Bitcoin keeps surging to new all-time highs following President-elect Donald Trump’s electoral victory three weeks ago, and it’s nearing $100,000 per coin after trading below $40,000 in January. It’s up $30,000 per coin post-election alone.
Alternatives to Bitcoin, often referred to as altcoins, are also seeing massive growth in wake of the election. The altcoin market has a total market value of $1.26 trillion, which is larger than the market capitalizations of Tesla, Berkshire Hathaway, Walmart, and other major companies.
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Does Bitcoin have a true competitor?
The flagship cryptocurrency currently makes up roughly 60% of the total crypto market, boasting a market value just under $2 trillion. No cryptocurrency comes even close, with the second most valuable being Ethereum, valued at about $400 billion.
The biggest difference between Bitcoin and Ethereum’s original design was the latter’s ability to run smart contracts, which are essentially self-executing agreements secured on a decentralized, distributed ledger called a blockchain. They act as programs, and come in many different forms. Bitcoin, on the other hand, acts as “digital gold” and offers the most secure and decentralized way to transact.
Ethereum has since added another key difference, in that it ditched the need for “mining” in 2022 by using a proof-of-stake consensus mechanism as opposed to the proof-of-work one used by Bitcoin. This entails users offering their own coins as collateral, and the coins are used similar to raffle tickets in that a random user is chosen to validate transactions in a given block before that block is added to the ledger. This can lead to centralization as wealthier users may control a disproportionate amount of the network, but it does reduce energy consumption.
PoW coins like Bitcoin and Ethereum Classic, the original Ethereum, require miners to solve a complex algorithm in order to validate the transactions in a block. If a blockchain has a lot of powerful computers mining on it, the network is more secure and less susceptible to attacks. The higher the hash rate, or total computational power securing the network, the more energy and money would be required to launch an attack. In general, PoW offers more decentralization and security, while PoS offers faster transaction times and less energy consumption.
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The creation of Ethereum as we know it came after a different kind of attack in 2016, where one of its smart contracts was designed with a reentrancy bug that allowed that specific program to be exploited and users’ funds to be stolen. The miners and developers were split between upholding the core blockchain principles of immutability and intervening to essentially roll back the clock and undo the attack.
In the end, most decided to intervene and created a hard fork which kept the Ethereum name and branding, while those who aligned more with the “cypherpunk” principles of Bitcoin remained on the original network and rebranded it as Ethereum Classic. While only valued about $4 billion, ETC has gone from obscurity to one of the largest cryptocurrencies on the market over the last few years as its developers seek to keep it uniquely positioned in the market by aligning with Bitcoin principles such as “code is law” while utilizing Ethereum smart contract technology.
Every DOGE has his day: Meme coins rule the internet
Before DOGE was a proposed governmental agency, it was a coin created as a joke in a matter of just two hours in 2013. The cryptocurrency’s logo features the shiba inu dog named Kabosu from the viral Doge memes, and it has surged considerably since the election.
For years, Dogecoin traded for a fraction of a cent per token, until the beginning of 2021 when it took the internet by storm and shot up to about 73 cents by May. This inspired the creation of thousands more meme coins, with many getting their 15 minutes of fame before fading back into obscurity.
One coin, a Doge clone built on the Ethereum network through an ERC-20 smart contract, has challenged its predecessor for the meme coin throne. Shiba Inu is one of the select few meme coins that has proven to have staying power. Like other meme coins, it does not serve a real purpose except for speculation. SHIB has a market valuation of about $14.5 billion compared to DOGE’s $56.6 billion.
The most recent meme coin to take the internet by storm is PEPE, which features the character from the Pepe frog memes on its logo and was recently listed on Robinhood. Since March, its market capitalization increased from about $1.5 billion to nearly $11 billion before falling back to $8.7 billion where it currently sits as the 18th most valuable cryptocurrency on the market.
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Other major players in the altcoin space
There are many other coins that share similarities to Bitcoin. For example, Litecoin, ZCash, Bitcoin Cash, and Monero are all coins that use a proof-of-work consensus mechanism and limited-to-no smart contract capabilities, but all differ in their own ways.
While Bitcoin offers some level of privacy in providing pseudonymity, coins like Monero and ZCash specialize in anonymity. Through the use of zero-knowledge proofs, ZCash offers users the ability to use private “z” addresses or transparent “t” addresses. However, most ZCash transactions involve “t” addresses, which leak metadata such as amounts, sender, and receiver, which can be combined with other data to deanonymize users.
Unlike ZCash, which was created out of the original Bitcoin codebase, all transactions on Monero, on the other hand, are fully anonymous and use ring signatures to hide the sender, steal addresses to hide the receiver, and RingCT to hide the amount of coins being moved.
While technically not a fork of Bitcoin, Litecoin was created from a copy of Bitcoin’s code by former Google software engineer Charlie Lee. While Bitcoin is seen as a store of value that will likely be used for higher-value transactions in the future due to its greater security, slower speed, and higher fees, Litecoin was designed to be more scalable for lower-value transactions as a form of digital cash as adoption increases.
There are also many coins that follow Ethereum’s lead by providing access to smart contract technology while using some variation of the proof-of-stake consensus mechanism, such as Solana, Cardano, Polkadot, and Avalanche.
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Like Ethereum, Solana, Avalanche, and Polkadot enable users to build entire blockchains on top of them. One of the largest blockchains in the world, Chainlink, is built on top of Ethereum. Each has its own benefits and drawbacks, often sacrificing decentralization or security for lower fees and faster transaction speed. Cardano, however, can only run smart contracts.
Avalanche is faster and cheaper than Ethereum, but it lacks in security as its consensus mechanism does not penalize misbehaving validations. Solana is also faster and cheaper, but lacks in decentralization as it is more expensive and complicated to run a node on the network, which makes it more vulnerable to outside censorship and undermines its ability to gain the trust of developers seeking to build decentralized finance applications. Polkadot similarly is cheaper and faster but by using a nominated proof-of-stake mechanism where instead of being randomly selected raffle-style, validators are nominated and those with more coins have more nomination power.
Stellar and Ripple are two other popular crypto networks that sacrifice decentralization for improved speed and cheaper transactions. They take Polkadot’s nominated proof-of-stake mechanism to the next level by implementing a federated consensus mechanism where a pre-determined group of users have the ability to choose validators. Stellar gained the ability to run smart contracts in 2022, while Ripple is considering adding them in 2025.
All of these coins are less secure and more centralized than Bitcoin, but offer additional features. As a result, they do not compete with Bitcoin but instead compliment it.
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One more type of cryptocurrency is a stablecoin, like Tether, USD Coin, Dai, and Ampleforth. These coins are pegged to a specific fiat currency, like the U.S. dollar, or reserve asset, like gold. The way they remain pegged to that currency depends on the coin. Tether and USD Coin both have a 1:1 ratio of crypto tokens to fiat dollars in a physical reserve. Dai uses cryptocurrency as collateral, and Ampleforth is constantly adjusting its supply to maintain the same price.
Why haven’t altcoins surged like Bitcoin in 2024?
As the latest Bitcoin bull market appears to be underway, altcoins have seen large gains but haven’t reached the levels they were trading at in May, 2021. The total altcoin market capitalization back then peaked at $1.6 trillion after falling below $50 billion in the previous bear market. In the most recent bear market, it fell to $438 billion.
Bitcoin has seen four bull cycles including this one, and each previous time it rose at a faster pace than the altcoin market at first, increasing its share of the total crypto market, before investors took profits and spread the money to altcoins. This phenomenon is referred to as “alt season” and typically results in a much more volatile and short-lived bull run before the cycle ends.
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There is also the possibility that the altcoin market has become oversaturated with redundant coins. Many of the coins already mentioned share similar purposes, and there are thousands upon thousands more. It is likely that while many altcoins will see large gains in the short term, only a few will experience sustained network and market growth over the long term.
Out of all the coins, Bitcoin is the most likely to be long-term adopted as it is already featured in a number of ETFs, several world governments are mining and storing it, states are voting on creating their own Bitcoin strategic reserves, and Trump even vowed to create a United States Bitcoin strategic reserve.
