In December 2017, bitcoin’s price hovered close to $16,000, which is a value that happens to be sixteen times its price from precisely one year ago. That, coupled with the fact that digital currencies have also set a new record regarding market capitalization at just over $437 billion, makes this year the most lucrative for the cryptocurrency market.
Backbone of Crypto
Another important consideration is the fact that cryptocurrencies have inadvertently fueled a sudden uptick in blockchain adoption. A blockchain put simply, is a decentralized, peer-to-peer ledger that, in the case of cryptocurrencies, keeps a record of all transactions that have ever occurred. Bitcoin, at the time of its public release in 2009, was the first practical application of the technology.
Since Bitcoin’s initial implementation of the technology, almost every single digital currency has used a blockchain to track transactions, with IOTA probably being one of the only exceptions.
Even so, IOTA’s proposed alternative does not deviate far from the concept of a traditional blockchain, as is evident from their tagline, “Next Generation Blockchain.” It is currently the fourth highest valued cryptocurrency by market capitalization, an impressive feat for such a recent entry into the ecosystem.
Metrics of Measurement
Market capitalization, while a fashionable statistic, is not the only metric of success, however. The market cap of a currency is calculated by multiplying the total number of units available with the current price of each unit. This method is usually not a problem outside the digital asset ecosystem.
However, with volatility, supply and liquidity problems plaguing the cryptocurrency market, it is easy to see how using the market capitalization to judge a currency’s potential can swing between somewhat misleading to grossly inaccurate.
An up-and-coming cryptocurrency, therefore, cannot be gauged based on its market capitalization alone. A careful analysis of all aspects of the cryptocurrency is probably the only safe way to tell which way it is going to tend towards in the future. Case in point, Ethereum, which currently trails Bitcoin in its market capitalization.
Even though critics of the cryptocurrency deride its ideological proliferation in comparison to a simplistic currency such as bitcoin, Ethereum’s usefulness in the form of “smart contracts” and tokens is undeniable.
Ripple (XRP) is another example of a new, yet practical digital currency. Their cryptocurrency is designed specifically to consolidate banks and other financial institutions with blockchain technology. Unlike other currencies that aim to achieve mass adoption through individuals, Ripple wants to develop a blockchain-based real-time gross settlement (RTGS) system.
First to Enter, Last to Leave
It is interesting to note that all these cryptocurrencies have over a billion dollars in market capitalization each. All in all, there is no evidence to suggest that bitcoin will continue to sit interminably on the cryptocurrency throne.
Even eight years after its release, it enjoys the benefit of being the first to market. But with other digital currencies and forks improving upon bitcoin’s shortcomings and learning from the challenges it initially faced, we may see the market tip in favor of one of those coins.
Whether that alternative will present itself as Bitcoin Cash, XRP, Litecoin or even Dogecoin, is still uncertain at this point in time. It is not without reason, after all, that the cryptocurrency market is known to be unpredictable.