After the global financial crisis hit in 2008, people around the world saw their faith in the financial system shaken. Bitcoin emerged in January 2009 seemingly as a direct in response to this crisis, although the history of cryptocurrencies runs far deeper. In any case, trust in the stability of established currencies was lost and Bitcoin offered an alternative: a universal currency that was not tied to any government and not correlated with the stock market.
Bitcoin became so ubiquitous that its trade name is now often used as the colloquial term for any cryptocurrency, but in reality there are many “altcoins” (a portmanteau of “alternative” and “bitcoin”). In what has been called the end of Bitcoin, in March of this year Bitcoin hit an all-time high trading value of $1,325, then plummeted by almost $500 as US authorities rejected proposal for a Bitcoin-backed exchange-traded fund (ETF) and Chinese regulators cracked down on Bitcoin exchanges. But the promise of Bitcoin lives on and the price began to climb once again.
While the future of cryptocurrency is still unclear, the fact that there is a future for this technology no longer seems to be in doubt. Banks, technology companies, venture capitalists, and even some countries have invested heavily in blockchain and cryptocurrency technology, in a wide variety of ways.
In 2014, an anonymous developer in Iceland announced the introduction of Auroracoin, an Iceland-specific altcoin created as an alternative to the Icelandic Krona, which has been under severe regulation since 2008. Auroracoin’s creators announced the currency as an alternative to a “flawed financial system … at the expense of the people”, stating that “the power must be taken away from the politicians and given back to the people.”
After debuting in March 2014 by distributing half of the total auroracoins equally amongst all 330,000 people in Iceland (31.8/person), Auroracoin rapidly plummeted in value and never recovered. But for all the failed cryptocurrencies, there are many successful ones that are catching the eye of public and private investors around the world.
We looked at some of the top altcoins in March and now we will feature a few more to watch in 2017.
Litecoin (founded 2011)
Litecoin is currently the fifth largest cryptocurrency after Bitcoin, Ether, Dash and Ripple. Almost technologically identical to Bitcoin, Litecoin operates on a blockchain, a type of software pioneered by Bitcoin which timestamps transactions into a public ledger on a peer-to-peer network.
As one of the earliest altcoins, Litecoin is one of the most stable cryptocurrencies on the market. A steady, gradual growth in 2016 saw the value closing at more than $2 above its January value. Litecoin’s price spiked mid-year in response to the Brexit vote, further proving that people turn to cryptocurrencies in response to government instabilities. It spiked again recently when it appeared that Litecoin would successfully enact a Segregated Witnesses (SegWit) upgrade to its network.
Ripple (founded 2012)
Ripple is the third most valuable cryptocurrency after Bitcoin and Ether. Unlike most altcoins, Ripple is not technically decentralized. Unlike open blockchains hosted on peer-to-peer networks, such as Bitcoin and Litecoin, Ripple operates on a permissioned ledger overseen by a private company.
Built on a distributed open source Internet protocol, Ripple’s native currency of XRP tokens (aka “ripples”) are not accepted by any retailers. Instead, Ripple serves as an intermediary for instantaneously converting one currency to another, enabling secure, instant and nearly free cross-border financial transactions of any size. For this reason, the Ripple protocol is being increasing adopted by companies and banks as an infrastructure for their internal payment networks.
Ripple has attracted some very high-profile investors including Andreessen Horowitz, Lightspeed Venture Partners, and GV (formerly Google Ventures). Major banks, including Standard Chartered, Westpac, National Australia Bank (NAB), BMO Financial Group, and Shanghai Huarui Bank, have also committed to joining the Ripple network.
Steem (founded 2016)
The founders of the social media website Steemit had a truly innovative idea: build a content-sharing platform on top of a blockchain and reward users for creating or curating (upvoting) content by paying them in Steem tokens, the currency built on the Steem blockchain.
Instead of arbitrarily rewarding people for having the processing power to mine the most blocks in the chain, Steemit provides a monetary incentive for producing high quality content modelled on Reddit’s upvoting system. This is a novel solution to the problem of cryptocurrency mining introduced by Bitcoin.
One of the newest altcoins, Steem’s value peaked in July and stabilized in October 2016. It is too early to tell how sustainable the system is, but in a market which rewards innovation, it is sure to be a major cryptocurrency to watch in 2017.
More people and companies are investing in cryptocurrencies and retailers large and small have begun to accept bitcoins and altcoins as legitimate forms of payment, both online and in-store. The power of digital currencies in today’s economy cannot be understated, and now is the time to start trading.
The history, complexity and power of cryprocurrencies is a subject we will be following closely in 2017. Visit the Payza Blog regularly for more in-depth articles about this and other industry disruptors, and follow us on Twitter and Facebook for e-commerce news from around the web.