- Many altcoins have real-world applications and are becoming disruptive technologies.
- They can or promise to solve real issues in fintech, DeFi, and even the entertainment industry.
- Part of investing in crypto is understanding the type of solutions an altcoin is tied to.
The cycles of the crypto market are as colorful as the seasons of the year.
Historically, they’ve followed an orderly pattern that starts with bitcoin’s price peaking, followed by a reduction in its dominance and then a spike in altcoins.
Most seasoned traders are privy to this type of movement and follow the lead, taking profits from bitcoin and throwing them at riskier, alternative bets. The second quarter of 2021 saw some altcoins rally hard after bitcoin peaked. Several hit all-time highs, making headlines that had new investors getting in on the action out of FOMO. Ether just about reached $4,200, a 471% increase year-to-date, while Binance coin, the third-largest by market cap, peaked at $675, up 55% year-to-date.
The last quarter of 2021 seems to be gearing up for another round. Altcoins like cardano have raced ahead, already hitting new peaks.
While some newbies may play their hands by swinging at the fences, seasoned investors have a grip on what’s worth betting on. And, they will often stick to blue-chip projects in the event they don’t get out fast enough or want to hold a small percentage after the dust has settled.
But what exactly are these real-world applications that investors are betting on in addition to the massive price upside that altcoins offer? Turns out that there are several, which is why crypto is beginning to take its place in the world of disruptive technologies in sectors such as decentralized finance (DeFi), fintech, and even the entertainment industry.
Insider compiled 10 of the top altcoins and their real-world applications.
The network dubs itself as the fastest blockchain in the world and the fastest-growing ecosystem in crypto. It currently supports over 400 projects in DeFi, NFTs, gaming and Web3. Its consensus is based on proof-of-stake and a unique proof-of-history process.
Solana’s blockchain is similar to Ethereum’s but is more easily scalable, has lower fees, and is composable. It can handle up to 50,000 transactions per second, or theoretical peak capacity of 65,000, according to the crypto exchange Gemini. Based on the high-end estimate, that’s about4,000 times faster than Ethereum.
Solana’s ecosystem supports multiple programs. Among them are numerous DeFi programs such as Investin, a decentralized fund management pool that allows fund managers and traders a one-stop dashboard for all things DeFi. It has decentralized exchanges such as 01, a decentralized derivatives protocol to trade options. And, it supports stablecoins such as Tether and USDC, as well as digital wallets like Ledger.
SOL saw its price increase by about 500% between August and early September as NFTs began to trend, and its blockchain was second only to Ethereum’s for buyers. Although it’s down from its previous high, Solana is still well above its August highs.
CryptoWendyO, the pseudonym for a well-known influencer whose primary focus is, as her name implies, cryptocurrencies, singled out Solana as her top utility pick. She puts out regular Youtube videos breaking down altcoins and their use cases for her over 100,000 subscribers. According to her, Solana’s base layer offers users low fees, which is one of Ethereum’s biggest issues.
She can also stake her SOL for returns as high as 8%.
Decentralized exchanges are applications that sit on top of layer-one blockchains like Solana or Ethereum. They enable investors to trade cryptocurrencies directly between two parties without the use of an intermediary to complete the transaction. Instead, the transaction is automated through the use of smart contracts, which are pieces of code that automatically execute when certain events are triggered.
The tokens of decentralized exchanges surged recently following China’s crackdown on crypto exchanges. Traders expected that more crypto investors would move to decentralized exchanges that are outside the purview of regulators and provide more privacy and control.
In June, David Siemer, the chief executive of Wave Financial, highlighted the benefits of decentralized exchange tokens.
“I think a lot of the DeFi coins, even though they’ve gone on a huge run, are still undervalued, like SushiSwap and Aave. I think Uniswap is still undervalued,” Siemer said. “The revenue on these platforms, which effectively flows to the token holders, is massive now. Uniswap alone generates about $6 million a day — so ~$2.2 billion a year — and is growing really fast.”
At the same time, Galaxy Digital’s Co-head of Trading Jason Urban thinks there could be some regulatory headwinds facing decentralized exchanges and decentralized finance. He instead pointed investors to layer-one technologies as safer investments.
“I will say that safe plays that are off the beaten track are definitely some other layer-ones,” Urban said. “But they’ve seen quite a move. I mean, things like Avalanche have really made a run. But I do think that that’s relatively safe if you want to avoid what could be a regulatory squeeze with the SEC staying there and maybe less DeFi.”
Polkadot (DOT) is the native crypto on the Polkadot blockchain. The blockchain’s consensus mechanism is based on nominated proof-of-stake, a unique process that requires selecting validators to participate in the consensus protocol.
Like Solana, Polkadot’s transactions are faster and more efficient than transactions on Ethereum, but they’ve been less popular among crypto enthusiasts lately. This is in large part due to the number of NFTs that have taken off on competitor blockchains like Ethereum and Solana.
Polkadot offers true interoperability, meaning it’s compatible with other blockchains. Through its parachain technology (custom blockchains made for specific projects) it can transfer any type of data between any blockchain with security guarantees. This means other blockchains can be easily connected to its network. It can also undergo upgrades without requiring hard forks. Its simplistic scaling capabilities and adaptability to innovation makes it user-friendly and attractive to developers creating new projects.
Keith Bliss, the president of Capital2Market, a firm that provides technology solutions to the financial sector,favors Pollkadot because of its ability to handle high-speed transactions while building out layers of protocol through scalable parachains, rather than needing to build right into the system.
The XRP ledger, which uses XRP as its crypto, is a leading contender for cross-border transactions between institutions like banks. It offers real-time gross settlements, currency exchange capabilities, and a remittance network. It was built by Ripple Labs, a US-based technology company.
Unfortunately, XRP may be difficult to obtain, as it waspulled off some exchanges after entering a lawsuit with the SEC over whether the crypto should be considered a securities asset. The lawsuit is ongoing.
Crypto investors and influencers like Mason Versluis, publicly known as Crypto Masun, who’s accumulated almost 500,000 followers on TikTok, is a heavy proponent of XRP. He believes it will be at the forefront of the global digital currency transformation.
He noted that the 43rd treasurer of the United States, Rosa Gumataotao, recently tweeted that XRP is the only crypto that is a non-speculative asset with a real use case for cross-border payments.
Versluis is invested in XRP because it solves a problem that he frequently faced when trying to run a business that accepted payments from other countries: receiving payment from his overseas clients was a slow and expensive process.
“Even though XRP is infamous for being involved with banking and the central banks, I am still able to see the value in helping the traditional financial system migrate over to using digital assets and blockchain technology,” Versluis said in an email to Insider.
He continued, “The global payments systems are extremely outdated and are not fit for the modern world. Everything is ‘smart’ now, you have ‘smartphones,’ ‘smart cities,’ ‘smart houses.’ The only thing that has not become ‘smart’ yet is our money, and how our money moves.”
Cardano’s blockchain uses ADA as its crypto. What makes Cardano unique is that it’s a community-based project that is structured on peer-reviewed research — even the white paper consists of community input. It has the same capabilities as Ethereum and Solana when it comes to supporting smart contracts, and runs on proof-of-stake consensus.
Cardano surged by about 182% between July and September but recently took a backseat in popularity as other blockchains that already supporteded NFTs took the lead. Early September, the blockchain finally made way for smart contracts to be deployed, following an upgradeknown as alonzo.
Although the network’s ecosystem isn’t as developed as some of its competitors, moving forward, it will be able to support decentralized exchanges, NFTs, and oracle programs from external data to trigger smart contracts.
Stablecoins are cryptocurrencies that are pegged to a fiat currency on a one-to-one basis. They are, in theory, backed by reserves, such as short-term government bonds and the currency itself. This stability means stablecoins offer an accessible entry and exit point to the crypto world.
Since launching in 2014, Tether’s journey to becoming one of the most popular stablecoins has been filled with controversy.
Tether initially claimed that every coin was fully backed by US dollars in bank accounts.
However, as demand for Tether grew, market participants started to question whether that was really the case.
To counteract that line of questioning, Tether secured attestations on its financial statements — a review from an independent accountant, rather than a full audit — on the reserves. However, these have frequently raised more questions than answers.
Despite these efforts, the spotlight is on Tether’s reserves once again as China’s second largest property developer Evergrande teeters on the brink of default. Reuters described Evergrande as “the biggest issuer of commercial papers.”
Tether has significant holdings in commercial paper, and while the firm confirmed it did not own Evergrande’s commercial paper, it would not confirm its exposure to the Chinese commercial paper market.
“The case is you have two choices, you trust the rating agencies, or you don’t trust them. But these are the same rating agencies that are rating the US Treasuries,” said Paolo Ardoino, Tether’s chief technology officer in a recent interview with Insider. “So if A1 commercial paper rated by a US Agency is considered safe [then] why is where the issuer located matters?”
Several portfolio managers are cautious about the crypto market because of the risk presented by Tether. Duncan MacInnes, a portfolio manager at Ruffer Investment Company, told Insider in July it was part of the reason they decided to sell their bitcoin position.
On the other hand, Tether has staunch support from many crypto figureheads, including 29-year-old crypto billionaire Sam-Bankman Fried.
An IoT device can be anything from a TV to a fridge, as long as it connects and communicates with the internet. Amazon’s Alexa is a well-known IoT device.
For an IoT future to play out, there needs to be internet available 24/7 across many locations.
Right now this is challenging because connections to the internet are offered by multiple providers and require a multitude of different authentication credentials.
This is where Helium steps in. Helium aims to create a global and decentralized network that supports IoT devices by having the community run internet hotspots.
These hotspots can be bought from the Helium website and then, in return for running the hotspot, individuals get rewarded with HNT tokens. The tokens can either be held or transferred on exchanges for fiat money or other cryptocurrencies. Right now the tokens trade around $19, an almost 1,000% surge from this time last year.
JC Parets, the founder of AllStarCharts.com, found out about Helium because the technicals for the token looked strong. However, after doing some research, he also decided to buy a hotspot and mine HNT as a “science experiment”.
The recent surge in the token’s price and potential gains have made it more expensive to buy Helium hotspots.
Charles Edwards, who founded the investment firm Capriole and created the famous metric Hash Ribbons, finds Helium interesting because the team managed to build an established protocol that creates an incentive model to help grow a wireless infrastructure.
“I’m not recommending this as a value investment as necessarily, but I think that the power of being able to set up literally physical infrastructure globally using a blockchain incentive structure is incredibly powerful and exciting for what the potential can be,” said Edwards, in a recent interview.
Elrond is the cryptocurrency of the Elrond blockchain, a public blockchain built to become a base structure for sectors that operate in the DeFi, Fintech, and IoT spaces. Elrond’s strengths include scalability, speed, security, and flexibility, which has encouraged a plethora of protocols to link to its ecosystem. This includes well-known exchanges like Binance and Kucoin, popular wallets like Cyrpto.comand Meta Mask, oracles like Chainlink, and even end-user onboarding from companies like Samsung and Huawei.
One reason why crypto investors and influencers like Mack Lorden said they hold ELGD is because they prefer staking it, earning risk-free interest. The protocol offers non-custodial delegation, allowing the staker to easily delegate their EGLD to a validator without the danger of losing the investment.
Polygon is a layer-two protocol used for connecting Ethereum-compatible blockchains. Polygon’s native tokenMATIC is leveraged for the maintenance and governance of the Polygon network and can be used to pay for fees for the transactions in the applications on the Polygon network, as well as for staking. Polygon uses a proof-of-stake consensus mechanism to achieve consensus and validate transactions on the network.
This protocol was launched to help tackle some of the scaling issues facing the Ethereum blockchain, such as high gas fees and slow speeds, but without compromising Ethereum’s security.
US billionaire Mark Cuban is currently invested in the network. David Siemer, the chief executive of crypto wealth manager Wave Financial, said in a recent interview that he’s invested in Polygon because it’s a strong layer-two scaling solution, but that they’re giving away a lot of money to incentivize use, which is something investors should be aware of.
Vechain is a layer-one blockchain solution that aims to allow businesses to build decentralized applications on its blockchain. The core goal of VeChain is to enable better collaboration with businesses by giving them tools for efficient data transfer and for supply-chain management.
Initially, VeChain focused purely on supply-chain management, but has since increased the scope of its blockchain to focus on more general data solutions. H&M and Walmart China are leveraging VeChain technology for tracking goods.
VeChain has two native tokens: the VET token is for voting on changes in the protocol, while the VTHO token executes transactions. The transactions on the blockchain are verified using a proof-of-authority consensus mechanism.
For transactions to be added to the blockchain, users muststake a minimum of 25 million VET and submit verifying information to the VeChain Foundation. Some have criticized this approach as being too centralized.
However, the backing of VeChain by leading companies gave David Thomas, co-founder of crypto brokerGlobalBlock, the confidence to invest in this project in his own personal portfolio. He prefers to play it safe and focus on better-known projects.
“Now obviously, the more esoteric you go, the greater the gains you can get, but equally, the more you’ve got to monitor them,” Thomas said.