Dan Boneh, Professor of Computer Science at Stanford University, and other experts in the field, are now leading conversations on the future of these currencies and the overarching crypto environment where digital coins operate. Here are some of the rising players and an overview of why these alternative digital currencies, despite their volatility, have gained rapid popularity.

The Basics of Crypto

The most popular cryptocurrencies operate on blockchain platforms. There are similarities between each platform and protocol, but each altcoin varies slightly both in intent and structure.

Breaking down the blockchain

Blockchain technologies act as decentralized digital environments for secure, trustworthy, and transparent transactions.

Information is digitally logged into one of these distributed ledgers and stored in blocks that are then set chronologically into the chain. Transactions are encrypted with a hash function into the block, making these activities visible to all while keeping the private information of each transacting party safe.

Blockchain technology allows for peer-to-peer trading without going through traditional modes of oversight. Participants in blockchains act as management, with forms of code verification that certify each transaction and ensure accuracy.

Blockchain tech offers novel applications in an emerging industry and a nascent market.

Trading Cryptocurrencies

Transaction timing, amounts, and signatures are generally included within an encrypted hash in the block. Cryptocurrencies follow a traditional stock-exchange model with traders buying or selling depending on stock market values or limits. Many of these transactions depend on the total value of the traded cryptocurrency, or the market capitalization, and the potential of the market asset being purchased.

The process for trading Bitcoin, which acts as a purely monetary asset, and trading Ethereum, an altcoin designed for multiple use cases, are not the same. Check out Dan Boneh on the podcast Zero Knowledge, Episode 100 on the past,present and future of cryptography, for a more in-depth explanation.

The Famous “Bitcoin”

Bitcoin Basics

Bitcoin, the most popular, oldest, and highest market cap cryptocurrency, was created by Satoshi Nakamoto. It was the first revolutionary use of the blockchain as a decentralized transaction.

There are only 21 million minted Bitcoins, making the virtual currency inherently scarce and deflationary. Because of their popularity, transferring Bitcoins takes time in a system that struggles with scalability. Bitcoin’s capabilities only allow for three to seven transactions per second — low compared to other digital currencies and significantly slower than a normal banking transaction.

The reason for this pace is Bitcoin’s Proof of Work (PoW) system that requires enormous computational software power. Miners, the computers that verify the data in the chain, are rewarded with a set amount of Bitcoin depending on how quickly they complete the computational puzzle. This differs from Proof of Stake (PoS) systems, which uses randomly selected validators to mint, or forge, new blocks.

Bitcoin “Forks”

A fork is, as it depicts, a split in the blockchain network that creates new paths. These forks may result in frequent protocol changes in an effort to maintain updates in a complex system made difficult by a decentralized space. The tradeoff between transaction speed with transaction fees can spur various investor interest and spark new tokens.

Bitcoin Cash was a hard fork. It was a divergence from the previous blockchain which shifted protocols for all users and required updates across the network, creating an entirely separate currency. This fork increased the size of the Bitcoin block, opening itself up to greater usage and improved scalability.

Bitcoin XT, launched in 2014, was another hard fork that aimed to accommodate 24 transactions per second. It ultimately declined into non-existence. In 2016, Bitcoin Classic and Bitcoin Unlimited attempted the same improvement, but with minor success.

Soft forks, like Segregated Witness (SegWit), presented by Bitcoin Core developer Pieter Wuille, shifted the protocol slightly but were not divisive enough to form a new currency. SegWit attempted to prevent Bitcoin transaction malleability and improve scalability; however, when participants refused to implement Wuille’s suggested protocol, the result was the hard fork that led to Bitcoin Cash.

Soft or hard forks shift the internal protocols of cryptocurrency, meaning the landscape of cryptocurrencies are rapidly fluid and unpredictable as accidental and intentional forks lead to varying results.

Bitcoin Alternatives: Rising Players in Crypto

Bitcoin is now one of over 6,000 digital currencies on the market. They each function differently, using the blockchain or a unique technology to create new digital assets with various aims, successes, and disadvantages.

Creation of New Cryptocurrencies

New digital assets can come from hard forks in an already established crypto. These are likely similar in goal to their parent coin, save for the variation that made them split.

Completely unrelated digital assets, however, are made the same way Bitcoin was created: with code. Monetary currencies typically use blockchain technologies while others employ iterations with similar distributed ledger systems. “Crypto” refers to complex cryptography that all cryptocurrencies utilize for transactions with code then verified by built-in structures.

The Most Popular Cryptocurrencies

Let it not be understated that cryptocurrency is a constantly shifting environment. Listing currencies in the crypto market — whether by headline-based “popularity” or by the highest market value, will only capture a single snapshot in time. Changing popularity has as much to do with an altcoin’s technical appeal as it does with its market cap, and an altcoin may fleetingly be more attractive than Bitcoin for some investors in one moment, and vice versa the next.

Nevertheless, here are several altcoins that have garnered popular attention based on their structures, approaches, and histories:

Ethereum (ETH)

Ethereum is a decentralized platform. While ether, the currency associated, is monetarily based, Ethereum itself was designed for smart contracts. Ether is smart in that the Ethereum network self-executes strict, immutable contracts. Ethereum’s protocol shifted from PoW to a PoS system, requiring far less energy to verify the code of each transaction and paying verifiers in ether.

XRP (XRP)

Operating on the Ripple blockchain, XRP digital tokens have grown in popularity, perhaps due to XRP’s fast and cheap transactions and the abundance of coins that were pre-mined when the crypto initially launched. XRP is released gradually, controlling circulation with smart contract protocols.

Cardano (ADA)

The Cardano blockchain system runs on an Ouroboros protocol, a PoS protocol that can be both permissionless (open to everyone) and permissioned (limited to only those participants with permissions). Cardano users trade and hold ADA, but as with Ethereum, Cardano supports smart contracts.

Dogecoin (DOGE)

Originally a joke memecoin, this unlimited supply coin had momentarily grown into one of the more popular cryptocurrencies on the market, helped along by the spokesmanship of Elon Musk and other celebrities. The system runs on a distributed proof of work verification model, similar to Bitcoin’s model. Miners are paid in the rapidly growing amount of available Dogecoin, raising concerns about the coin's longevity. 

Shiba Inu (SHIB)

Shiba Inu coin, a Ethereum-based token that acts much like Dogecoin, is yet another spin-off meme coin that pulled investor attention. It was created in mid 2020 after a Japanese dog breed. While the price of this token initially surged shortly after its creation, the volatility has made prices fluctuate dramatically.

Tether (USDT)

Tether operates on the Ethereum blockchain and is known as a stablecoin, meaning it is designed to always be worth — and backed by — one US dollar. This fiat-collateralized coin was designed to connect fiat currencies and crypto, but has been plagued with controversy after allegedly losing millions in hacking incidents.

Chainlink

Instead of running on its own blockchain, Chainlink operates on many blockchains simultaneously, running smart contract programs. Started in 2017, its decentralized Oracle technology relies on a network of operators as opposed to a single centralized point of authority.

Learn More

Craving more crypto knowledge? Watch Stanford Online’s free on-demand webinar, The Future of Blockchain and Cryptocurrencies. Add your voice to the growing conversation and enroll in the professional course, Cryptocurrencies and Blockchain Technologies, part of the Cryptocurrencies and Blockchain Technologies certificate program.