The term "altcoin" is a misnomer. In 2017, the term became popular after thousands of new Bitcoin alternatives popped up on the market. However, in 2022, most of the top 100 cryptocurrencies aren't Bitcoin alternatives at all. The landscape is now filled with novel applications and products, some of which differ greatly from others. With millions of cryptocurrencies now in existence, it's impossible to keep track of everything going on in the space. That's why we've made this article to highlight a few interesting developments in the space, and hopefully to peak your curiosity.
The Best Altcoins
Powered by smart contract blockchains like Ethereum and Solana, new "Web3" apps are being created every day. Web3 is any application that integrates blockchain within their product. For example, Coinbase is a web2 exchange that operates based on the goals of the company. On the other hand, Uniswap is a Web3 exchange protocol (think HTTP) that operates entirely on-chain. This means that the Uniswap cannot be shut down by the company or a central government, a benefit that many users are willing to pay higher transaction fees for.
The modern market for crypto continues to expand. The rise of smart contracts and new DeFi products have continued to weaken Bitcoin’s cryptocurrency market cap dominance. This trend could result in a smart contract blockchain surpassing Bitcoin as the big dog in the space. Don't worry, this doesn't change Bitcoin's ability to store value, but newer products can do more than just store value.
It's hard imagine the crypto space without Ethereum. Since Ethereum was released in 2015, the majority of cryptocurrencies were created using Ethereum smart contracts. Smart contracts are also a misnomer, as they do not need to be smart or contracts at all. In reality, smart contract is a simple term for any piece of code that runs on a blockchain.
The difference between Bitcoin and Ethereum is simple: Bitcoin is a ledger – Ethereum is a ledger plus a computer. By adding a computer to a blockchain, you can create blockchain based applications (like new tokens, NFTs, lending markets, exchanges and more).
Space on Ethereum's computer is limited in order to make sure that all of the miners can keep a full record without needing to purchase their own personal data center. This keeps the blockchain decentralized (more difficult to takeover) and therefore secure. Ethereum's security is highly valued by the market, as is evident with Ethereum's high fees. The fees are based solely on supply and demand for space on Ethereum's computer (blockchain) at any given moment. High fees are not a signal of weakness, but of strong demand. This is an issue for many retail traders, however, who are priced out of using Ethereum.
The race to help Ethereum scale is on-going, and some of the best projects working on this will be included down the list. Long story short, the Ethereum blockchain is the foundation and home of most blockchain activity today due to its superior security. The whole Ethereum network is powered by a native asset, Ether (ETH), which reflects demand for the blockchain itself. If Ethereum continues to provide the best security for high value applications, you shouldn't be surprised if demand for Ether rises as well.
Some applications benefit greatly from the immutability of decentralized blockchains like Ethereum (like the Uniswap example above). While other applications have little to gain from going on-chain. Many projects use blockchain and cryptocurrency only to capitalize on the hype. An important question to ask yourself is “why is blockchain needed for this”.
Chainlink aims to provide valuable real-world data to smart contracts on Ethereum and other blockchains. This could result in thousands or millions of new blockchain applications made possible by the use of Chainlink's data. While bringing real world data to the blockchain may seem trivial at first, the goal of Chainlink is to provide trustworthy data without the need to trust anyone, otherwise, there's no difference from web2.
At it's core, Chainlink is a "Decentralized Oracle Network" (DON). An oracle is a fancy term for a source of trustworthy information – a calculator is a math oracle. The trick is sourcing the data in a decentralized manner, and the reason that Chainlink needs to use blockchain tech. In short, Chainlink allows for many entities to give an answer to 1 question, and returns the answer provided by the majority of responders. These entities must stake Chainlink's native asset, LINK, for the opportunity to answer questions. Those who respond correctly are paid. Any who respond maliciously will be penalized from their stake. These rules are hard-coded in to the protocol, and allow for Chainlink to work at scale.
Many legacy applications like insurance and real estate funding could benefit from on-chain execution. Currently, insurance is slow and manual, but payouts could be automated with smart contracts.
Additionally, on-chain exchanges like Uniswap could benefit greatly from having trustworthy pricing information for off-chain assets (like the US Dollar). This could allow for users to change between fiat and crypto using only their Ethereum wallet address as their identity.
Sushi is a blockchain-based exchange, just like Uniswap. In fact, Sushi began by copying and pasting Uniswap's entire codebase (which is public on the blockchain). Since then, Sushi has launched a suite of DeFi products and applications like lending, farming and staking – all of which Uniswap has not done.
The story from Sushi's creation to where it is today is almost unbelievable. The projects original creator left without a trace – taking millions of dollars with them. The community refused to let this be the end of the story, however, and banded together to turn Sushi from a rip-off to a top 10 DeFi protocol with over $2 billion locked in its smart contracts. They are also launching a decentralized NFT platform, which many hope will have less issues than OpenSea.
While there is still some controversy surrounding Sushi's core team (including a leader who recently left on bad terms) the project is certainly one to keep an eye on in 2022. Uniswap's core team is currently under investigation by the SEC, which presents a huge risk for its UNI token. Sushi is not the target of any investigations right now, but this risk cannot be taken lightly. Luckily, thanks to Ethereum's decentralization, the SEC cannot stop either of the exchange protocols from running.
Stellar Lumens (XLM)
Stellar, a decentralized platform for uniting the world's various banking systems, uses different, disconnected payment methods (ACH, SEPA, SPEI, etc). Stellar’s network connects these systems through a decentralized ledger, with on-off ramps for every payment method.
Stellar’s closest competitor, Ripple, faces SEC investigation. Stellar has a prime opportunity to seize the moment and take its best shot at becoming the global payment network.
To prevent spam on the Stellar Network, users must pay a transaction fee and meet a margin requirement in Stellar’s token, Lumens (XLM).
With support from Ethereum co-founder Vitalik Buterin, Polygon is one of the best altcoins of 2022. Polygon is a layer-2 solution for Ethereum, meaning that Polygon leverages Ethereum's applications and security on a separate network that can be added to your Ethereum wallet. By using the MATIC Network, users can interact with Ethereum applications without needing to spend high transaction fees on Ethereum.
Numerous large exchanges have already introduced support for integration with Polygon. For example, FTX announced Polygon adoption in January of this year and Coinbase also has plans for Polygon integration that are likely to come to market in 2022. The Polygon network’s low gas fees have also made it ripe for NFT transactions. Until now, a majority of NFTs are minted on the Ethereum blockchain but with rising transaction fees users are looking to more sustainable networks to transact on. Polygon offers just that as transacting NFTs is much cheaper on the Polygon network thanks to its layer 2 architecture.
The goal of Polygon and other layer-2 solutions is to scale Web3 to the masses. To use Ethereum's blockchain, users must pay fees that can range from $10 to over $100 at peak times. Conversely, users can use Ethereum on Polygon's MATIC network for pennies. Coinbase and other major exchanges have plans to integrate transfers to the MATIC network, which may drive more adoption to Polygon this year.
Solana is a smart contract blockchain with an active DeFi ecosystem and over $10 billion locked in protocols. Many see Solana and other smart contract blockchains as "Ethereum-killers". Others see the demand for blockchain products growing to the point where many of the largest smart contract blockchains can be simultaneously fully utilized.
Regardless of which outcome happens, there's likely to be significant amount of innovation happening on the Solana blockchain thanks to its deep-pocketed VC-backing. Solana has been embraced by Sam Bankman Fried and the FTX team, who certainly have the funds to ensure the success of the blockchain.
While many financial applications require the security of a heavily decentralized blockchain like Ethereum, blockchain gaming and other applications make more sense on a high-throughput, low-fee chain such as Solana. Solana's native token is SOL, which is required to interact with the blockchain.
Where to Trade Cryptocurrency
The trading platform you choose will determine the best altcoins that you have access to in 2022. While some platforms like Robinhood and Webull offer a few cryptocurrencies as well as stocks, dedicated cryptocurrency platforms typically offer far more altcoins to invest in. If you're looking to invest in lesser known altcoins, you may need to use a decentralized exchange like Uniswap or SushiSwap. Check out our list of some of the top rated crypto trading platforms below.
What are the Best Altcoins to Mine?
Altcoin mining is fairly nuanced and the profitability of mining depends on your mining hardware and electricity costs. For most people, mining cryptocurrency isn't worth it. However, if you live somewhere with cheap or free electricity, then mining altcoins could be well worth your time. Some altcoins use ASIC miners, while other use simple graphics cards. Depending on your mining set up, some good altcoins to mine are Dogecoin, Litecoin, Decred and Dash.
Cryptocurrencies vs. Stocks
Generally speaking, cryptocurrencies are much more volatile than stocks. What's more, the cryptocurrency market is open 24 hours a day, 7 days a week. While Bitcoin and Ethereum are generally less risky than altcoins, they are still volatile assets. Most investors use a portfolio tracker to keep track of their cryptocurrency positions, especially if they're invested in several altcoins.
CryptoPro is a great free mobile app that lets you track your entire crypto portfolio across multiple exchanges are crypto wallets. Getting a portfolio tracker will help you stay organized and save you time monitoring your portfolio.
Prime Time for Altcoins
Bitcoin can certainly be your introduction to the crypto industry in the same way that buying a share of Apple is an easy introduction to the securities market. However, there is so much more under the surface. This could be the year that many altcoins hit prime time. As people begin to understand altcoins through their real-world use cases, you can bet that their implementation will rise with the price of their currencies and tokens.
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