Valuing cryptocurrencies is difficult because fundamentals don't exist and there's no one metric investors can use to compare them. Many investors see Bitcoin (BTC -0.73%) as a store of value, like gold, but other cryptocurrencies have more utility in payments or non-fungible tokens (NTFs), or building businesses on their blockchain. They act more like smart currencies.
Long term, I think the value in crypto will come from building real businesses, not just trading assets. And that means the underlying cryptocurrencies of valuable digital economies will likely be more valuable than Bitcoin. Three that I think have a chance to beat Bitcoin long term are Ethereum (ETH -1.17%), Solana (SOL 7.81%), and Polygon (MATIC -0.81%).
There's nothing Bitcoin can do that Ethereum can't, but there's a lot that Ethereum can do that Bitcoin can't. At its core, Ethereum was built to be a smart cryptocurrency with smart contracts that developers can build on. They've done that quickly with decentralized finance and NFTs leading the way.
What's even more encouraging is upgrades to the network that could dramatically improve performance. Ethereum co-founder Vitalik Buterin recently said that Ethereum will be able to handle 100,000 transactions per second, up from about 15 transactions per second today, when a series of upgrades are completed.
Ethereum has a big lead in developing real utility in crypto, and that's why it's one that could beat Bitcoin long term.
Coming up quickly behind Ethereum is Solana, which is a cryptocurrency blockchain that can handle about 3,000 transactions per second today and plans to continue to upgrade that figure over time, improving to 30,000 transactions per second or more.
Solana has similar smart contract capabilities as Ethereum, but transactions are faster and far less costly. A typical transaction on Solana costs a fraction of a penny as opposed to costs in dollars and sometimes hundreds of dollars on Ethereum. That allows developers and innovators to potentially create more businesses on the blockchain than a more expensive blockchain like Ethereum.
Solana now has more active users and more transactions than Ethereum, and if the current growth rate continues this will be an extremely disruptive cryptocurrency.
The upgrades I mentioned for Ethereum are partially intended to improve performance for what's known as Layer 2 blockchains like Polygon. A Layer 2 lives on top of the Layer 1 (in this case Ethereum), but provides important tools like scalability or security.
Polygon was built with scalability in mind and has become a leading way to lower the cost of operating on Ethereum. Instagram launched support for Polygon NFTs recently, and Stripe enabled payouts using Polygon.
If Ethereum is going to scale the way developers hope, Polygon will be a key solution and that could give it the ability to be bigger than a cryptocurrency like Bitcoin.
Utility is the future
Notice that each of these cryptocurrencies are built with utility in mind. That could be payments in the real world or digital asset ownership in the metaverse or with NFTs, but doing something productive is key. And it's that productivity that makes me think Ethereum, Solana, and Polygon could all beat Bitcoin long term.