Watch the press talk about cryptocurrencies and you might believe that there was only one digital coin and only one way to invest. In fact, the technology that underpins bitcoin was always meant to be open source. The blockchain concept has now been replicated and is being used to power hundreds of different altcoins that can all be bought and sold on digital exchanges.
That creates a bunch of new opportunities. You might have missed out on bitcoin's sudden rise but there's no shortage of other cryptocurrencies that might just be about to rocket to the top.
Assessing them isn't straightforward. It doesn't take much to create and sell a new token so before you swap your dollars for some numbers in a digital wallet, you'll need to take a close look. Coinmarketcap.com shows the market capitalization of each altcoin, letting you see how large it is, how much it's traded and how volatile it is. (And if you think bitcoin is a rollercoaster, wait until you see what's happening further down the chart!) You should also look at who created it. Are they tech experts who understand cryptocurrency and have developed an altcoin variant that solves a real problem? Or are they celebrities looking to cash in on a craze they don't understand? Once you've done a bit of research, you might well find that there are some valuable opportunities currently overlooked by the press. Here are five you should keep a close eye on in 2018.
Ripple is an unusual cryptocurrency. Unlike bitcoin it's centralized, with a small group of developers setting the rules and determining availability. It also has a specific use: the coin was created to enable transfers between financial institutions. While that should give it a certain degree of security the lack of community control has made it a controversial and unreliable investment vehicle. In 2017, Ripple's dollar value rose by 36,000 percent. It's since come back down significantly.
With a market capitalization of more than $130 billion, ethereum is the second largest cryptocurrency after bitcoin. Like ripple, it was created for a specific purpose, this time to power smart contracts. That makes the coin valuable to developers. As long as they continue to build on ethereum and find uses for it, there could be demand.
Litecoin is often described as the silver to bitcoin's gold. It's been around since 2011 and has been helped by not having any of bitcoin's transaction speed limits. Despite those advantages however, it has much smaller trading volumes which means even more volatility than bitcoin. Its faster transaction speed could also be negated by a smart bitcoin reform.
Bitcoin Cash was created as a variant of bitcoin that doesn't have bitcoin's scaling problems. Block sizes are eight times larger than bitcoin's enabling more transactions to be grouped together. It also doesn't use replace-by-fee, a way of speeding up the confirmation of transactions by raising the fee which also creates a potential for double spending. The bitcoin community is divided on whether or not this fork of bitcoin's blockchain is a good thing.
One of the benefits that bitcoin promised was anonymity. No one could trace the direction of the funds or their owners. It's a feature that made it popular with black market traders. In fact, bitcoin was never completely secure. The blockchain can track individual payments and can link them to individuals as soon as they're converted into fiat. Monero promises greater security. As long as there's a demand for confidential transactions, there should be a demand for monero.