A number of alternative coins (altcoins) and DeFi (or “decentralized finance”) tokens are increasingly rising in prominence. Altcoins generally refer to any type of cryptocurrency other than bitcoin and DeFi tokens are tokens that help power decentralized finance protocols.
Here is a look at some of the most popular (by market capitalization) and newsworthy altcoins that investors are gravitating toward.
Ethereum (ETH) is a decentralized, open-source blockchain with smart contract functionality. Ether is the native cryptocurrency of the platform. Amongst cryptocurrencies, Ether is second only to Bitcoin in market capitalization. Ethereum was created to enable developers to create, publish, monetize and use decentralized apps, called dApps, on the network. Users of Ethereum pay a fee to use dApps, called “gas.” The fees vary depending on the amount of computational power needed. Ethereum differs from Bitcoin in that it’s a programmable network that’s used as a platform of exchange for apps, financial transactions and games. Due to the nature of the network, all activities can be facilitated without threat of fraud, theft or censorship, and paid for in Ether. Ether is also accepted as payment outside of the Ethereum network, by vendors such as Overstock and Shopify. Unlike Bitcoin, there is no limit to the number of Ether that can be created.
Aave is an open-source DeFi platform, running on the Ethereum blockchain, that functions as a crypto lending service. Users can participate in the Aave network as depositors or borrowers, as the network allows holders to earn interest on deposits or borrow on their crypto assets. Aave entered the cryptocurrency market in 2017 under the name ETHLend (with LEND as its native token). Today, AAVE is the Ethereum token that powers the Aave network. There are 16,000,000 AAVE in total.
Terra is a blockchain protocol that uses fiat-pegged stablecoins to support stable programmable payments. It is supported by a basket of fiat-pegged coins that are stabilized by LUNA, its native crypto asset. LUNA holders are also able to submit and vote on governance proposals and LUNA holders do not need to stake their tokens directly but can delegate them to a validator.
Launched in 2017 by Sergey Nazarov, Chainlink is a decentralized, Proof-of-Stake DeFi oracle network that enables smart contracts to connect to external data sources, APIs, and payment systems with high reliability and security. LINK is the Ethereum token that powers the network; holders can send and receive LINK as well as deposit it in DeFi protocols to earn a reward.
Litecoin is one of many cryptocurrencies, or networks which use a blockchain as their public record of transactions. Litecoin was created by Charlie Lee as a fork of Bitcoin. Litecoin is a cryptocurrency that uses a faster payment confirmation schedule and a different cryptographic algorithm than Bitcoin. It is a peer-to-peer cryptocurrency and public blockchain network. Litecoin miners use Proof of Work (PoW) to increase transaction speed and efficiency. Litecoin is often used to facilitate cross-border transactions and make payments. It can also be held as a store of value or as an investment. The maximum supply of Litecoin is 84 million coins; more than 66 million LTC (around 79%) are currently in circulation.
Polygon (MATIC) is a layer-2 scaling solution for the Ethereum network. Polygon is a framework as well as a protocol for building Ethereum scaling solutions. Their open source solutions include Polygon POS, Polygon Plasma, ZK Rollups, Optimistic Rollups and Standalone Sidechains that can be public or private. Polygon POS is an Ethereum side-chain that has an independent set of validators that commits back to the Ethereum chain on a regular basis. The native token of Polygon POS, as well as Polygon’s other existing and forthcoming scaling mechanisms, is MATIC.
Uniswap (UNI) is a decentralized exchange that’s designed to make it easy to exchange Ethereum (ERC-20) tokens. There is no orderbook or central facilitator on Uniswap. Instead, tokens are exchanged through liquidity pools that are defined by smart contracts. Anyone can trade tokens or contribute to the liquidity pool. Advantages of Uniswap include liquidity for thousands of tokens, safety and global and frictionless access (anyone with a smartphone and an Internet connection can participate). It’s also easy to use and anonymous—users don’t need to provide personal details or sign up for an account to use it. Uniswap was created by Hayden Adams. The UNI token is the governance token of the Uniswap protocol.
Launched in August 2017, Bitcoin Cash was created through a hard fork of the Bitcoin network. Its development stemmed from a disagreement among Bitcoin proponents about the technical makeup — specifically, the block size — of Bitcoin. Blocks are essentially files where data on the Bitcoin network is recorded. Supporters of BCH argued that Bitcoin's one megabyte block size limit would prevent it from scaling and accruing value as more investors adopt cryptocurrency. BCH has a larger block size limit in comparison to Bitcoin, which allows for faster transaction speeds at lower costs. BCH is considered the most successful spin-off of Bitcoin.
Decentraland (MANA) is an Ethereum token that powers the Decentraland virtual reality platform. MANA can be used to pay for virtual plots of land in Decentraland as well as in-world goods and services.
Axie Infinity (AXS) is an Ethereum token that powers Axie Infinity, a blockchain-based game where players can battle, collect, and build a digital kingdom for their pets. AXS holders can claim rewards for staking their tokens, playing the game, and participating in key governance votes.
Launched in 2015, the XLM (or lumen) token is required to complete transactions on the Stellar blockchain network. Stellar is a blockchain-based payment protocol created by Jed McCaleb and lawyer Joyce Kim; it was built to support the transfer of digital currency to fiat money both domestically and across borders. XLM is used to pay for transaction fees on Stellar and can act as a connector enabling Stellar users to trade between multiple currencies.
Software engineers Billy Markus and Jackson Palmer created Dogecoin in 2013 as a joke cryptocurrency — naming it after the popular "Doge" internet meme of a Shiba Inu dog. In 2021, DOGE became a top cryptocurrency by market cap thanks largely to its popularity with investors on Reddit and the (highly publicized) interest of Elon Musk. As of September 2021, there were roughly 131 billion Dogecoins in circulation, and 10,000 new coins are mined every minute. Unlike Bitcoin, there is no maximum supply of DOGE.
MKR is a DeFi coin that was developed by the team behind the MakerDAO protocol. As an Ethereum token, MKR is used to maintain the MakerDAO system in two primary ways: by stabilizing the price of DAI, the stablecoin of MakerDAO that is tied to the value of the US dollar and by facilitating voting on the operation of MakerDAO (all investors in Maker gain voting rights within the MakerDAO ecosystem.) MakerDAO was launched on the Ethereum network in December 2017.
Compound is a DeFi protocol for decentralized lending, which hosts lending pools that allow for the earning of interest on various cryptocurrencies. The pools allow crypto holders to lend their tokens out for borrowing at algorithmically set interest rates based on supply and demand. The COMP crypto asset is an Ethereum token that enables governance of the Compound protocol. Compound was founded by entrepreneurs Robert Leshner and Geoffrey Hayes; the COMP token was launched in June 2020.
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