What Are Cryptocurrencies?
Before taking a closer look at some of these alternatives to Bitcoin (BTC), let's step back and briefly examine what we mean by "cryptocurrency" and "altcoin":
A cryptocurrency, broadly defined, is virtual or digital money that takes the form of "tokens" or "coins."
The cryptocurrencies modeled after Bitcoin are collectively called altcoins and have sometimes tried to present themselves as modified or improved versions of Bitcoin.
The "crypto" in cryptocurrencies refers to the cryptographic technics (techniques and technology) that allow for creating and processing digital currencies. Alongside this important "crypto" feature is a common commitment to remaining decentralized; cryptocurrencies are typically developed by teams who build in mechanisms for issuance and other controls.
Cryptocurrencies are almost always designed to be free from government manipulation and control—although, as they have grown more popular, this foundational aspect of the industry has dwindled somewhat through regulatory developments.
Types of Altcoins
Cryptocurrencies
Cryptocurrencies are intended for payments, transmitting value (akin to digital money) across a decentralized network of users. Many altcoins (i.e., those that are not Bitcoin or sometimes Ethereum) are classified in this way.
Tokens
There are also blockchain-based tokens that are meant to serve a different purpose from that of money. One example could be a token issued as part of an initial coin offering (ICO) that represents a stake in a blockchain or decentralized finance (DeFi) project. If the tokens are linked to the value of the company or project, they can be called security tokens (as in securities like stocks, not safety).
Other tokens have a particular use case or function. Examples include Storj tokens, which allow people to share files across a decentralized network, or Namecoin, which provides a decentralized Domain Name System (DNS) service for internet addresses.
Ethereum (ETH)
The first Bitcoin alternative on our list, Ethereum (ETH), is a decentralized software platform that enables smart contracts and decentralized applications (dApps) to be built and run without downtime, fraud, control, or interference from a third party. The goal behind Ethereum is to create a decentralized suite of financial products that anyone in the world can freely access, regardless of nationality, ethnicity, or faith.
This aspect makes the implications for people in some countries more compelling because those without state infrastructure and state identifications can get access to bank accounts, loans, insurance, or a variety of other financial products.
Ethereum uses ether, its platform-specific cryptographic token. Ether (ETH) is used to pay validators who stake their coins for their work for the blockchain, as an off-chain payment method, and as an investment by speculators.
Tether (USDT)
Tether (USDT) was one of the first and most popular of the stablecoins—alternative cryptocurrencies that aim to peg their market value to a currency or other external reference point to reduce volatility. Because most digital currencies, even major ones like Bitcoin, have experienced frequent periods of dramatic volatility, Tether and other stablecoins attempt to smooth out price fluctuations to attract users who may otherwise be cautious.
Tether’s price is tied directly to the U.S. dollar because the developers claim to hold one U.S. dollar (or an equivalent) for every circulating USDT. This system allows users to more easily make transfers from other cryptocurrencies back to U.S. dollars in a more timely manner than actually converting to standard currency.
Launched in 2014, this cryptocurrency allows individuals to utilize a blockchain network and related technologies to transact in traditional currencies while minimizing the volatility and complexity often associated with digital currencies.
On Oct. 6, 2024, Tether was the third-largest cryptocurrency by market capitalization, with a market cap of $119.70 billion and a per-token value of $0.999.
Binance Coin (BNB)
Binance Coin (BNB) is a utility cryptocurrency that operates as a payment method for the fees associated with trading on the Binance Exchange. It is the fourth-largest cryptocurrency by market capitalization.
Those who use the token as a means of payment for the exchange can trade at a discount.
Binance Coin’s blockchain is also the platform on which Binance’s decentralized exchange operates. The Binance Exchange was founded by Changpeng Zhao and is one of the most widely used exchanges in the world.
Binance Coin was initially an ERC-20 token that operated on the Ethereum blockchain. It eventually launched a mainnet and uses a PoS consensus model. On Oct. 6, 2024, Binance Coin had a $82.70 billion market capitalization, with one BNB valued at around $567.00.
Solana (SOL)
Founded in 2017, Solana is a blockchain platform designed to support decentralized applications (dApps). Also referred to as an 'Ethereum killer,' Solana performs many more transactions per second than Ethereum. Additionally, it charges lower transaction fees than Ethereum.
Solana and Ethereum can utilize smart contracts, which are essential for running cutting-edge applications, including decentralized finance (DeFi) and non-fungible tokens (NFTs).
The cryptocurrency running on the Solana blockchain is called Solana (SOL). Since its inception, its price has risen tremendously. Solana had a market capitalization of $68.4 billion and was valued at around $145.95 on Oct. 6, 2024, making it the fifth-largest cryptocurrency by market cap.
USD Coin (USDC)
Another stablecoin, USD Coin, also pegs its price to the U.S. dollar using fiat-collateralized reserves, which means it holds an amount of fiat currency equal to the amount of USD Coin in circulation.
USD Coin was launched in 2018 by the Centre Consortium, which at one time consisted of Circle and Coinbase, which is no longer part of the project. Because Circle is based in the U.S., it is subject to regulation, making USDC a regulated stablecoin.
As of Oct. 6, 2024, USD Coin had a market cap of $35.57 billion and a price per coin of $1.00.
XRP
XRP is the native token for the XRP Ledger, which was created by Ripple in 2012 as a payment system. The XRP Ledger uses a consensus mechanism called the XRP Ledger Consensus Protocol, which doesn't use proof-of-work or proof-of-stake for consensus and validation. Instead, client applications sign and send transactions to the ledger servers. The servers then compare the transactions and conclude whether they are candidates for entry into the ledger.
The servers then send the transaction candidates to validators, who work to agree that the servers got the transactions right and record the ledger version.
On Oct. 6, 2024, XRP had a market cap of about $30.2 billion and traded around $0.53.
Dogecoin (DOGE)
Dogecoin (DOGE), seen by some as the original “memecoin,” caused a stir in 2021 as its price skyrocketed. The coin, which uses an image of the Shiba Inu as its avatar, is accepted as a form of payment by some major companies.
Dogecoin was created by two software engineers, Billy Markus and Jackson Palmer, in 2013. Markus and Palmer reportedly created the coin as a joke, commenting on the wild speculation of the cryptocurrency market.
As of Oct. 6, 202, Dogecoin’s market capitalization was $16.46 billion, and one DOGE was valued at around $0.11, making it the eighth-largest cryptocurrency.