The Top-5 Biggest Cryptocurrencies by Market Cap
We recently published an article on how you can short bitcoin or 5 other cryptocurrencies without actually having to hold the tokens themselves. On the same platform, you can also go long bitcoin, which turned out to be a lot better strategy than shorting it. While we were speculating with our new bitcoin account at eToro, we started to think about which cryptocurrencies are the biggest by market cap, and how do they all differ? While we’re big fans of blockchain as a truly disruptive technology, we’re much less enamored by cryptocurrencies used for marijuana-related workspaces or tokens for our future tow truck needs. In order to see which cryptocurrencies are largely considered the biggest, we can take a look at the constituents of the eToro Crypto CopyFund:
We can then crosscheck that list against a list of all 1,246 cryptocurrencies in existence sorted by market cap. Here’s what the top-5 list of the biggest cryptocurrencies looks like excluding any hard forks (hard forks are when the chain splits into two different instances which in itself is problematic):
|Cryptocurrency||Ticker||Market Cap (billions)||Non-Profit|
The eToro fund contains one extra crypto which is ETC or Ethereum Classic, a hard fork that we’re leaving off our list. Let’s take a closer look at how each of these top-5 cryptocurrencies differs.
Bitcoin epitomizes the whole idea of what a cryptocurrency should be. The protocol and software are published openly (also called open source software) and nobody owns the technology in the same way that nobody owns email. The entire platform relies on everyone involved to form a consensus. Now pay attention to this next part. When people cannot form a consensus, they perform something called a “hard fork” which essentially is just creating two instances of the same currency. It sounds highly troubling because it is. Here is what some expert named Sol Lederer had to say about the whole thing according to an article by The Coin Telegraph:
“What’s deeply troublesome is that these spin-offs sprung from a relatively minor squabble in the Bitcoin community on how to handle the blocksize limit. Instead of coming to an agreement, the community, developers and code are fracturing into different groups. We’re learning that while a Blockchain gives you consensus on a distributed ledger, it does not provide you consensus on the codebase, that is what code to run. This does not bode well for Bitcoin’s future, where it will face new and bigger challenges requiring further upgrades to the codebase.”
That is scary, people. Let’s move on to our next cryptocurrency.
While about a quarter of the size of bitcoin, Ethereum is still 3X the size of the next closest cryptocurrency. Like bitcoin, it’s setup as a nonprofit organization and managed as an open source project. Ethereum is a distributed application platform which means developers can build applications that users will access and interact with using “ether”. The platform supports “smart contracts” which are chunks of code that automatically send money based on certain events happening. The ethereum platform allows you to create applications that reward the developers at the lowest possible level which is kind of cool.
You may have seen in the news recently that one person managed to lock a bunch of people out of their wallets to the tune of $300 million worth of this stuff. Just read today’s article titled $300m in cryptocurrency’ accidentally lost forever due to bug and see how that makes you feel about all your ICO “investments”. That’s not even counting the $225 million in Ethereum that has been stolen from people this year with the average person losing $7,500. All of this just hints at the fragility of this whole thing and does little to instill confidence in the future of cryptocurrencies in general, though blockchain technology continues to hold a great deal of potential in the right hands. Proof of that can be seen in the Enterprise Ethereum Alliance which contains big names from all kinds of industries, names like Intel, BP, Microsoft, UBS, Accenture, and the list goes on.
Here we come across our first startup that has raised traditional funding through VCs like Google, Accenture, and Andreessen Horowitz. Ripple was one of the startups featured in our article on the Top 7 Biggest Blockchain Startups That Are Not ICOs. It’s an open-source technology built on the principles of blockchain with the purpose of facilitating cross border payments. While traditional methods of cross-border payments take 3-5 days, XRP takes 4 seconds and can scale to 50,000 transactions a second (the same throughput as Visa). They’re now going up against the likes of IBM who recently announced their intent to use blockchain for cross-border payments. Looking at their client list shows some serious traction with more than 100 customers to date including the below names:
We’re having a hard time understanding just why this cryptocurrency has risen +2,597% over the past year. Since its sole purpose is to move money around (USD-> XRP -> GBP) , then the value it has at any given time seems irrelevant. Since the coins do not represent any actual equity in the business, it’s hard to see what intrinsic value they actually have.
Update 12/19/2019: Ripple has raised $200 million in Series C funding to expedite hiring and “better serve its growing community of customers and partners.” This brings the company’s total funding to $321.6 million to date.
Yet another “global decentralized currency based on blockchain technology”, Litecoin was created by a former Google employee back in 2011 and is now managed by a non-profit entity called the Litecoin Foundation. It is about 4X faster than Bitcoin and is more expensive to mine. If you’re new to this whole thing, mining is where you exchange computing resources (and consequently electricity) for producing new coins. In the case of Litecoin, there is a final total of 84 million coins that can ever be produced (much like how all cryptocurrencies limit supply). You are supposed to use these coins to buy things, and it seems unclear what merits their $3.4 billion market cap.
It’s around this time that we’re grateful we limited this to the top-5 cryptocurrencies because this is starting to get somewhat boring. We can sense that you’re getting bored too, so here’s a cartoon to amuse you before we move on to our last cryptocurrency:
While Dash throws up the usual “digital cash you can spend anywhere” value proposition, what’s more interesting is that they are the first “self governing and self funding protocol”. The idea is that everything happens based on a consensus, not just what code changes take place, but also how the entire operation is run. Below is an example which shows how this might work:
As people develop on the platform, they get paid, though there are apparently a whole bunch of people working on it for free for whatever reason. (If you like technology and you like working for free, please drop us a line and let’s have a chat.) It claims to the most user-friendly cryptocurrency out there (whatever that means), and it supports instant payments (confirmed in less than a second) and private transactions (ensures your activity history and balances are private). Apparently, this all adds up to a $2.4 billion market cap.
After researching this article, we just felt uneasy. Knowing that minor disagreements are causing hard forks or that one person managed to eff up $300 million worth of Ethereum wallets doesn’t instill a whole lot of confidence from where we’re sitting. Throw in the stories about how ICOs just suddenly lose millions of dollars due to largely unsophisticated methods of theft, and we’re just not seeing much maturity around the whole thing. It’s also very difficult to see why the returns of these cryptocurrencies should all be correlated, which lends more proof to the fact that we’re sitting on a fragile bubble that’s waiting to pop.
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