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What do Vladimir Putin and Burger King have in common?
For starters, they both have a cryptocurrency named after them. Actually, PutinCoin and Whoppercoin might be the only thing they have in common. But their namesake cryptocurrencies are among the thousands of different virtual currencies making up a growing marketplace grabbing investors’ attention.
Cryptocurrencies like Bitcoin and Ethereum have a growing track record of holding and increasing in value over time, though recent dips have wracked the market, while lesser-known cryptos are considered much more speculative and unpredictable. And while PutinCoin and Whoppercoin belong to a category of cryptocurrencies marked more for their absurdity than their potential as either an investment or cryptocurrency, they show just how unique different types of cryptocurrencies can be.
Here’s Where to Start:
In general, cryptocurrencies can be grouped by utility: What is the purpose of the cryptocurrency? What is its value proposition? What is it for?
“They all have different utilities, they all have different founders who have different visions for where that cryptocurrency is going,” says Mike Uehlein, founder and financial planner of WealthU advisors. Uehlein regularly talks to clients about investing in cryptocurrency.
10 Most Popular Cryptocurrencies
There are thousands of cryptocurrencies, most with very little value and unclear potential. Many advisors recommend investors stick to Bitcoin and Ethereum — if any — and pass on the smaller cryptos.
Leading cryptocurrency news outlet CoinDesk maintains a Coindesk 20 list of the most popular cryptocurrencies currently being bought and sold. This list includes cryptocurrency assets and networks by their most common names. Some, like Bitcoin (BTC), have one name for both the blockchain network and the cryptocurrency. Others, like Ethereum, are named for the broader blockchain network, but have a different name for their associated native cryptocurrency (Ether, or ETC, in the case of Ethereum).
Updated quarterly, the list ranks cryptocurrencies based on dollar volume and other data from third-party cryptocurrency exchanges, where people can buy and sell different cryptocurrencies.
- USD Coin
Note: This top 10 list was last updated — using the Coindesk 20 — on May 26, 2021.
As the first cryptocurrency, Bitcoin (BTC) is also the most popular and highly valued, despite high volatility over the course of its history. Bitcoin was initially created to be used as a digital payment system, but experts say it is still too volatile to be used for that.
Ether (ETH) is the cryptocurrency of the Ethereum network, an open-source blockchain upon which developers can build apps and other cryptocurrencies. It’s also the second largest cryptocurrency by market cap, behind Bitcoin. Ether’s value has risen sharply since its creation in 2013, to nearly $3,000 for one token as of late May, but still lags well behind Bitcoin’s value of nearly $40,000 per coin.
XRP is the cryptocurrency of the Ripple digital payment network. Built for digital payments, XRP touts itself as a faster and more efficient way to power global payments. Ripple and XRP also allow for third-party development on other uses for XRP.
Tether (USDT) is a fiat currency tied to the U.S. dollar. This keeps its value more stable, allowing Tether to present itself as a stable cryptocurrency alternative to cash deposits and withdrawals. Amid high volatility with other cryptocurrencies, Tether’s value hovers around $1 on account of its tie to the U.S. dollar.
Cardano (ADA) uses a technology called Ouroboros, a peer-reviewed blockchain protocol. It describes itself as a more secure and scalable way to maintain decentralization.
Stellar’s native cryptocurrency is the Lumen (XLM). Stellar is designed as an “open network for storing and moving money” that allows people to create, send, and trade digital money. It’s designed to sell and trade all digital monies, not just Stellar’s own associated cryptocurrency, the Lumen — although you’ll need to own some Lumen to make transactions.
Chainlink (LINK) uses “real-world data and off-chain computation while maintaining security and reliability,” according to its website.
Uniswap (UNI) is a decentralized crypto exchange that operates on Ethereum’s blockchain. Its developers promise to get rid of unnecessary intermediaries, which it says gives users more control.
Polkadot (DOT) says its mission includes allowing different blockchains to exchange information and transactions with one another. Its website plays up data and identity security and users being in control.
USD Coin (USDC) describes itself as “the world’s digital dollar.” Created by a global financial firm called Circle, USDC is the result of work that has been invested in by Goldman Sachs, Baidu, and IDG Capital, among others. USD Coin is tied to the U.S. Dollar, which makes its price much more stable than other cryptocurrencies. That stability lends itself more toward digital payments, while other cryptocurrencies have more potential to increase in value as investments (along with more risk of losing value, of course).
Bitcoin Cash is a peer-to-peer electronic cash system, which was the original intention of Bitcoin. The currency allows you to send money anywhere for very low fees.
While each of these top cryptocurrencies is unique in its own way, they all tie into an underlying principle called decentralized finance (DeFi).
Any cryptocurrency that’s not Bitcoin is referred to as an “altcoin.”
In its simplest terms, decentralized finance refers to financial activities conducted without the involvement of a traditional bank.
Think about all of the activities in which you’d normally use a bank or some other financial institution — getting a loan, insurance, investing, even using a credit card. “All of these [activities] are traditional-finance based and have intermediary companies,” says Ollie Leech, learn editor at CoinDesk. “Now people are creating these products in a completely autonomous way with [cryptocurrencies].”
It can seem counterintuitive — where else would you go for a loan, if not an established lender? But that’s one of the appeals to DeFi, says Leech.
In the same way people have increasingly brought “smart” technology into their homes, proponents say cryptocurrency has potential to automate and digitize more and more aspects of the financial system. The appeal of this happening outside the conventional — or centralized — finance system depends on who you ask.
Many Americans may not understand the appeal of a finance system that operates beyond government control. But things can be very different in countries with less financial stability, says Roger Aliaga-Díaz, principal and senior economist with Vanguard Investment Strategy Group. If cryptocurrencies offer as much or more stability as a given national currency, it’s an entirely different equation than if your national currency is the safe and stable U.S. dollar.
Just like there are different types of accounts and tools in conventional finance — from savings accounts to investment accounts to credit cards — that are used for different purposes, different cryptocurrencies can have similarly unique uses in this emerging decentralized finance system.
Instead of going to a bank to draw out a loan, you might “go to a decentralized application that’s not owned or operated by anyone in particular,” says Leech.
Where conventional loans involve humans at a bank who take part in processing, reviewing, and approving loans, a DeFi loan — with funding in the form of cryptocurrency — could run via app on a network like Ethereum with an algorithm processing it. The borrower would put up some cryptocurrency as collateral, which they’d get back minus interest when they repay the loan.
“The code runs autonomously using smart contracts,” Leech says. “So once the developers release the data they’re pretty much hands-off, and everything runs automatically so there’s no intermediary.”
Ethereum’s website offers a comparison chart contrasting decentralized from traditional finance. Along with these technical differences, a big consideration to keep in mind is that the conventional financial system is regulated to serve the interests of everyday customers, while cryptocurrency and decentralized financial systems are largely unregulated, and subject to governance and oversight only by their creators/users.
Unlike the money kept in a bank account, money you have in crypto may not be FDIC insured. Some exchanges offer this insurance while others don’t — something you’ll want to look into before buying crypto from one or another. For exchanges that don’t offer this insurance, there’s no guarantee you will be repaid if there is a hack or the exchange goes out of business.
|Decentralized Finance||Traditional Finance|
|You hold your money||Money held by financial institutions|
|Transfers happen in minutes||Payments can take days to process|
|Transactions are pseudonymous||Financial activity is coupled to your identity (social security number, name, address, etc.)|
|Market is always open||Market closes|
|Built on transparency – anyone can inspect the system||Financial institutions are closed books|
With that in mind, here are some of the broad categories of cryptocurrencies that tend to organize the market.
Digital gold refers to cryptocurrency comparable to real gold in its ability to store and increase in value….