Even when taking into account the recent swoon in cryptocurrency market caps, no asset class has been more impressive since the beginning of 2017. Over a nearly 15-month stretch, the aggregate value of virtual currencies has jumped from less than $18 billion to north of $334 billion, an increase in value of around 1,900%. Comparatively, the stock market has gained 7% annually, inclusive of dividend reinvestment and when adjusting for inflation.
Bitcoin is often heralded as leading the charge higher for the virtual currency marketplace. Since its trading debut in 2010, bitcoin has rallied from less than $0.01 to a price of $8,650 per token as of late Sunday, March 25, 2018. Its $147 billion market cap accounts for almost 44% of the aggregate $334 billion crypto market cap, giving it particularly strong influence over this burgeoning asset class.
These cryptocurrencies are more promising than bitcoin
However, bitcoin also has a blockchain network that's notoriously slow relative to almost every other large cryptocurrency, meaning its upside from here on out may be limited. While cryptocurrencies as a group offer no guarantees, and their market caps may fall further, I'd suggest that the following five virtual currencies offer far more long-term promise than bitcoin at this point.
Some would suggest that Ethereum offers the same sluggish network concerns as bitcoin, but the fact remains that Ethereum is built to handle currency and noncurrency blockchain applications, whereas bitcoin is strictly confined to currency-only applications.
As of October 2017, approximately 200 organizations in the Enterprise Ethereum Alliance from around the world were testing a version of Ethereum's blockchain network in a host of industries and sectors. This network could prove pivotal to monitoring supply chains, expediting settlements for energy trading platforms, creating digital IDs, and so much more.
What makes Ethereum so exciting, other than its bounty of partnerships, are its implementation of smart contracts -- protocols that verify, facilitate, or enforce the negotiation of a contract. Smart contracts are completely customizable by the business using them, meaning they can be complex or simple, depending on the needs of the business. This customization, transparency, and the binding nature of digital contracts make them the perfect choice for global businesses.
Ripple, on the other hand, is all about appealing to financial institutions. Blockchain itself is believed to have its greatest impact on the financial services industry by expediting settlement times, as well as removing banks from the equation, thus reducing transaction fees in the process. According to Ripple, its transactions process within a matter of seconds – even cross-border payments – and they cost just a fraction of a penny.
If that's not intriguing enough, Ripple already has five brand-name partnerships under its belt. One of the more recent includes a tie-up with money transfer service MoneyGram International (NASDAQ:MGI). MoneyGram plans to use Ripple's XRP coin via the xRapid network to expedite payment flows. Imagine this: A U.S. consumer wants to send money to a friend or family member in Mexico through MoneyGram. Through xRapid, U.S. dollars can be converted into XRP coins, which can then be changed to pesos and settled for the receiver to pick up in Mexico. The time to complete this transaction could be mere seconds, which would give MoneyGram a serious advantage over its rivals.
Ripple may have a lot to prove, but its list of brand-name partners can't be overlooked.
Another cryptocurrency worth keeping your eyes on is Stellar and its Lumens coin (the XLM). Stellar, like Ethereum, employs the use of smart contracts on its blockchain, which allows businesses to customize blockchain networks to fit their needs. And like Ethereum, Stellar is able to offer its blockchain services in currency and noncurrency applications. According to Stellar, its transactions usually settle within two to five seconds.
It first gained major notoriety in October 2017 when IBM (NYSE:IBM) chose its Lumens coin and payment facilitator KlickEx for its South Pacific blockchain project. IBM is testing its blockchain in 12 major South Pacific region banks, but is using Stellar's Lumens coin as the intermediary currency, much in the same way Ripple's XRP is being used as an intermediary in its MoneyGram partnership. The expectation is IBM's blockchain will settle these cross-border payments considerably faster than under the current banking system.
Additionally, ICICI Bank in India piloted a project that involved processing transactions over Stellar's blockchain back in 2016. Considering how underbanked the Indian population is, blockchain could be a game changer. Stellar certainly appears to have what it takes to outperform bitcoin.
If there's a cryptocurrency that could truly dazzle investors, it's Nano. Based on sheer speed, virtually nothing touches the Nano blockchain, which can process up to 7,000 transactions per second. Assuming developers get even better infrastructure in place, Nano's processing speeds could head even higher and one day rival primary payment processors like Visa.
The secret to Nano's blockchain is its block-lattice structure. Rather than having a central blockchain that requires consensus from the community to settle transactions and make changes, each user has control over their own blockchain. Without the need for a large community consensus, transactions can be processed exceptionally fast.
Perhaps the only oddity with Nano's blockchain is that each transaction requires twice the effort. Rather than processing a payment as a single transaction, the fact that every user has a separate blockchain means the need to remove funds from one account, then have the receiver of the funds accept it. It's a bit tedious, but these processing speeds are extremely promising.
Continuing the trend of cryptocurrencies employing the use of smart contracts is Qtum. The China-based Qtum actually takes the best aspects of bitcoin's infrastructure and Ethereum's Virtual Machine (including smart contracts) and brings them together into a unique network with its own proprietary twists.
The reason Qtum shows more promise than bitcoin is its recent partnerships with major Chinese business. In January, Qtum announced that it had partnered with 360 Finance, a subsidiary of Qihoo 360, the company behind China's third-largest search engine by market share. 360 Finance, Qtum, and BTN Foundation are planning to work together to create next-generation blockchain solutions.
Just a day after its partnership with 360 Finance was announced, Qtum partnered with Baofeng Bokocloud. Baofeng is the name behind a popular streaming and video service in China with over 200 million active users. While Baofeng plans to use Qtum's blockchain to shore up copyright protections for artists, it's the fact that Baofeng has pledged to run over 50,000 nodes on its Bokocloud service that's most exciting. These added nodes may give Qtum a level of network scale that puts bitcoin to shame.