Bitcoin has experienced a massive surge in value over the last couple of years, breaking the $20,000 AUD threshold and catapulting cryptocurrency into the mainstream media. Despite this dramatic increase in popularity and adoption rates, there are still many issues left unresolved with the Bitcoin network.
While Bitcoin may be the undisputed champion of the cryptocurrency arena, there are more than 1,300 different digital currencies, crypto coins and tokens that are currently being traded on the cryptocurrency markets. While most of these altcoins are either redundant or highly niche-specific, there are few key cryptos that present cryptocurrency investors with viable and potentially promising alternatives to Bitcoin.
What’s Going Wrong With Bitcoin?
Satoshi Nakamoto, the mysterious creator of Bitcoin, originally devised the cryptocurrency as a “peer-to-peer electronic cash system” that would revolutionize, democratize, and decentralize the current international financial paradigm. The massive increase in popularity and value that Bitcoin has experienced over the last year, however, has left the Bitcoin network slow, unwieldy, and far from this original objective.
The core issue with the Bitcoin network at this point in time is a specific parameter called “block size limit”. The “block” in “blockchain” refers to a cryptographically encoded list of all transactions that have occurred over the network in the last ten minutes. In 2010, the size of each block was limited to 1 megabyte in order to prevent hacking attacks, but with the massive increase in transaction frequency that has occurred recently this block size limit is now crippling the Bitcoin network.
Bitcoin Transaction Frequency Since Inception Courtesy of Blockchain Luxembourg S.A.
The 1 megabyte block size limit means the Bitcoin network can only support a potential maximum of seven transactions per second, which means transactions can sometimes take as long as 24 hours average transaction times or longer to complete during peak periods.
Bitcoin network participants that help process transactions will treat transactions with higher fees as high priority, resulting in transaction fees as high as $55 USD in January 2017. There are a number of solutions that aim to solve these issues, such as the Lightning Network layer, but these developments present their own unique issues.
The birth of the lightning mainnet can be viewed live here as a new layer grows organically on top of the Bitcoin network. For comparison, it’s possible to view a 3D live visualization of the current Bitcoin Network on Bitnodes. The nature of the Lightning Network solution, however, means that the network will be centralized around major hubs as illustrated in the visualization below:
Lightning Network Testnet Visualisation Courtesy of Steven Roose.
Centralization is antithetical to the core tenets of blockchain technology, so there is an understandable amount of controversy within the Bitcoin and blockchain community as to whether the Lightning Network will solve the issues that plague the Bitcoin network at this point in time.
The high value of Bitcoin has also led many investors to “HODL”, a humorous backronym derived from a typo in a Bitcointalk Forum post back in 2014 that refers to “holding on for dear life”. Many investors purchase Bitcoin in order to use it as a method of storing value, not for use as currency, promoting hoarding.
Lastly, the extreme surge in Bitcoin popularity has captured the attention of regulatory bodies around the world. The Australian Transaction Reports and Analysis Centre has recently been provided with new powers to investigate Bitcoin traders, while new legislative amendments force crypto exchanges to disclose user information. As a result, more Australian crypto traders are seeking privacy-focused cryptocurrencies.
Fortunately, there are many highly innovative high market cap cryptocurrencies that have the potential to challenge Bitcoin as the de facto king of cryptocurrency. We’ll now proceed to examine the best Bitcoin alternatives for 2018 and find out what makes them prime competitors:
Market Cap: $9.33 Billion
Litecoin is a rising star in the cryptocurrency ecosystem, and is focused heavily on facilitating seamless day-to-day payments. Created by Charlie Lee, a former Google thought leader, Litecoin has dramatically increased in popularity since the third quarter of 2017.
Litecoin has maintained a position in the top 10 highest market cap cryptocurrencies for several months now, and is designed with practicality in mind. Lee, speaking at a Coinbase talk in March 2017, elaborated on his vision for Litecoin:
“Bitcoin can be used for like moving millions of dollars between banks, buying houses, buying cars. It’s really secure… Litecoin can be used for cheaper things.”
Litecoin performance over 2017 courtesy of CoinMarketCap.com
The technological architecture behind Litecoin allows it to offer significantly faster transaction times than Bitcoin— more than 400% faster. Litecoin also offers a total cap of 84 million individual coins, which makes it more viable as a daily payment method.
One of the most important differences between Litecoin and Bitcoin is the hardware required to participate in mining. Litecoin implements the Scrypt algorithm for cryptographic encryption, which requires less specialized hardware than Bitcoin’s SHA-256 algorithm. This difference could draw more network participants in assisting with network maintenance, speeding up overall growth.
With a lower barrier to entry for mining, faster transaction speeds, and a lower per-unit cost, Litecoin is a solid alternative to Bitcoin. With Charlie Lee announcing an upcoming marketing campaign, now could be the ideal time to get on board the Litecoin hype train.
Where to Buy Litecoin:
- Coinspot makes it possible to purchase Litecoin via POLi, BPAY and Cash.
> Click here to get started with Litecoin on Coinspot
- Coinbase allows Australian traders to purchase Litecoin with credit and debit cards
> Click here to get started with Litecoin on Coinbase
Bitcoin Cash (BCH)
Market Cap: $25.78 Billion
Bitcoin Cash is a “fork” of the original Bitcoin blockchain ledger. Launched in July 2017, Bitcoin Cash was created when a team of developers decided that they would improve upon the Bitcoin core by increasing block size and implementing a number of other changes. This split is referred to as a fork in the blockchain ecosystem.
The primary goal of Bitcoin Cash is to improve transaction times and decrease transaction fees by increasing the size of each block to 8 megabytes instead of just 1. Bitcoin Cash, or BCH, has been a highly successful cryptocurrency since launch. The price of BCH jumped dramatically to around $2,000 in November 2017 when a proposed fix called “SegWit2x” that was intended to resolves issues in the core Bitcoin blockchain failed.
The value of Bitcoin Cash almost doubled to $4,000 in December 2017 when highly popular platform Coinbase announced their support of the coin. Vinny Lingham, who is referred to as the “Bitcoin Oracle”, has stated that he believes Bitcoin Cash will surpass Bitcoin as the number one cryptocurrency:
“The one need is global fast cheap payments… When I look at it from a products standpoint I think the greater demand is for peer to peer cash than for digital gold.”
Bitcoin cash performance over 2017 courtesy of CoinMarketCap.com
Bitcoin Cash Features:
The higher block size of Bitcoin Cash allows the network to resolve more than 50 transactions per second, which dominates the 7 transaction per second limit in place with Bitcoin. Bitcoin Cash transaction fees are also significantly lower, with fees averaging at around $0.001. Transactions on the Bitcoin Cash network are currently taking just 10 minutes to resolve.
Why Bitcoin Cash?
Bitcoin’s Lightning Network layer may claim to provide faster transaction times and lower fees, but Bitcoin Cash is already delivering on these promises. If the Lightning Network layer fails to succeed in addressing the issues that plague Bitcoin, then it’s likely Bitcoin Cash could depose Bitcoin as king of the crypto world.
Where to Buy Bitcoin Cash:
- Coinbase allows Australian traders to purchase Bitcoin Cash with credit and debit cards
> Click here to get started with Bitcoin Cash on Coinbase
Market Cap: $107.91 Billion
Ethereum is the second largest cryptocurrency by market cap, and is vastly different to Bitcoin in many ways. Created by Vitalik Buterin in 2013, Ethereum has exploded over the last year, increasing in value by more than 12,500 percent.
While both Bitcoin and Ethereum are based on blockchain technology, Ethereum is far from a simple cryptocurrency— Ethereum is a blockchain platform, using “Ether” as a currency token. Ethereum is designed to function as a blockchain platform that enables the creation and execution of “smart contracts”, which are immutable programs executed on the Ethereum blockchain that control the transfer of cryptocurrency or other crypto-assets.
Ethereum is often described as the “World Computer”— it can be used to create decentralized applications that manage energy distribution, decentralize digital marketing, or even allow users to share their computer’s processing power in a vastly distributed supercomputer.
Ethereum creator Vitalik Buterin has elaborated on the highly flexible and scalable nature of the Ethereum blockchain:
“You could run StarCraft on the blockchain. Those kinds of things are possible. High level of security and scalability allows all these various other things to be built on top.”
Ethereum performance over 2017 courtesy of CoinMarketCap.com
The Ethereum network is currently able to handle around 15 transactions per second, or TPS. Recent comments made by Buterin, however, reveal that the Ethereum blockchain will soon rival Visa, at around 2,000 TPS.
Ethereum is a highly flexible, dynamic, and intelligent blockchain platform that is far more functional than Bitcoin, and is currently the driving force behind the most disruptive blockchain-based projects currently underway.
Bitcoin may be the highest value cryptocurrency, but Ethereum is most definitely here to stay. Ethereum-standardized tokens, or “ERC20” tokens, are used in most initial coin offerings— a technique used by blockchain startups to generate seed capital outside of traditional VC sources.
Ethereum is also set to switch from the energy-intensive “proof of work” consensus method that is currently used in Ether mining to a faster, cheaper, and more accessible “proof of stake” method.
Where to Buy Ethereum:
- Coinbase allows Australian traders to purchase Ether with credit and debit cards
> Click here to get started with Ether on Coinbase
Stellar Lumens (XLM)
Market Cap: $9.03 Billion
Stellar Lumens, is a blockchain network that is specifically focused on “cross asset transfers of value”. Simply put, Stellar is focused on lowering the cost of transferring assets such as currency between individuals.
While Bitcoin has the same fundamental purpose, Stellar is a decentralized, hybrid blockchain that geared towards streamlining monetary transactions. Stellar Lumens, or XLM, make transactions cheaper, faster, and more reliable. XLM offers less functionality as a method of storing value when compared to Bitcoin.
Stellar performance over 2017 courtesy of CoinMarketCap.com
Stellar Lumens address three primary issues with the current asset transfer paradigm— high transaction costs, slow settlement times, and a lack of liquidity in lesser-used currencies. Stellar Lumens solves these issues by charging a fee of 0.00001 XLM for each transaction. At current market rates, it would be possible to process 100,000 transactions for just under $0.50 USD.
Stellar network transactions are processed within less than 4 seconds, which makes it the fastest network online. As XLM can be used as a bridging currency it dramatically increases liquidity and makes exchanging lesser known currencies cost-effective and easy.
Why Stellar Lumens?
Stellar has recently announced partnerships with IBM, Deloitte, and Stripe, making it a highly attractive cryptocurrency to those interested in tokens that integrate with existing financial systems.
Where to Buy Stellar Lumens:
Buying XLM can be a little trickier than purchasing other cryptos in this list. You’ll need to obtain some cryptocurrency to trade for XLM, or get started with an exchange that supports fiat deposits
Binance is one of the easiest exchanges for trading other cryptocurrencies for XLM. If you’d like to get started with Binance, take a look at our Australian Exchange Guide. If you’re looking for some pointers on how to purchase other cryptocurrencies than can be traded for Stellar Lumens, take a look at our Australian Bitcoin Buying Guide
Market Cap: $5.61 Billion
Dash is another top ten market cap cryptocurrency and, like Litecoin, is focused on addressing the issues of scalability that are currently troubling the blockchain network. Dash is the brainchild of Evan Duffield and is a Bitcoin fork, but unlike Bitcoin Dash is heavily focused on protecting the privacy of users.
Since launch in 2014, Dash has experienced a dramatic increase in value. If you invested just $1,000 in Dash at the 2014 price of $0.03, you’d now be sitting on a wallet holding more than $25 million USD worth of the privacy-focused cryptocurrency.
Dash performance over 2017 courtesy of CoinMarketCap.com
On the Bitcoin blockchain, it’s possible for anybody to see which wallets are sending how much Bitcoin and where. Dash uses a complicated anonymization strategy called coinjoin mixing that obfuscates transaction ownership by processing the transactions of multiple parties as one single transaction. This process makes it impossible to determine who received funds, who sent them, or the amount transferred.
This anonymization technique does slow down transaction per second rates somewhat, but still allows Dash to process around 48 TPS, which is 7 times faster than Bitcoin. Dash also offers a much more attractive transaction fee, with an average of $0.10 per transaction.
The highly secure, private, and anonymous nature of Dash makes could make it a major competitor to Bitcoin as regulatory authorities both around the world and within Australia tighten their grip on the explosive cryptocurrency market.
Where to Buy DASH:
- CEX.IO makes it possible to purchase Dash by funding your trading account with AUD via bank transfer, and credit/debit card payments.
Bitcoin may be struggling through some growing pains as the network matures, but it’s still the most valuable and widely-used cryptocurrency in the world. The upcoming Lightning Network implementation may provide Bitcoin users with a solution to the problems that the Bitcoin scalability issue, but the above cryptocurrencies are all worth careful consideration.