interest account. This is an alternative to Bitcoin’s proof-of-work mechanism, in which miners are rewarded with extra Bitcoin in exchange for processing transactions.
2. Litecoin (LTC)
Litecoin, which debuted in 2011, was one of the first cryptocurrencies to follow in the footsteps of Bitcoin and has been dubbed the “silver to Bitcoin’s gold.” Charlie Lee, an MIT graduate and former Google developer, designed it.
Litecoin is based on an open-source global payment network that is not centralized and use “scrypt” as a proof of work that can be decoded using consumer-grade CPUs. Litecoin is similar to Bitcoin in many ways, except it has a quicker block creation rate and hence offers faster transaction confirmation time. Aside from developers, there is an increasing number of shops who take Litecoin. Litecoin has a market capitalization of $10.1 billion and a per-token value of $153.88, making it the world’s sixth-largest cryptocurrency as of January 2021.
3. Cardano (ADA)
Cardano is a “Ouroboros proof-of-stake” Best cryptocurrency to invest 2021 developed by engineers, mathematicians, and cryptography professionals using a research-based approach. Charles Hoskinson, one of Ethereum’s five original founding members, cofounded the project. He left Ethereum after some issues with the direction it was headed, and eventually helped to build Cardano.
Cardano’s blockchain was established through considerable testing and peer-reviewed research by the Cardano team. The project’s researchers have published over 90 papers on blockchain technology covering a wide range of issues. Cardano is built on this study.
Cardano appears to stand out among its proof-of-stake rivals as well as other significant Best cryptocurrency to invest 2021 as a result of this rigorous procedure. Cardano has also been branded the “Ethereum killer,” owing to its blockchain’s ability to do more. Cardano, on the other hand, is still in its early phases. Although it has surpassed Ethereum in terms of proof-of-stake consensus, it still has a long way to go in terms of decentralized financial applications.
Cardano promises to be the world’s financial operating system by creating decentralized financial products akin to Ethereum, as well as solutions for chain interoperability, voter fraud, and legal contract tracing, among other things. Cardano has a market value of $9.8 billion as of January 2021, and one ADA is worth $0.31.
4. Polkadot (DOT)
Polkadot is a one-of-a-kind proof-of-stake coin that aims to provide compatibility with other blockchains. Its protocol connects permissioned and permission-less blockchains, as well as oracles, allowing systems to collaborate under one roof.
Polkadot’s essential component is its relay chain, which enables network interoperability. It also enables for the creation of “parachains,” or alternative blockchains with their own native coins for specialized use cases.
Polkadot differs from Ethereum in that instead of only establishing decentralized applications on Polkadot, developers can design their own blockchain while still utilizing the security that Polkadot’s chain already provides.
Developers can establish new blockchains with Ethereum, but they must create their own security mechanisms, which can leave new and smaller projects vulnerable to attack, as the larger a blockchain, the more secure it is.
This is known as shared security in Polkadot.
Polkadot was built by Gavin Wood, another member of the Ethereum project’s core founders who had divergent views on the project’s future. Polkadot has a market capitalization of $11.2 billion as of January 2021, and one DOT is worth $12.54.
5. Bitcoin Cash (BCH)
Bitcoin Cash (BCH) is significant in altcoin history since it was one of the first and most successful hard forks of the original Bitcoin. A split occurs in the bitcoin realm as a result of disagreements and arguments between developers and miners. Because digital currencies are decentralized, wholesale changes to the code underpinning the token or coin at hand must be made by general consensus; the mechanism for this process varies depending on the cryptocurrency.
When various groups cannot agree, the digital currency is sometimes split, with the original chain remaining true to its original code and the new chain starting as a new version of the preceding coin, replete with code changes.
As a result of one of these splits, BCH was born in August 2017. The discussion that resulted in the formation of BCH was over scalability; the Bitcoin network has a restriction on the size of blocks: one megabyte (MB). BCH increases the block size from one MB to eight MBs, with the theory being that larger blocks may carry more transactions and hence boost transaction speed. Other changes include the removal of the Segregated Witness protocol, which has an impact on block space. BCH has a market capitalization of $8.9 billion and a token value of $513.45 as of January 2021.
6. Stellar (XLM)
Stellar is an open blockchain network that connects financial institutions for massive transactions in order to deliver corporate solutions. Massive transactions between banks and investment firms, which used to take several days, involve a number of intermediaries, and cost a lot of money, can now be completed very instantly with no intermediaries and for little to no cost to the parties involved.
Stellar has positioned itself as an enterprise blockchain for institutional transactions, yet it is still an open blockchain that anybody may use. The system supports cross-border transactions in any currency. Lumens are Stellar’s native currency (XLM). To transact on the network, users must have Lumens in their possession.
Jed McCaleb, a founding member of Ripple Labs and the creator of the Ripple protocol, launched Stellar. He eventually quit his position at Ripple to co-found the Stellar Development Foundation. Stellar Lumens have a market capitalization of $6.1 billion and are worth $0.27 in January 2021.
Chainlink is a decentralized oracle network that connects smart contracts, such as those on Ethereum, to data outside of the blockchain. Blockchains do not have the ability to link to external apps in a secure manner.
Chainlink’s decentralized oracles enable smart contracts to interface with external data, allowing contracts to be executed based on data that Ethereum cannot access.
A number of use cases for Chainlink’s system are detailed on the company’s blog. One of the numerous use cases described is monitoring water supplies for pollution or illicit syphoning in certain towns. Sensors might be installed to monitor corporate consumption, water tables, and local body of water levels. This data might be tracked by a Chainlink oracle and fed straight into a smart contract. With the incoming data from the oracle, the smart contract might be set up to execute fines, issue flood warnings to cities, or invoice corporations that use too much of a city’s water.
Sergey Nazarov and Steve Ellis collaborated to create Chainlink. Chainlink has a market capitalization of $8.6 billion as of January 2021, and one LINK is worth $21.53.
8. Binance Coin (BNB)
Binance Coin is a utility coin that serves as a payment option for trading fees on the Binance Exchange. Those that utilize the token as payment for the exchange can trade at a reduced rate. Binance Coin’s blockchain is also available.
9. Tether (USDT)
Tether was one of the first and most popular of a class of cryptocurrencies known as stablecoins, which try to limit volatility by tying their market value to a currency or other external reference point. Because most digital currencies, including big ones like Bitcoin, have undergone regular bouts of extreme volatility, Tether and other stablecoins aim to smooth out price variations in order to attract users who may otherwise be wary. Tether’s value is directly proportional to the value of the US dollar. The mechanism enables users to make transfers from other cryptocurrencies back to US dollars more quickly than converting to regular currency.
Tether, which was founded in 2014, defines itself as a “blockchain-enabled platform meant to simplify the digital use of fiat currencies.” This coin, in effect, allows individuals to use a blockchain network and related technologies to transact in traditional currencies while limiting the volatility and complexity that are sometimes associated with digital currencies. Tether is the third-largest cryptocurrency by market capitalization as of January 2021, with a total market cap of $24.4 billion and a per-token value of $1.
10. Monero (XMR)
Monero is a currency that is secure, secret, and untraceable. This open-source cryptocurrency debuted in April 2014 and quickly gained popularity among the cryptography community and fans. This cryptocurrency’s development is entirely donation-based and community-driven. Monero was created with a heavy emphasis on decentralization and scalability in mind, and it provides perfect secrecy through the use of a specific technology known as “ring signatures.”
With this strategy, a group of cryptographic signatures appears, each of which has at least one genuine participant, but the genuine one cannot be identified because they all appear to be authentic. Monero has gained an ugly reputation as a result of extraordinary security methods like this—it has been tied to illicit enterprises all over the world. While this is an excellent option for anonymous illegal transactions, the secrecy inherent in Monero is also beneficial to dissidents in oppressive regimes all over the world. Monero has a market capitalization of $2.8 billion and a per-token value of $158.37 as of January 2021.
Compete without risk with $100,000 in virtual cash.
Use our FREE Stock Simulator to put your trading talents to the test. Compete against hundreds of other Investopedia traders to see who can trade their way to the top! Submit trades in a virtual environment before putting your personal money at risk. Practice trading methods so that when you are ready to enter the real market, you will have got the necessary practice.