Which Altcoins Should You Invest in?
Originally, there was just bitcoin – a cryptocurrency that used blockchain technology as a digital ledger and ushered in a new era of currency. But, as time went by, people began to realise that bitcoin was problematic: it was slow to transact with, and the more people used it, the slower it got.
This caused developers to start looking for solutions to Bitcoin’s problems, leading to the birth of altcoins – all cryptocurrencies other than bitcoin. When it comes to investing in altcoins, it can be a minefield – so here are our top 5 promising altcoins to look into.
Altcoin choice: Which factors to consider?
There are several things you should look at when considering investing in altcoins.
A good basic metric is to look at market capitalization. Generally speaking, a good coin will have decent market capitalization. However, it isn’t a foolproof method of selecting an altcoin to invest in as many coins have high market capitalization but are overvalued. A good example of this is ethereum classic (ETC).
Which exchange is the altcoin listed on?
Again, this one must be approached with caution. Many reputable exchanges list coins that are not great projects, often because they are popular, like Dogecoin. But, in general, looking for reputable exchanges that support your altcoin is a good way to gauge whether the project is reputable.
Technology is more important than hype
As you will see from the following list, there are tokens that have great technology and functionality. A good investment is a project that will provide returns over the long run, so try and assess whether the project is good by the actual technology it is based on. It can’t be stated enough that before investing you should read the whitepaper of the project with a critical eye to discern if the project is valuable or not.
Currently, Cardano is performing very well and with the launch of smart contracts, many are convinced that it is an Ethereum killer. The truth is not so rosy though, and the amount of development by third parties on Cardano is frankly minuscule compared to its rival Ethereum.
With that said, the crypto market moves with emotion, and Cardano has been promising big things for many years now. This means that many still see Cardano as a viable investment, even if it won’t quite reach the heights it is aiming for. Unlike Ethereum, Cardano is already a Proof-of-Stake (PoS) blockchain, which can be considered its one key advantage over Ethereum until it fully moves to PoS with Ethereum 2.0.
Enjin is a token built on the Ethereum network. The project works predominantly as a gaming blockchain that allows users to buy, sell, and create gaming NFTs using the specialized Ethereum token. It has performed consistently well over the years and has partnered with big companies like Microsoft, Samsung, and most recently Blockster.
The price has always held decently as well. Despite its niche market, Enjin has surpassed expectations and currently holds a market capitalization of over $1bn. What’s more, the development team is constantly active and striving for new partnerships and features to grow the brand.
Chainlink is a crypto network that aims to link blockchains and allow developers the ability to transact with each other across multiple blockchains in a secure and decentralized fashion. It has been relatively successful so far and it frequently performs well in bear markets. This makes it a good backup coin for a portfolio.
As a cryptocurrency, it is still in its growth phase and hasn’t been around as long as others on this list. That makes it a valid speculative option.
Like other coins, it is sometimes called an Ethereum killer. The truth is, however, that Chainlink has a unique functionality that is quite different from Ethereum, and the two can co-exist very happily.
Moving on from one Ethereum killer to another (there seems to be a trend emerging here), Polkadot is another cryptocurrency that promises smart contract functionality with specific tools and features to help developers build their own blockchains on the Polkadot network. Like Cardano, Polkadot is the brainchild of an original Ethereum founder (Gavin Wood created Polkadot, and Cardano is Charles Hoskinson’s project).
Interestingly, Polkadot currently has more functionality for developers than Cardano. It also has some of the Chainlink features (cross-chain support), which makes it a promising project and an attractive speculative investment.
Ethereum has been around for a long time, and during that time it has rolled out many successful upgrades and supported tens of thousands of developers in creating their own blockchains through ERC20 tokens (see Enjin above).
Some of these tokens are worth tremendous amounts of money, and there are some incredible projects on the Ethereum network. Ethereum is considered the home of DeFi and NFTs. It has also successfully implemented a hard fork of the blockchain that allows the burning of ETH, which will in future lead to it becoming a deflationary coin.
However, things aren’t perfect with Ethereum, and transaction fees on the current Proof-of-Work system are sometimes eye-wateringly high. This is often seen by new investors as a big barrier to entry. Ethereum is a victim of its own success – with the growth in adoption and usage, the demand on the blockchain increases and fees rise accordingly.
To combat this, Ethereum is moving to the PoS consensus that will allow the network to better control the fees and bring the fee structure in line with other PoS blockchains. This transition is a complex one and although users can currently stake their ETH, the network itself isn’t expected to move to PoS until the end of this year at the earliest.
If the transition to Ethereum 2.0 goes smoothly and the new functionality is in fact as attractive as promised, Ethereum might just kill all the “Ethereum killers”.
However, it does not mean that investing in all other altcoins is not profitable. Ethereum is not the only crypto that is developing and growing. Who knows, maybe Cardano or Polkadot will roll out an update that will change the market landscape and form a new crypto leadership board. Just remember to keep a close eye on crypto news.
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