Though they may have begun the year as a taboo investment, cryptocurrencies as a whole have taken center stage and captured the attention of investors worldwide. With more than 1,300 virtual currencies combining for a market cap of $336 billion, the aggregate increase since the beginning of the year, through Dec. 3, is about 1,800%. Mind you, it would take decades for the stock market to generate historically similar returns for investors.

It's all about blockchain

What's really come into focus is the potential for blockchain technology, which underlies most cryptocurrencies. Blockchain is the digital and decentralized ledger than records all transactions without the need for a financial middleman, like a bank. Because these networks are open source, altering data would prove exceptionally difficult. Also, since they're decentralized, the ability of cybercriminals to disrupt a network is pretty low.

Bicycle chains with binary code linked together to resemble blockchain.

Image source: Getty Images.

And that's still not all. Blockchain technology, potentially in cooperation with virtual currencies, can aid in the facilitation of quicker settlement times. In some cases, we could be talking about instantaneous overseas transactions from person-to-person or businesses-to-business.

Because of these attributes, businesses are chomping at the bit for the opportunity to test or incorporate blockchain technology in their payment platforms. And as a result of this excitement, cryptocurrency valuations have gone through the roof.

15 virtual currencies with billion-dollar market caps

As of Dec. 3, 15 unique cryptocurrencies were now sporting a market cap in excess of $1 billion. Mind you, excluding bitcoin, the total market cap of every other cryptocurrency in the world as of Jan. 1 was just $2.48 billion.  That's quite the performance in just 11 months' time. Here are the biggest cryptocurrencies in the world today:

  1. Bitcoin ($185.8 billion)
  2. Ethereum ($44.3 billion)
  3. Bitcoin cash ($26.1 billion)
  4. Ripple ($9.7 billion)
  5. Dash ($5.9 billion)
  6. Litecoin ($5.4 billion)
  7. Bitcoin gold ($5.3 billion)
  8. IOTA ($5.2 billion)
  9. Cardano ($3.3 billion)
  10. Monero ($3 billion)
  11. Ethereum Classic ($3 billion)
  12. NEM ($2.4 billion)
  13. NEO ($2.4 billion)
  14. EOS ($1.9 billion)
  15. Stellar Lumens ($1.6 billion)
A physical gold bitcoin lying atop a messy pile of hundred dollar bills.

Image source: Getty Images.

It probably comes as no shock here that bitcoin dominates, with more than half of the aggregate cryptocurrency market cap, and Ethereum firmly hanging on to second place. Bitcoin is the world's first major cryptocurrency to be traded, so it's had a clear first-to-market advantage. It also has the largest merchant base of any digital currency, and has easily attracted the highest average daily trading volume.

But Ethereum shouldn't be counted out for the top spot in terms of market cap. Whereas bitcoin has primarily focused its attention of being a peer-to-peer payment facilitator, Ethereum has focused its efforts on attracting businesses to its blockchain. In particular, Ethereum has special protocols written into its blockchain known as "smart contracts" that help facilitate, verify, or enforce the negotiation of a contract. It's this distinguishing factor that could set Ethereum apart from bitcoin and perhaps allow it to surpass bitcoin's market cap one day. 

Bitcoin and Ethereum had better be wary of their competition

Despite bitcoin and Ethereum comprising about two-thirds of the aggregate digital currency market cap, these two juggernauts should be fully aware that other virtual currencies are making waves.

For example, American Express (NYSE:AXP) and Banco Santander (NYSE:SAN) recently announced a partnership that'll see both banking giants testing international real-time payments to U.K. Santander ban accounts across American Express's FX International Payment network using Ripple's blockchain technology. They key word here is "real-time" payment potential, and the future possibility of Ripple's virtual currency, the XRP, to play a role in further speeding up payments for the financial services industry. 

A physical silver and gold Litecoin token.

Image source: Getty Images.

Litecoin, which has been referred to as "bitcoin lite" by some folks in the crypto-investing community, has been focusing its attention squarely on its payment potential. Recent upgrades to its blockchain that should boost capacity and reduce settlement times could be just what it needs to attract merchants. And like bitcoin, Litecoin has a fixed number of coins that can be mined (84 million). 

Even the newest member of the billion-dollar list, Cardano, could make a run at bitcoin's throne. The previously thinly traded Cardano has more than tripled in value over just a seven-day stretch (through Dec. 3) as a result of having its virtual currency, Ada, listed on cryptocurrency exchange Binance. More importantly, Cardano brings something unique to the table with its blockchain. According to BanklessTimes.com, Cardano's blockchain is the very first to use a "provably secure, proof of stake algorithm." 

Cryptocurrency investors need to keep this in mind

The emergence of Cardano, and the big gains we've seen in so many other cryptocurrencies, serves as a reminder that the barrier to entry in developing blockchain technology and bringing new virtual currencies to market is incredibly low. That's a significant worry for bitcoin, which may not be safe on its perch.

A risk dial turned to its maximum setting.

Image source: Getty Images.

In addition, there are no guarantees that bitcoin can remain the go-to payment facilitator, or that it's blockchain will emerge as the preference for businesses. We're seeing a lot of unique approaches to blockchain, and businesses seem more than willing to test the blockchain of one of bitcoin's competitors, or even develop their own.

We also have no clue just how quickly businesses will adopt blockchain. Sure, we're seeing plenty of pilot programs and small-scale tests, but that doesn't signal whether businesses will quickly adopt blockchain technology. Investors are notorious for overestimating when new technology will be adopted, and it wouldn't surprise me if we see the same thing here.

Long story short, expect volatility among cryptocurrencies to remain exceptionally high, and don't be shocked if this list of the 15 largest virtual currencies looks a lot different in just a few months' time.

Sean Williams has no position in any of the stocks mentioned. The Motley Fool recommends American Express. The Motley Fool has a disclosure policy.