There are so many cryptocurrencies now it’s hard to keep them straight. Bitcoin was the first cryptocurrency, which went live around 2009. Bitcoin uses blockchain technology to transact as an open source community network, without an official leader or administrator. So far it is the most widespread, most secure and has the most diverse participants out of all the cryptocurrencies. According to CoinMarketCap, by Monday bitcoin’s global market cap was worth more than $247 billion.
It is possible to argue and are the two altcoins, aka alternative coins, that are most similar to bitcoin. They have grassroots contributors that cooperate with nonprofit foundations without taking direction from them. Both the bitcoin and litecoin communities are experimenting with something called the Lightning Network, which creates a whole new layer for unprecedented features and cross-chain transactions. It will be a long time until this scaling solution is really implemented on the bitcoin network.
In the meantime, the important thing to remember about altcoins is they are not all bitcoin “rivals.” Litecoin and bitcoin have a symbiotic relationship. Some tokens serve very different functions altogether. There is no beef between monero and bitcoin, only between a few individual fans who may get in fights on social media. To the contrary, cryptocurrency communities often overlap and learn from each other.
Aside from bitcoin and its younger cousin litecoin, there are many other blockchain-based tokens with even more technical variations. Here are the top altcoins of the moment:
Ethereum appears to be the second-most diverse cryptocurrency network in the world. It launched around 2015. There are many cryptocurrencies that use the Ethereum network. Ethereum-based tokens are now a popular form of fundraising in the tech industry. But if someone refers to a token itself as “Ethereum,” they are probably referring to ether tokens, the network’s standard currency. According to CoinMarketCap, ether tokens currently sell for more than $1,099 a piece and the network’s global market cap exceeds $106 billion.
Unlike bitcoin, which was founded anonymously, the creators of both litecoin and Ethereum are publically involved with their respective projects. They have even become tech celebrities in their own right. “Ethereum is at this time the hands-down winner on sheer scale, due to first mover advantage, super effective marketing, and the savant-force of its founder, Vitalik Buterin,” Rik Willard, CEO of Global Blockchain Technologies Corporation and founder/managing director of a New York City-based federation of over 50 blockchain companies called Agentic Group, told International Business Times. Buterin is a Russian-Canadian developer who invented Ethereum when he was 19. He is now a leading member of the nonprofit Ethereum Foundation.
Ethereum’s biggest competition, although it is also a comrade in this game of tokens, may be the Chinese business-oriented cryptocurrency NEO. “I feel that NEO is being built for applications that are prepared to act as a seamless bridge to the future which may be opposed to some of the more ardent Ethereum purists who seem to want to build the future in a more immediate and disruptive sense,” Willard said.
If bitcoin is the gold standard of cryptocurrency, litecoin is the silver counterpart. If bitcoin is a hundred dollar bill, best suited for big purchases, litecoin makes up the coins and smaller bills. You can always break up a bitcoin into smaller pieces, just like you can go to a store and spend a $100 even if the clerk probably won’t enjoy handing out that much change. (You can buy a small fraction of a bitcoin!) Yet the reason silver and gold are better comparisons is because litecoin and bitcoin are still different cryptocurrencies.
Technically, litecoin and bitcoin are extremely similar. So it is easy for any payment processor or scaling solution that works with one currency to prove compatible with the other network as well. Litecoin was created by Google alumni Charlie Lee, who now works full-time developing the cryptocurrency to complement bitcoin. As of Monday, CoinMarketCap estimated a litecoin token sold for around $252 thanks to a global market cap well over $13 billion.
Charlie Lee invented litecoin, which works cheaper and faster than bitcoin. Photo: Charlie Lee
Monero is a privacy-centric cryptocurrency run by a grassroots community. It is socially very similar to bitcoin, with the added bonus of anonymous transactions. Another comparison to bitcoin is that it relies on cryptocurrency miners. Mining is what makes new tokens. Some cryptocurrencies, like Stellar and IOTA, are pre-mined. This means tokens are distributed and community members around the world don’t generally make new tokens. Some people believe the fact that both bitcoin and monero involve miners in the ecosystem makes these currencies more diverse and robust. CoinMarketCap estimates monero tokens are selling for roughly $380 with a market cap of almost $6 billion.
The San Francisco tech company Ripple makes a token called XRP, which sold on Monday for $2.51 per token with a market cap above $97 billion. Ripple recently tweeted that three of the world’s top five global money transmission companies “plan to use XRP in payment flows in 2018.”
The XRP network does not rely on miners like monero and bitcoin’s communities both do. This currency is largely controlled by the parent company Ripple. However, the company is investing heavily in community outreach and growing partnerships.
Ripple CEO Brad GarlinghousePhoto: Eric Piermont/AFP/Getty
Stellar came out around 2014 and established itself as a nonprofit foundation developing an open source project with the stated goal of enabling financial inclusion for marginalized communities. Theoretically, if we accept the idea that cheaper business transactions trickle down to increase access, this is slightly more aligned with the widely accepted values of decentralization. The network’s tokens are called lumen.
“This is a lot of the creators from Ripple who were unhappy with how the Ripple project went. And so they went off and they made Stellar, which means it shares some technical qualities,” Peter Van Valkenburgh, director of research at the nonprofit Coin Center, told IBT. “It’s a subjective or social-based mechanism where nodes create a list of those that they trust instead of it being proof of work [like bitcoin] or proof of stake.”
This is the fundamental difference between the bitcoin network and cryptocurrencies like XRP and Stellar. It’s almost as if XRP has a VIP guest list for the network validators it thinks are most important. If those nodes are compromised, the network is vulnerable.
A Stellar spokesperson told IBT that Stellar does not have the exact same node system as XRP. “Stellar instead uses a decentralized mechanism in which each validator chooses what are called quorum slices,” the spokesperson said in an email. “One big difference is that the system remains safe even if different people choose very different quorum slices. Hence, rather than a VIP list, every participant has its own idea of whom to depend on.”
To the contrary, the bitcoin network doesn’t have any guest list or slices. Everyone with the technical means to contribute can do so with equal access. You can literally operate a bitcoin node with a mobile satellite device and a power generator in the middle of nowhere, no Wi-Fi needed.
There are so many ways to access the bitcoin network, plus so many diverse contributors, that it offers a type of crowd-fueled security. These younger tokens have a long way to go until they could offer comparable security. Plus, there has been a lot of academic research into bitcoin’s theoretical properties. We know the many ways it is invulnerable to attacks. There has been far less peer-review of Stellar’s technical underbelly compared to bitcoin, Ethereum or even startup-driven altcoins like Zcash. It will take time to see how, if at all, these ecosystems mature.
Stellar is at least on its way. Stanford professor David Mazières is the chief scientist of the Stellar Development Foundation. According to Brit Yonge, cofounder of a startup called Lightyear.io that works with the Stellar network, Stellar was originally a fork of Ripple but it no longer shares any code with Ripple at all.
Great 20 minute video by @dmazieres on the @StellarOrg Stellar Consensus Protocol. https://t.co/sy69fuP6rp
— Lisa Nestor (@nestorious828) December 19, 2017
Regardless, Stellar is still an institutional financial services network with a bottleneck source of token distribution, the foundation itself. Lumen is a pre-mined token. “At the genesis of the Stellar Network, 100 billion lumens (XLM) were created as specified in the protocol,” Yonge told IBT. “As part of its custodial mandate, the Stellar Development Foundation is entrusted to oversee that the vast majority, 95 billion, of the lumens are distributed to the world.”
Yonge said the Stellar network could be adopted by financial institutions around the world. “This would be mean payments between licensed money service businesses on behalf of someone sending money home from France to Philippines or India, would clear and settle in almost real-time,” he told IBT. Companies such as IBM, Deloitte, and the Kik Foundation are all experimenting with Stellar. On Monday, lumen sold for roughly $0.65 each, supporting a market cap of more than $11 billion.
“Stellar and Ripple are still blockchains under the hood,” Bitcoin Core developer Peter Todd told IBT. “The question is really how do they come to consensus. That is the one overarching difference. Ripple, the way that they do it is slightly more centralized. Stellar kind of hides that a little. But it is still ultimately centralized because of the ‘you need unique node lists’ question. There’s really not that much difference [compared to bitcoin] except for this massive consensus issue.”
Celebrating with our new @StellarOrg partner @GOPAX_kr in Seoul, Korea #blockchain#fintech#cryptocurrencyhttps://t.co/7vDZVmNVKUpic.twitter.com/5g1w5Fv0pk
— Stellar (@StellarOrg) December 6, 2017
Right now the American market is really fixated on the controversy surrounding Ripple, the cryptocurrency industry’s newest Silicon Valley giant. But Willard is more interested in global blockchain trends. Africa and Asia are home to some of the most impactful aspects of this new cryptocurrency market.
“I think that the question of Cardano vs. XRP vs. NEM, while valid, is somewhat limiting and reflective mostly of the worldview of the West-leaning banking community, that is to say, incumbents,” Willard told IBT. “I’m much more interested in the looming standoff between Ethereum and NEO, either of which may well produce the platform winner for the development of PoS-based dApp ecosystems.”
It is still early to say how issues such as basic security and scalability will play out for all these cryptocurrencies. There are many stars that need to align in order for these platforms to gain significant mainstream traction. Only time will tell which tokens will survive the decade.
Update: This story was updated to include feedback from Stellar about how their system is different from the XRP ledger. The Stellar team also claims their network can be used to trade any type of asset, from dollars to niche startup tokens.