Signs that 2021 will be the year of crypto just keep rolling in. We’ve only just passed the first quarter, and Bitcoin’s (BTC) price has shot up several times to new record-breaking all-time highs. But the original cryptocurrency is not the only one shooting for the stars. Many alternative cryptocurrencies, so-called ‘altcoins’, have also seen their value boosted to record levels, either riding the popularity of the original crypto coin as more affordable alternatives or because new financial processes are increasingly adopting blockchain technology.
Bitcoin has been around for over a decade, but its recent meteoric rise can at least be partially attributed to the fear of inflation and devaluation of fiat currencies that rocked the financial world amid the economic disruption caused by the COVID-19 pandemic. Old-school financial investors who once mocked cryptocurrency as a flash-in-the-pan Internet fad are eating their words as established companies, such as JP Morgan, Goldman Sachs, and CitiGroup, are snapping up digital assets.
But it isn’t only the big fishes that are in a financial feeding frenzy. If you know anything about crypto at all, you may have noticed it cropping up more often in everyday life from all types of people. Your mom, neighbour, co-worker, yoga teacher and Uber driver are all looking at crypto thanks to new user-friendly trading apps that let almost anyone with an Internet connection and financial ambitions explore cryptocurrencies as an option.
The benefits of blockchain are not just the domain of computer experts anymore. If you’re reading this, chances are you’ve already taken the plunge into the world of digital asset trading or are just about to. So, want to know which tokens deserve your attention? Here are the coins making waves in the crypto world right now.
Forever first and foremost: Bitcoin (BTC)
Let’s first address the elephant in the room. Bitcoin is the original cryptocurrency, the one that everyone has heard of and still the strongest digital asset on the market. Over time, it has proved itself to be resilient to market crashes and has built up a high level of trust over the years. BTC is the largest cryptocurrency by market cap, with over 50% market dominance. At the time of writing, Bitcoin’s price dipped from its recent all-time high of $60,000, hovering between $55K and $60K. It seems like Bitcoin’s value will always be a barometer for the cryptocurrency market as a whole, and your crypto portfolio should always have some Bitcoin if you have the opportunity. But as with any investment portfolio, diversification is key. And with BTC being prohibitively expensive right now, you would do well to consider these up-and-coming alternatives.
Solana’s (SOL) sunny outlook
Decentralised finance, also known as DeFi, first came to wider public attention in 2020 when this kind of blockchain solution started attracting many high-profile investments. In a nutshell, DeFi technology uses decentralised blockchain networks to carry out automated versions of traditional financial services, such as loans, contracts and mortgages. The tokens that are used to power these processes are a kind of cryptocurrency known as DeFi tokens.
Because of their usefulness in future financial services, DeFi tokens are a hot investment, and it feels like there are always more of them popping up on the horizon to capitalise on the trend. Our tip? Take a look at Solana.
Solana is an exciting open-source DeFi project that has been in the works since 2017 but was only officially launched in March 2020 by the Solana Foundation, a company based in Geneva, Switzerland. Although a relatively new cryptocurrency, Solana (SOL) has enjoyed huge and steady gains in recent months, recently reaching $39.
For the real crypto-heads, Solana’s main draw is its unique consensus mechanism. Like other DeFi tokens, Solana’s protocol is designed to facilitate the creation of decentralised apps (dApps). It uses an innovative hybrid consensus method, introducing a proof-of-history (PoH) consensus combined with the blockchain’s underlying proof-of-stake (PoS) consensus. This should render Solana easily scalable from the ground up and make it beneficial for retail investors and financial institutions alike.
The unique proof-of-history consensus model was designed by Anatoly Yakovenko, the founder of Solana. Yakovenko is a tech industry veteran who previously worked as a former senior staff engineer manager at the renowned chipmaker Qualcomm and a software engineer at Dropbox. He first started working on a project that would become Solana in 2017. Later, he founded Solana Labs with his Qualcomm colleague Greg Fitzgerald. The pair managed to snap up a few more Qualcomm veterans to work on Solana Labs, and, in 2020, the Solana protocol and SOL token were released into the world.
The Solana blockchain enjoys a good reputation in the cryptocurrency community because of its incredibly fast processing times. The coin’s hybrid protocol significantly speeds up both transaction validation times and smart contract executions, which has also earned Solana attention from financial institutions looking to invest in the next DeFi token that could see wide adoption.
As of the time of writing, Solana is attracting investments from individuals and enterprises alike. In addition to promising scalability, Solana also offers very low customers transaction costs. Its protocol was designed to allow high scalability and lightning-fast processing speeds without raising costs for users.
Thanks to its innovative systems and Yakovenko and Fitzgerald’s expertise, Solana is enjoying a prominent place in cryptocurrency rankings, currently ranked 18th by market capitalisation in CoinMarketCap’s listings in April 2021.
Polygon (MATIC): ready to roll
Polygon is another intriguing DeFi project that seeks to resolve the problem of scalability in blockchain technology. It was previously known as Matic Network, and the coin still carries the trading ticker MATIC after the rebrand. Polygon is a platform for Ethereum that prioritises ease-of-use and scalability with an aim to improve infrastructure development on Ethereum.
Ethereum developers can use Polygon’s SDK as a flexible framework to build and launch multiple types of applications. It incorporates modules for a high level of customisation and effectively allows Ethereum to be developed into a multi-chain system like some competitors (Polkadot, Avalanche, etc.) while keeping all the advantages of Ethereum (security, wider adoption and community, and openness). The end goal of all of this is to build an Internet of Blockchains, wherein blockchains operate as part of wider interoperable networks, not closed-off silos.
The Polygon network is secured by the MATIC token, which also serves as a governance token that allows stakeholders a say in major decisions regarding the project. The tokens are used for payment services, settlements and transaction fees on the Polygon network. As a trading instrument, MATIC’s price has increased in value considerably over the last months but is still very accessible as a ‘penny stock’ crypto, currently priced at $0.39 per token.
MATIC tokens have been released on a monthly basis since 2017 when the Matic Network (now Polygon) was founded by blockchain developers Jaynti Kanani and Sandeep Nailwal and business consultant Anurag Arjun. Like Bitcoin, MATIC’s total supply is limited; after the last token is released, no more will be made. MATIC currently has a circulating supply of 4,877,830,774 tokens and a max supply of 10,000,000,000. According to the release schedule, the final MATIC tokens will be released by December 2022.
Polygon is a Layer 2 scaling solution that seeks to improve Ethereum’s speed and scalability. To do this, it combines the Plasma framework and the proof-of-stake blockchain consensus model. Both of these methods have been proposed by Ethereum co-founder Vitalik Buterin, and Ethereum is working to move towards a proof-of-stake model. Polygon’s sidechains work alongside Ethereum’s blockchains to improve scalability and processing speed.
This method allows an unlimited number of dApps to be hosted on the blockchain infrastructure, something that is usually very difficult on proof-of-work blockchains (such as Bitcoin and the current base version of Ethereum). Currently, Polygon can process 65,000 transactions per second on a single side chain, with a block confirmation time of less than two seconds.
Polygon currently supports only Ethereum’s basechain, but the network intends to extend support for additional basechains in response to the community’s wishes and consensus among stakeholders. If this happens, it would make Polygon an interoperable Layer 2 scaling solution connected to multiple blockchain networks, and the value of MATIC tokens would rise accordingly.
Compound (COMP): the crypto lending solution
As the name suggests, Compound (COMP) is all about earning interest. The coin a DeFi lending protocol that allows crypto holders to earn interest on their cryptocurrencies by depositing them into one of several pools on the Compound platform.
The user receives cTokens in return for their deposits into a Compound pool. These cTokens represent the individual’s stake in the pool and can be used at any time to redeem the same cryptocurrency that was initially deposited into the pool. For example, if you deposit ETH into a pool, you will receive cETH in return. Then there is the interest mechanic. Over time, the cTokens exchange rate for the pool’s asset increases, so you can redeem your cTokens for even more of the original cryptocurrency that you initially put in the pool.
But Compound can also be used to borrow. Users can take a secured loan from any Compound pool by depositing collateral, with a maximum loan-to-value (LTV) ratio ranging from 50% to 75%, depending on the asset being borrowed. The interest rate paid also varies according to the cryptocurrency being borrowed. The Compound protocol enforces the automatic liquidation of borrowers if their collateral falls below a specified maintenance threshold.
Compound was founded in 2017 by CEO Robert Leshner and CTO Geoffrey Hayes, who both previously served in senior positions at delivery platform Postmates and operated as investors in the crypto scene. They launched the platform in September 2018. Since then, the platform has dramatically increased in popularity, with more than $800 million in total value locked in Compound pools.
The platform’s native governance token, known as COMP, is earned by interacting with the Compound protocol (by borrowing or depositing). It allows holders to propose changes to the protocol and participate in discussions about its future. COMP holders vote on whether to implement proposed changes without any interference from the Compound team. Factors such as which cryptocurrencies to add support for, rules for collateral and making changes to how COMP tokens are distributed lie in token holders’ hands.
COMP is also traded as a crypto instrument and is one of the more attractive altcoins on the market. At the time of writing, COMP is valued at $540 and ranks 47th by market cap.
Solana, Polygon, and Compound are just three of the exciting altcoins making waves in the cryptocurrency space and the wider world right now. Each of these coins has made a strong showing in both the long and short term and can add valuable diversity to a crypto portfolio aside from the usual BTC, ETH, and XRP. If you’re searching for your next investment on a crypto exchange (such as StormGain, featured in this article’s charts), then consider these for May.
Why these crypto tokens are making waves in May was originally published in DataDrivenInvestor on Medium, where people are continuing the conversation by highlighting and responding to this story.