With 2017 now in the books, we can officially look back and dub it the "year of the cryptocurrency." Despite the stock market historically taking its seat at the head of the table in terms of wealth creation, it was cryptocurrencies that delivered what could be the single greatest year we've ever seen from an asset class.
When the year began, the aggregate market cap of all cryptocurrencies was just $17.7 billion. However, by late December, this figure had topped $650 billion, representing a better than 3,500% increase in about a year's time.
Bitcoin, the world's most popular and valuable virtual coin by market cap, is perceived to have led the charge higher in cryptocurrencies. It is, after all, the crypto coin most accepted by merchants, and easily the most-traded virtual currency of the nearly 1,400 that can be purchased by investors.
However, truth be told, bitcoin was actually an underperformer last year. It took a backseat to many up-and-coming coins and blockchain players -- blockchain is the infrastructure that virtual coins are built on, and it is responsible for logging all transaction data in a digital ledger -- which wound up gaining a whole lot more on a percentage basis. Heading into 2018, the story is no longer about just bitcoin. Instead, it's about which cryptocurrency could become the next bitcoin, or the next thing to be better than bitcoin.
With this in mind, I'd suggest forgetting all about the highly played-out bitcoin at this point and consider following these 12 cryptocurrencies instead.
Ethereum is the second-largest cryptocurrency in terms of market cap behind bitcoin, and there's a very good reason to pay attention to it rather than bitcoin: big businesses' attraction to its blockchain.
The Enterprise Ethereum Alliance, which was formed early in 2017, currently has 200 organizations testing out a version of Ethereum's blockchain in numerous different industries, demonstrating that its blockchain technology can transcend currency-only applications, which is something bitcoin can't do. In particular, the incorporation of smart contract protocols into its blockchain (smart contracts help to facilitate, verify, or negotiate the enforcement of a contract) makes it a very popular choice among enterprise clients.
Stellar (formerly known as Stellar Lumens) has been hovering between 10th and 20th in terms of largest crypto market cap for a few weeks now. Like Ethereum, Stellar's blockchain is its major selling point, and it similarly incorporates smart contract protocols. However, Stellar has positioned itself to go after corporations, and not just financial service companies.
In October, Stellar announced a partnership with IBM (NYSE:IBM) and KlickEx that'll see a dozen banks in the South Pacific region develop and deploy Stellar's blockchain technology in order to handle the multiple currency payments received from IBM's customers. If successful, Stellar has the capability to scale its blockchain to new regions, which is great news seeing as how IBM generates tens of billions of dollars from overseas clients.
Unlike Stellar and Ethereum, Ripple has a gung-ho mission to become the go-to blockchain for big banks and financial institutions. Its quick transaction-processing times are one reason it was able to snag a partnership with American Express (NYSE:AXP) and Banco Santander (NYSE:SAN) in November. According to the partnership, any non-card payments made via American Express's FX International Payment network to a U.K. Santander account will be routed through Ripple's blockchain and process instantly.
What's more, Ripple's coin, the XRP, could be used as an intermediary in future cross-border partnerships. As an example, if a company paying in Japanese yen sent a payment to the U.K., Ripple's blockchain could instantly convert yen into XRP, then XRP into pounds, cutting out the financial middleman.
NEM and its coin XEM may not flow off the tongue like bitcoin, but XEM ran circles around bitcoin last year, with a gain of more than 30,000% at one point from Dec. 31, 2016, through Christmas Day 2017. Like many of the other names on this watchlist, blockchain is the big reason it's been such a top performer.
NEM, rather than focusing solely on enterprise clients, is all about peer-to-peer payments and transfers, be they retail or enterprise. Being that the NEM Foundation is based in Singapore, it should come as no surprise that its biggest win in 2017 was a September announcement of a partnership between NEM and the Malaysia Digital Economy Corporation (MDEC). MDEC is a government-owned institution that handles digital infrastructure, security, and technology-related laws advisement in Malaysia, meaning it could have significant influence in getting XEM adopted in Southeastern Asia.
Sometimes called "bitcoin-Lite" since it forked from bitcoin back in 2011, Litecoin is an intriguing cryptocurrency to monitor since it appears to hold a number of advantages over bitcoin.
Make no mistake about it, Litecoin is all about becoming the next peer-to-peer payment facilitator like bitcoin. However, it has a founder that's fully dedicated to its development, has a faster block-processing rate that keeps miners intrigued (and rewarded), has a more decentralized proof-of-work algorithm than bitcoin, and perhaps most importantly, it's implemented the SegWit (Segregated Witness) upgrade to its blockchain. This upgrade helps to vastly improve blockchain capacity, while reducing transaction settlement times and fees.
Komodo is a relatively new cryptocurrency to hit center stage, but it brings a whole slew of advancements that virtual coin users and investors are bound to appreciate. Naturally, as is the case with most of these cryptocurrencies, the blockchain is once again the star.
With Komodo's blockchain platform, you have the option of choosing between transparent anonymous transactions (you'll read about the emergence of privacy coins in a moment), with the technology being used to obfuscate the source of those transactions evolving from what cryptocurrency Zcash uses. Komodo also has plans to launch 32 independent, fiat-pegged cryptocurrencies, which may allow for the easiest conversion between fiat and digital currencies that we've ever seen.
Blockchain has been a driving force for IOTA as well, which has moved to as high as fourth in terms of biggest cryptocurrencies by market cap last year. The big catalyst was an announcement in November from the IOTA Foundation, a German nonprofit that oversees the IOTA virtual currency, that it was releasing its Data Marketplace for a two-month demo.
IOTA's Data Marketplace is a setup that'll allow businesses to sell data in order to incentivize data sharing, as opposed to having that data go to waste. Further, this Marketplace is "blockless," meaning transactions on the network can be made for free. This helps to resolve one of the biggest constrains of blockchain technology (transaction fees), and it also brings the potential for scalability to the demo. IOTA has already teamed up with the likes of Accenture and Deutsche Telekom, with ambitions for additional big partners in the future.
Privacy coins, or virtual currencies that beef up protocols designed to protect the privacy and anonymity of a sender (or receiver) of coins, are suddenly all the rage since they speak to the heart of a decentralized cryptocurrency. At the top of that list very well could be Monero, which has gravitated toward being a top-10 cryptocurrency by market cap of late.
What makes Monero so special is its use of ring signatures via its open-sourced protocol known as CryptoNote. Ring signatures act like a group of signers in a joint bank account, but in this instance, the actual signer remains unknown. A one-time spend key, known as a stealth address, is generated by a sender of XMR (Monero's coin), with only the recipient of those funds being able to detect and spend those funds.
Verge, which was just a blip on the cryptocurrency screen a year ago, exploded higher by more than 1,500,000% at one point last year -- and no, there aren't any missing decimal points in there! It, too, is part of the recent privacy coin craze, and it received a nice boost of late following positive commentary from John McAfee, the CEO of MGT Investments and former figurehead by McAfee antivirus software.
The secret sauce for Verge is its use of multiple anonymity-centric networks like I2P and Tor to obscure users' IP addresses and ensure that transactions are untraceable. Verge offers quick transaction settlement times over its blockchain of around five seconds, and it already offers multiple secure mobile wallets, including the Tor Android Wallet for mobile anonymity.
If you want something really unique, put Einsteinium and its aptly dubbed EMC2 coin on your radar. At one point, EMC2 had risen by well over 200,000% during 2017, but it has since pulled back a bit after a parabolic run.
The buzz about Einsteinium is its focus on becoming a charitable fund for scientific, technological, educational, and blockchain-based studies. Every time a block reward is paid out to miners for proofing transactions, the Einsteiunium Foundation receives 2.5% of that reward. Approximately 80% of the funds received goes toward research, with the remaining 20% used for marketing and donations. The Einsteinium community gets to vote every so often on what project they believe should be funded next. And best of all, mining EMC2 is relatively simple compared to other cryptocurrencies, suggesting anyone could potentially get involved.
11. Binance Coin
Want an alternative way to consider taking advantage of the cryptocurrency craze? Consider Binance Coin (BNB), which is the official coin of the Binance cryptocurrency marketplace where the trading of cryptocurrencies (no fiat currencies) takes place. Not only would an investor presumably benefit from an increase in trading volume, but transaction fees on Binance that are paid in BNB as opposed to bitcoin receive a big discount of up to 50% in the year of use, as well as smaller staggered discounts through the first four years.
Furthermore, Binance recently announced plans to buy back up to 100 million BNB in the first quarter of 2018. When a publicly traded company buys back its own stock, it often inflates the value of the remaining shares by making existing shares scarcer. That same ideal could hold true with Binance Coin if up to 100 million BNB are permanently taken out of circulation.
12. Steem Dollars
Last, but not least, if you want something really off the cuff, consider Steem Dollars. Steem Dollars are one of three virtual coins attached to the Steemit social network, which rewards content creators when their work gets upvoted, as well as those folks who do the upvoting of others' work.
Steem Dollars aren't something you can buy on any cryptocurrency exchange. In fact, they can't be traded on any of them. You first have to create popular content on Steemit, and are then rewarded with 50% of your "pay" being in Steem Dollars. What's really neat about Steem Dollars is that they're theoretically pegged to the U.S. dollar to somewhat reduce downside volatility -- but they earn a handsome 10% interest rate per year. Are you earning a 10% interest rate right now on your cash? Probably not! At any time, you can choose to convert your Steem Dollars to Steem, and then cash out those Steem coins for actual U.S. dollars.