Historically, the stock market is one of the greatest wealth creators on the planet. There have been short periods of time where housing, gold, or other commodities have outperformed stocks, but no other investment vehicle has delivered a higher average annual return over the long run than the stock market.
But in the short run, cryptocurrencies have emerged to leave the broader market eating their dust. The most jaw-dropping outperformance can be seen from meme coin Shiba Inu (SHIB 0.10%), which launched at the beginning of August 2020.
Over the past 15 months, the benchmark S&P 500 has gained a healthy 39%. Meanwhile, Shiba Inu's SHIB tokens have gained (I hope you're sitting down for this...) 16,119,508%, based on a price of $0.00008221 per token. That's not a typo. That's a gain of better than 16.1 million percent in 15 months.
Shiba Inu's short-term gains are historic, but its future looks bleak
How on Earth does an investable asset rise over 16,100,000% in a little over a year? For SHIB, it's a confluence of factors. In no particular order:
- More cryptocurrency exchanges are allowing SHIB to trade on their platforms. More accessibility means improved liquidity, better brand recognition, and a growing community.
- The launch of decentralized exchange ShibaSwap in July 2021 will almost certainly encourage some investors to stake their coins. This should increase the average holding time for SHIB.
- A lack of derivative options to bet against Shiba Inu has given it, and many other cryptocurrencies, an inherent buy bias that's lifted valuations.
Yet, in spite of these life-altering gains, Shiba Inu has a fatal flaw: It doesn't stand out or do anything particularly well.
The expectation with cryptocurrency projects is they'll make financial and nonfinancial transactions faster and cheaper than existing infrastructure, and they'll democratize the process so everyone can participate. While Shiba Inu may have that last part down, it's not a standout network or payment coin. In fact, only around 100 merchants globally accept it as a form of payment despite the fact that it's now the 10th-largest cryptocurrency in the world by market value.
Without any true competitive advantages or differentiating factors -- sorry, Elon Musk's tweets of his Shiba Inu-breed dog don't count -- Shiba Inu's future looks bleak.
Over the long run, these lesser-known cryptocurrencies can outperform SHIB
On the other hand, a number of under-the-radar cryptocurrencies look far more intriguing than Shiba Inu and may offer significant long-term upside. Keeping in mind that I remain highly skeptical of digital currencies as a whole, this crypto trio has far more utility and potential than Shiba Inu.
What I'm looking for in financially focused blockchain projects are efficiencies that stand out. Using existing banking infrastructure, cross-border payments can take up to one week to validate and settle, which isn't very efficient. With Stellar's blockchain, more than 180 fiat currencies can be converted to Lumen coins (XLM, the protocol token on Stellar's network), transferred across borders, and converted back into a preferred fiat currency. The time to completely validate and settle said cross-border transaction? A couple of seconds.
But speed isn't the only advantage for Stellar's blockchain. The average transaction costs 0.00001 XLM, which equates to $0.00000334 per transaction. To put this figure into an easier-to-understand number, it would take approximately 300,000 transactions on Stellar's blockchain before a party would rack up the equivalent of $1 in fees.
And that's still not all. Stellar's development team claims the network can handle up to 3,000 transactions per second. Though this is far cry from the 24,000 transactions per second payment-processing giant Visa (V 3.00%) can handle, 3,000 transactions per second is an exceptionally high number for a digital currency-tethered blockchain.
Stellar has tangible partnerships, too. Back in 2017, it partnered with IBM to help facilitate blockchain-based cross-border payments for a dozen banks in the South Pacific region. More recently, in May, the Stellar Development Foundation announced it would be part of a collaboration by Visa and Tala to bring financially focused blockchain solutions to underbanked emerging markets.
Another under-the-radar cryptocurrency that looks to have far more long-term potential than Shiba Inu is Nano (NANO 0.64%). According to data from CoinMarketCap.com, Nano is the 119th-largest cryptocurrency ($669 million market cap).
Nano aims to revolutionize digital payments, and there are three things about this cryptocurrency project that really stand out. To begin with, Nano's developers shunned an open-source network with a central blockchain. Instead, the network utilizes a block-lattice blockchain. With the block-lattice, every user has their own blockchain that they can add to. This means no competing with other users to add blocks and no hassle in gaining consensus. Since only the sender and receiver of a payment are needed for consensus, verification is quick. In theory, the block-lattice should also allow Nano to scale rapidly without the networks' performance being adversely effected.
Secondly, Nano's network is lightning-fast, with transactions processing (this means validation and settlement) in under a second. Assuming the network can be effectively scaled to increase transactions per second well into the four digits, like Stellar, Nano could become a popular digital payment option.
The third and most intriguing aspect of Nano is that its transactions are free. As noted by Nano:
The consensus mechanism, called Open Representative Voting (ORV), also provides useful differentiation from other networks. Consensus is reached through representatives voting on the validity of individual blocks shared on the network. The voting weight for each representative is assigned to them by the account owners and is in proportion to the Nano in those accounts.
In short, ORV helps keep Nano free from a transaction standpoint, which could give it real long-term appeal.
A third and final cryptocurrency with significantly more real-world potential than Shiba Inu is Qtum (QTUM -3.67%), which is pronounced "quantum." According to CoinMarketCap, Qtum is the 88th-largest cryptocurrency, with a market value of $1.2 billion.
Although Qtum has financial applications, it's really designed to be a quick and secure blockchain solution for businesses.
The standout aspect of Qtum's blockchain is the combination of Bitcoin's (BTC -0.49%) UTXO security protocols with Ethereum's (ETH -2.11%) Virtual Machine. Qtum's developers have taken the best aspects from the top two digital currencies by market cap and created a network that incorporates smart contracts. Smart contracts are protocols that facilitate, verify, or enforce the negotiation of a contract between two parties. Since smart contracts are transparent on blockchain and legally binding, they're the perfect tool to attract businesses.
To build on this point, Qtum further separates itself from other blockchain projects with its Account Abstraction Layer (AAL). The AAL is what allows applications to be decoupled from the underlying protocol in order to add new smart contract capabilities down the road. It also allows Qtum's blockchain to remain backward compatible with Bitcoin's secure UTXO model, no matter how many updates Qtum's developers put out.
To add, Qtum has had little issue attracting enterprise partnerships. In mid-March, prediction markets platform and exchange Value Network announced it would be migrating away from Ethereum to Qtum's smart contract and decentralized applications platform. Just a couple of weeks later, Qtum founder Patrick Dai noted that developers were working with Filecoin to enable smart contacts through the Qtum network.
The point being that, unlike Shiba Inu, Qtum has demonstrated real-world potential.