Since the beginning of 2017, cryptocurrencies have been what dreams are made of for those with the wherewithal to invest in them. Though exceptionally risky and largely unproven, the combined value of all digital currencies soared by more than 3,300% last year to $613 billion, and just weeks ago, they touched as high as $835 billion. In just one year, investors were treated to what amounts to a lifetime of gains.
The rise of cryptocurrencies has a lot to do with the emergence of blockchain technology. Blockchain is the digital, distributed, and decentralized ledger responsible for logging all transactions without the need for a financial intermediary. It's designed to fix a number of perceived issues with the current banking system, including excessive transaction fees and long wait times for payments to settle. With blockchain, transactions have the opportunity to settle almost instantly (even with cross-border payments), and there's no bank (i.e., third-party) involvement, meaning there's the real chance of lower transaction fees.
To a lesser extent, investors are also excited about the potential for using virtual currencies in place of traditional paper currencies to buy goods and services.
These digital currencies are turning heads among big businesses
But the long-term value of cryptocurrencies will likely be determined by their ability to land partnerships and deals with brand-name businesses. The easiest way for digital currencies to distance themselves from what are now nearly 1,500 investable cryptocurrencies is by doing well through brand-name partnerships. The following five cryptocurrencies have done just that.
No surprise here. Bitcoin, the world's oldest and most valuable cryptocurrency by market cap, has more than a handful of brand-name partners willing to accept its tokens as a form of payment.
It all began in 2014 with online home-goods retailer Overstock.com, which is itself an ambassador of digital currency acceptance among retailers. Bitcoin also added Microsoft (NASDAQ:MSFT), DISH Network (NASDAQ:DISH), PayPal, and Intuit as payment partners that year. Microsoft allows users to purchase content in the Windows and Xbox stores using bitcoin, while DISH announced its intention to accept the most popular digital token as a form of payment for its content services. Since adding these partners, bitcoin has continued to expand its merchant network.
Unlike the other cryptocurrencies on this list, bitcoin is less concerned with marketing its blockchain technology to enterprises, and has focused its efforts on signing up merchants and replacing traditional paper currencies. Nevertheless, it's responsible for putting blockchain technology in the limelight, and its blockchain is the basis of evolution for many of the proprietary blockchains we see being developed today.
If there were a trophy to hand out for most brand-name involvement, Ethereum would almost certainly have to win. Despite its Ether token having little use at the moment beyond paying for transaction fees on its network, Ethereum has a small army of big businesses currently testing a version of its blockchain.
Formed in February 2017, the Enterprise Ethereum Alliance includes approximately 200 organizations from a variety of industries that are testing a version of Ethereum's blockchain in demos and small-scale projects. These brand-name testers include JPMorgan Chase, Microsoft, Intel, Mastercard, Credit Suisse, and BP (NYSE:BP), to name just a few. In particular, BP is testing the capabilities of Ethereum's blockchain to expedite energy futures trading settlements.
Ethereum was also the first major cryptocurrency to signal to the world that blockchain has applications beyond just currency. Tech and retail applications of Ethereum's customizable blockchain can aid in supply chain management and network oversight.
The secret sauce to Ethereum's success are its smart contracts. These are customizable protocols that help to verify, facilitate, or enforce the negotiation of a contract. Since paper contracts are viewed as legally flimsy and inefficient, legally binding digital records via blockchain that are backed by smart contract protocols are quite appealing to big businesses.
One virtual currency that emerged from bitcoin's shadow in a big way last year was Ripple. It was among the top-performing cryptocurrencies in 2017, with its XRP coin gaining more than 35,500%. Since mid-November, Ripple, which has marketed its blockchain technology to global financial service companies, has announced two partnerships with brand-name businesses.
In mid-November, Ripple announced that American Express (NYSE:AXP) and Banco Santander (NYSE:SAN) would be using its blockchain in a real-world cross-border payment test. American Express users who send noncard payments over AmEx's FX International Payment network to U.K. Santander accounts will have those transactions processed through Ripple's blockchain. Rather than these payments taking up to five days to clear, Ripple is figuring on virtually instant settlements.
Then, earlier this month, Ripple announced a partnership with money transfer service MoneyGram International (NASDAQ:MGI) that's designed to expedite the time it takes to move money around the globe. MoneyGram should be able to convert the currency of the origin country to XRP coins, then convert those coins into the currency of the destination country, all within a matter of seconds. Plus, Ripple's transactions cost just a fraction of a penny, which could be a major selling point over the high transaction fees of rival Western Union.
With an exceptionally quick transaction speed relative to bitcoin and Ethereum, you could rightly say that Ripple is making waves.
Though it stayed under the radar for much of 2017, Stellar exploded onto the scene in a big way in October when it announced blockchain partnerships with both computing giant IBM (NYSE:IBM) and KlickEx, a Polynesian currency exchange service.
Unlike Ripple and its focus on big banks, Stellar seems perfectly comfortable going after multinational businesses. Its current partnership with IBM entails having a dozen big banks in the South Pacific region deploy Stellar's blockchain technology in order to quickly settle and validate payments from customers. IBM generates tens of billions of dollars from overseas clients, but these payments can often take days to clear since they're cross-border transactions. Stellar's blockchain is designed to proof these payments in a matter of seconds, perhaps improving order efficiency and cash flow for Big Blue.
Though not publicly traded, global financial management services firm Deloitte also has a working partnership with Stellar. Back in July 2016, Stellar announced a partnership with Deloitte to develop custom-built mobile applications, as well as a digital banking platform for businesses, which included invoice tracking and reference numbers. And, as usual, Stellar promised transaction resolution in around five seconds.
If it can scale and maintain these quick processing times, Stellar may soon give the big boys (bitcoin, Ethereum, and Ripple) a run for their money.
But if you want to really dip below the radar, yet still find a cryptocurrency capable of landing big-name partners, Qtum is the digital currency to dig into. What makes Qtum's blockchain so attractive is that it combines bitcoin's popular core infrastructure with Ethereum's Virtual Machine and smart protocols. It basically takes the most popular features of both cryptocurrencies, adds in mobile applications, and ensures that the network will remain backward compatible with existing bitcoin gateways and Ethereum contracts despite future upgrades.
This month, the Qtum Foundation announced that it had partnered with two major Chinese companies. First, Qtum is working with 360 Finance, a subsidiary of the now-private Qihoo 360. If the name sounds familiar, it's because Qihoo 360 is the company behind the 360 Search engine in China, which has about 10% market share (third-highest in China). The Qtum Foundation, along with the 360 Blockchain Research Center and BTN Foundation, will work to develop next-generation smart contract solutions.
The second partnership, which was announced a mere day after the first, is with Baofeng Bokocloud. Though that's not a name folks in the U.S. might be familiar with, Baofeng's media player is one of the most popular video and streaming services in China, with over 200 million users. The two will work to achieve the world's first blockchain consensus network service, with Baofeng using Qtum's blockchain to strength its copyright protections and to handle payments made by users to the company.
Qtum has suggested that these are two of five major partnerships it'll announce in 2018.