Which Cryptocurrency Will Take Off in 2018? Everything You Need to Know About Bitcoin’s Rivals
Bitcoin’s journey over the course of 2017, an upwards value trajectory that has caught fire over the past couple of months, has propelled cryptocurrencies into the public eye. Bitcoin, the first cryptocurrency, was released 8 years ago now. It has had periods of more intense media coverage over that period, almost always coinciding with the periods of extreme price volatility that have been a feature of its rise. However, it isn’t unreasonable to say that it is only over the course of 2017 that Bitcoin has reached a level of media coverage that means the average Joe has an approximate idea what it is.
Bitcoin started the year with a value of a little under $1000 and you would have been hard pressed to find much coverage in the mainstream media. Up until this year, despite occasional flurries of media coverage when there was particular price volatility or an exchange was hacked and large volumes of Bitcoin stolen, the cryptocurrency had what could be described as a cult following. Millennials with a background or interest in tech and coding mainly, with a sprinkling of the occasional anarchist or shopper of illegal goods and services on the dark web. For most, if they’d heard of Bitcoin, it was largely considered of little importance – a niche fad that would no doubt fizzle out.
In tech circles, the blockchain technology that Bitcoin and other cryptocurrencies are built on has been big for a few years now. As a secure and decentralised data store and transfer system it has a huge number of potential applications outside of cryptocurrencies and is being billed as the next tech revolution. In mainstream finance, work was going on in the background, exploring blockchain applications in finance and money transfers as well as keeping an eye on the cryptocurrency movements But while big financial institutions had their cryptocurrency advocates, or at least those taking the technology more seriously, it is fair to say most decision makers in senior roles were relatively dismissive of Bitcoin’s prospects of disrupting the established fiat monetary system. Other cryptocurrencies were barely on the radar.
However, 2017 will undoubtedly go down as the year of Bitcoin, regardless of what the future holds for the original cryptocurrency – something still far from clear. Bitcoin has been on the bull run of all bull runs all year. From $1000, exchange values of $2500 and $5000 were passed by the summer. However, it is the period from late autumn that things have really taken off. On December 31st, the Chicago Mercantile Exchange, the biggest commodities and futures exchange in the world, announced that it would look to launch Bitcoin futures before the end of the year, with another smaller but still significant mainstream U.S. exchange, CBOE, making their own announcement to similar effect shortly afterwards. Even the Nasdaq said that it expected to start offering Bitcoin derivatives at some point during the first half of 2018.
That move into mainstream financial markets has resulted in a subsequent price trajectory that has been historically unique in its steepness. $7000, $8000, $10,000 and $15,000 levels have been passed within weeks, with the pace picking up and not slowing down. Early adopters who were investing online in Bitcoin before 2017 have seen the value of their holdings skyrocket. Even those who piled in over the course of 2017, or just November, have made a killing. At least on paper as any profits will not be locked in unless holdings are now or have been sold.
It remains to be seen if Bitcoin derivatives starting to trade on mainstream financial exchanges means the cryptocurrency’s future has now been secured. However, it is certainly a huge step towards cryptocurrencies achieving a level of ‘legitimacy’ in the eyes of the wider finance industry and general public.
Those who feel they have missed out by not investing online in Bitcoin earlier may well wonder if one of the other major cryptocurrencies will have a similar lift off in 2018. Bitcoin’s 2017 rise has already had a knock-on effect on other cryptocurrencies, many of whom have also seen very strong price rises this year. Before Bitcoin’s ‘hockey stick’ 2017, there were also plenty of cryptocurrency enthusiasts who believed one of its peers would overtake it as the dominant force. Many still believe that other cryptocurrencies are built on superior blockchain technology and have other strengths that make them superior to Bitcoin, something that in the longer-term users and markets will come to realise.
There are over 900 cryptocurrencies, and that’s excluding ICO tokens which now number in their thousands. Most have very limited rates of adoption and can be considered, at least for now, relatively insignificant. However, there are several that have significant market capitalisations, adoption levels and are perceived as having a bright future. So, with a view to 2018, let’s take a look at some of the other cryptocurrencies that stand a chance of having a ‘lift off’ year comparable to Bitcoin’s 2017.
In any list of major ‘non-Bitcoin’ cryptocurrencies with a potentially bright future, Ethereum is the natural starting point. It is also the cryptocurrency that was tipped by many of the blockchain and cryptocurrency community’s luminaries as being set to take Bitcoin’s crown as the developing market’s poster boy.
In fact, Ethereum is not actually a cryptocurrency at all. It’s a blockchain-powered platform for building decentralised smart contracts and smart contract-based applications. Building contracts and applications on Ethereum, or using them, is paid for in Ether, Ethereum’s native cryptocurrency. However, Ether, unlike Bitcoin, was not created as a challenger to fiat currencies but simply as a mechanism that allows more secure blockchain transactions. It can’t be used outside of the Ethereum environment to buy general goods and services.
However, despite its more specific environment, many believe that its practical application means Ether has greater claim to intrinsic value than Bitcoin. This makes it less reliant on external factors dictating its value or potentially fatal interference from financial regulators or government bodies.
Vipul Goyal, who teaches a graduate course on blockchain and cryptocurrencies at Carnegie Mellon University (CMU) predicted as recently as late this spring that “Ethereum will end up becoming the biggest cryptocurrency."
Ethereum has its own coding language and, as mentioned, has the core functionality as a platform smart contracts are built upon. Rather than a lawyer preparing a contract, it can be programmed on the Ethereum blockchain and because smart contracts are decentralised they enforce themselves, including imposing penalties in the case of a breach. Goyal’s former employer, Microsoft India, has already moved big property contracts onto blockchain in an effort to avoid expensive legal disputes.
Another possible use of Ethereum is that of ‘programmable money’. For example, a university student’s parentally funded bank account could be limited to allow withdrawals of up to £150 a week. Further withdrawals would require approval involving the parents’ cryptographed key.
And that’s the tip of the iceberg. Smart contracts can set rules in much the same way to software coding. Within the past few weeks an game built on the Ethereum platform, using only 5 interlinked smart contracts, has gone somewhat viral. ‘CryptoKitties’ allows players to buy, sell and breed digital cats, with their own genome sequences. In-game purchases are made using Ether.
One current weakness of Ethereum is a major scalability issue with transaction speeds. The platform can only process 13 transactions per second, which is 250 times too slow to serve a user base of 10 million.
NEO is a relatively new cryptocurrency, or rather a relatively newly branded and improved version of a predecessor called ‘Antshare’. Often referred to as the ‘Chinese Ethereum’, it is also a blockchain-powered platform for building smart contracts and decentralised applications. It has taken off this year, with the fact that, unlike Ethereum that requires developers to learn a unique coding language – Solidity, contracts and applications can be built on NEO using several popular existing languages, helping make it more accessible alternative. NEO also has the considerable advantage of, while privately owned, being backed by the Chinese government.
NEO steamrollered its way into the top 10 cryptocurrencies on market capitalisation within 2 months of its re-brand and rerelease. It describes the platform as “…about building a financial system bridging the real-world assets.” From a starting exchange value of $0.18 in September, NEO is now worth over $35.
NEO establishing lower barriers to entry by facilitating the use of common coding languages, and the backing of China, could yet give it the edge on Ethereum over the course of 2018 for anyone looking for a cryptocurrency dark horse.
The Other Challengers
While this forecast could well turn out to be wholly inaccurate, this writer’s personal opinion is that Ethereum and NEO are the most likely contenders among the other cryptocurrencies to further establish themselves in 2018. However, it is still worth mentioning a few more that could break out from the chasing pack.
Zcash, Monero and Dash are the three major cryptocurrencies closest in character to Bitcoin, in the sense that they are intended to be used as an improved alternative to fiat currencies for everyday financial transactions. There is some criticism of how secure Bitcoin’s blockchain really is and many critics believe it is still potentially vulnerable to hackers. Also, while Bitcoin technically provides users with anonymity, the fact that transactions from one wallet can still be connected to that wallet’s ‘key’, mean that there are ways to potentially track a wallet back to its owner.
Zcash, Monero and Dash all employ additional levels of cryptography that also scramble the wallet information of parties involved in a transaction. However, this author’s personal opinion is that while it is keeping with the anarchic leanings of a section of hardcore cryptocurrency advocates, it is exactly this more dogmatic approach to providing complete anonymity of transactions that will keep these cryptocurrencies from achieving mainstream adoption.
Whatever happens over the course of 2018, it promises to be another hugely interesting year for developments in Bitcoin, other cryptocurrencies and blockchain technology. Investing online in cryptocurrencies, all of them, has to understood as highly speculative. There’s a small chance such an investment could pay off massively and there is a much bigger chance the investor will never see their money again.
This writer wouldn’t be brave enough to make any confident forecast of what will happen in cryptocurrency markets. Nonetheless, I hope this article provides some food for thought or just general information for those interested in this uniquely fascinating global development.
Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.
There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.