- Introduction: The Best Investment of the Last Decade
- Ethereum (ETH): The Backbone of the Decentralized Internet
- Chainlink (LINK): Connecting Blockchain to the Rest of the World
- Monero (XMR): Private Money in a World that’s Trying to Get Rid of It
- Synthetix (SNX): Trade any Asset, Anywhere
- What if the Next Bitcoin… is Bitcoin?
Introduction: The Best Investment of the Last Decade
When Bitcoin (BTC) launched, it was a truly revolutionary idea, and still is. Bitcoin isn’t controlled by any government, and instead of being inflationary like government-issued paper money, which loses value over time, it is disinflationary (and eventually deflationary once all BTC are created) due to its low creation rate that stops at a predetermined maximum supply of 21 million BTC.
This groundbreaking invention is not only a technological tour de force, but has also become one of the best investments of all time. In fact, it’s the best investment of the 2010s - offering 8 million percent returns for those who invested at the start of the decade.
That makes even the American stock market, which has had its own spectacular run with 250% returns, look like nothing.
Due to Bitcoin, and other crypto assets’ unheard of investment performance, people everywhere have been looking for the “next Bitcoin” to strike it rich in this new digital gold rush.
With the thousands of crypto assets out there, it can be hard to spot the next big cryptocurrency. Therefore, we’ve curated a list of some of the top contenders for what might be the next Bitcoin like investment.
Ethereum (ETH): The Backbone of the Decentralized Internet
Ethereum (ETH) often gets mentioned in the same breath as Bitcoin, as it’s one of the most popular cryptocurrencies behind BTC. Not only that but it revolutionized the blockchain industry with the idea of “Blockchain 2.0”.
“Blockchain 1.0”, or the first iteration of blockchain, popularized by Bitcoin and its lookalikes, saw the first use case for blockchain, or the technology that runs Bitcoin and other crypto assets, in the form of peer to peer payments.
Blockchain 2.0 takes blockchain one step further. While assets like Ethereum can also be used for payments, they introduce another layer of functionality to blockchain: programmable transactions.
Through the use of smart contracts, or self-executing contracts of computer code, developers can create decentralized applications (Dapps), which are applications that eliminate the need for many middlemen (and their associated transaction times and fees), by automating many middleman functions with code.
For instance, imagine an Uber (or other taxi app), that can automatically connect taxi drivers and passengers without the need for a centralized entity, such as Uber, in the middle.
Moreover, the Dapps run on Ethereum, a decentralized network of computers, which means that you don’t have to rely on a single company with its servers to do things like stay running all the time (popular centralized services like Instagram have had uptime issues recently) and not get hacked (e.g. all 3 billion Yahoo accounts were hacked in 2013).
This ability to act as a sort of basic infrastructure for all kinds of decentralized applications like decentralized financial services, no more passports (faster lines at the airport!), and secure online voting (no more lining up to cast your vote), has given Ethereum the nickname the “decentralized supercomputer” for its potential to revolutionize… basically everything.
And indeed, this sort of potential has seen Ethereum reward early investors in a big, big way, with 1 ETH originally going for about $0.30 and appreciating in value all the way to about $1,300 at its peak, over a 430,000% increase.
Though Ethereum wasn’t the first smart contracts platform and it has many competitors, it still has one of the highest chances of becoming a major part, or even backbone, of the decentralized Internet - called Web 3.0.
While it is struggling to “scale” or handle large amounts of transactions at once, Ethereum has the biggest developer community by far, who are working to improve the technology and build Dapps on it.
Moreover, there are many businesses, including big names like Microsoft, Intel, and JP Morgan, also working to improve as well as standardize Ethereum's technology for all kinds of use cases in the business world.
Chainlink (LINK): Connecting Blockchain to the Rest of the World
The next contender for what might be the best cryptocurrency to invest in is Chainlink (LINK).
The core problem that Chainlink tries to address is what’s known as “the oracle problem”. That is - blockchains cannot interact with off-blockchain data, which is basically all data, without the use of an oracle or data feed. This has limited early use cases for popular Dapps to mainly things like gambling, though this is changing.
While there are many blockchain projects using oracles to connect with off-chain data, these oracles are often centralized, which has led to many problems.
For example, Synthetix, a blockchain project that lets you gain exposure to all kinds of assets like gold, Bitcoin, US dollars, and Tesla stock, by creating synthetic, blockchain versions of them, saw a bug caused by a data outage for one of their oracles. This led to a trading bot exploiting the bug to make $1 billion in less than an hour.
Though the company behind Synthetix and the owner of the trading bot agreed on a deal to restore the lost funds, this incident (and others) showed the dangers of relying on a centralized oracle, which brings back all the problems of centralization that decentralized blockchains are trying to solve.
(Funny enough, Synthetix has since entered into a partnership with Chainlink, which as of January 31st, 2020, powers more than $100 million of DeFi, or about 10% of all of DeFi at the time).
After all, what’s the point of a decentralized blockchain that has centralized data inputs? This is what Chainlink is trying to address so that blockchains can remain decentralized from end to end.
For a while, Chainlink was seen as a joke by many because of its close association with the site 4chan, which is known for its controversial content. Many users on 4chan, specifically the /biz (business & finance) section, were posting and still post, endless amounts of memes about LINK, prompting many to think that Chainlink was just a huge joke or meme (though more serious discussion about LINK had taken place in the past).
This all took a radical turn in June 2019, when Google published a blog post detailing how Chainlink could be used to connect Google’s enterprise cloud data warehouse (BigQuery) with Ethereum. In a little over two weeks, LINK’s price more than doubled from $1.73 on June 13th to $4.12 on June 29th.
This (perceived) endorsement of Chainlink’s technology by Google thrust LINK from 4chan message board obscurity to the realm of top crypto assets. Despite a downturn in the crypto market in late 2019, Chainlink was still one of the best performing crypto assets of 2019.
The God protocol is the idea of a protocol that could receive and process inputs before delivering outputs in a completely secure as well as decentralized way. This protocol would be automated, under the control of no one, yet deliver perfect results.
While that vision has a far ways to go, Chainlink seems to be the leading decentralized oracle project as of now. Chainlink’s creator, Sergey Nazarov, is also a smart contract pioneer, having worked on early smart contracts projects like NXT (a smart contract platform that came before Ethereum). He also is the owner of Smartcontracts.com since before Ethereum came out or most people even knew what smart contracts were.
Monero (XMR): Private Money in a World that’s Trying to Get Rid of It
Next up for what might be the next big cryptocurrency is Monero. For those unfamiliar, Monero is the premier “privacy coin” in the cryptocurrency space.
Many think that Bitcoin is private. In many ways it is indeed more private than other forms of digital money. However, it isn’t fully anonymous, since all Bitcoin transactions are public for everyone to see on the Bitcoin blockchain, or record of transactions.
While Bitcoin transactions only reveal the addresses (similar to accounts but without any identifying information other than a random mix of letters and numbers) and amounts involved, if someone is able to associate a Bitcoin address to your person, they can know your entire Bitcoin transaction history.
Of course, you can do things like create new Bitcoin addresses for every transaction, use CoinJoin, or use a Bitcoin mixing service (similar to CoinJoin but requires trusting a third party) to enhance Bitcoin’s privacy. However, with Monero, full privacy is on by default (for more info about the differences between BTC and XMR, see our article on Monero vs. Bitcoin).
Now you might be thinking - why is privacy so important? As long as I’m not doing anything wrong it doesn’t matter.
You might be right that as long as you don’t do anything wrong, you don’t have to worry about staying 100% private. After all, many people post about their lives on social media for all to see.
But who’s to decide what’s “right” and what’s “wrong”? Twitter? Google? People build entire businesses on platforms like Youtube and have their videos and/or channel taken down without even an explanation.
Now imagine this power to censor people at will not just with social media content… but with money. Oh no you say - that would never happen in [insert your country here].
Thanks to central bank digital currencies (CBDCs) and/or corporate digital currencies, this can and will happen. Many countries are already mostly cashless or getting there. The ability to be free from this kind of digital financial censorship, which happens now with digital money like bank and Paypal accounts, by paying with physical cash, will disappear.
As mentioned in our future of cryptocurrency article, huge companies like Facebook and JP Morgan are developing their own digital currencies. Moreover, 80 percent of central banks around the world are working on CBDCs, with 40% already in the experimental phase and 10% running active pilot projects.
Real life will become The Panopticon, where you are afraid to do or say certain things, just like at the workplace or on social media in many countries. This time though, you won’t just lose your job, but also your access to money, which allows you to pay for food, housing, and everything else in life.
Also, even if you are the most perfect, law-abiding citizen, it’s very possible that a mistake set off by a faulty computer algorithm could shut down your money, too. If you have any experience dealing with government agencies, it will probably be a good few months before things get resolved (“Please hold. Your call is very important to us.”)
Too extreme? Conspiracy theory? In 1933, the US government ordered ALL US citizens (not criminals or suspected criminals, but everybody) to hand in their gold to the government. If they didn’t comply, they had to pay a $10,000 fine (about $200,000 in today’s money) and/or go to jail for 10 years.
However, unlike in 1933, there won’t be federal agents knocking on your door. Thanks to technology, they won’t have to come after you. They can simply flip a switch.
As you can imagine, in this kind of world, a fully private, censorship-resistant digital money would have a lot of value.
While Monero isn’t the only privacy coin, it is the most popular and has some of the best privacy protections. In fact, it’s so “good” that many centralized exchanges have delisted it from their platforms for fears of being persecuted by the authorities, since it’s extremely difficult to tell whether privacy coins like Monero are being used for normal purposes or illegal activities.
In fact, there aren’t many places that let you exchange for XMR without an account now with the exception of Exodus and a few others.
Anyway, for now Monero might just be a niche privacy coin. Tomorrow? It might be one of the only forms of real money left.
Synthetix (SNX): Trade any Asset, Anywhere
Mentioned earlier in this article, Synthetix has been a rising star in the DeFi world. But what makes it so special?
Well, imagine you are someone living in a country with underdeveloped financial services. You have very limited ways to grow or even preserve your wealth, with bank accounts (if you can get one) - let alone other financial accounts - paying pitifully low or even no interest on deposits.
The effect of this gets multiplied after you take inflation (or decrease in value of your money due to things like government mismanagement and corruption) into account. Inflation that is high or even extreme occurs in many of these countries, meaning that keeping your money in the bank or under your mattress results in you even losing money.
While there are many potential solutions to this problem, Synthetix is one such approach that allows for the creation of synthetic assets, as the name implies, on the Ethereum blockchain.
Synthetic assets can track the price of any financial asset, including crypto assets, stocks, bonds, commodities like gold or silver, and anything else that has real world value. Users can also create synths that do things like increase in value when the underlying asset, such as Bitcoin or the euro, decrease in value.
Synths that track the price of certain assets and certain movements in the price of assets are but two examples of what Synthetix allows users to do.
In plain English, the traditional and crypto markets, which collectively comprise hundreds of TRILLIONS of dollars worth of assets, can be recreated in a decentralized way so that everyone in the world can buy more Tesla stock and not just those with easy access to the US financial markets (joke):
On a more serious note, Synthetix not only allows for anyone with an Internet connection and a compatible wallet to gain exposure to a wide variety of financial assets, but the ability to create Synths is also open to anybody without the need for a middleman like a broker or bank.
Moreover, you can also trade any Synth for another one, which gives you unlimited liquidity, or ease of getting in and out of assets, without being limited to certain trading pairs or situations where it’s hard to buy or sell certain assets due to low trading volume.
If Synthetix takes off, owning SNX tokens would not only let you create (“mint”) Synths but also earn part of the Synthetix exchange fees. And that is a very enticing proposition for SNX holders if Synthetix were to capture even a small part of the financial derivatives market (what it most resembles), which is worth anywhere from tens of trillions of dollars to hundreds of trillions of dollars.
However, Synthetix is still very much a work in progress compared to the likes of Ethereum, Chainlink, and Monero. Nevertheless, it’s the early adopters who are most rewarded for their vision and belief, hence the phrase “high risk, high reward” 😉.
What if the Next Bitcoin… is Bitcoin?
Last but not least, what if the next Bitcoin like investment, is just Bitcoin?
If you look at the list of the top crypto assets by market capitalization (number of an asset in circulation multiplied by asset price), the list changes frequently. During the peak of the 2013 crypto bull market, the list of the top cryptos looked very different from the list of the top cryptos during the peak of the 2017 crypto bull market:
As the image above shows, Bitcoin has a lot of staying power, even though it is the first crypto asset and many other crypto assets have come and gone since its creation.
At this point, Bitcoin has a large “network effect”, which makes it difficult for other assets to displace it. Since Bitcoin is money, it might not be so much about the technological innovation as it is about the network.
For example, there are already many cryptocurrencies that are faster and cheaper to use than at Bitcoin - though they haven’t been tested at a large scale.
Monetary value is largely based on trust, recognition or brand value, and network effect. Even though better technology might come along (don’t forget that Bitcoin, too, is working on scalability improvements, such as Lightning Network), that won’t necessarily overcome the trust in Bitcoin as well as its network effect that it’s built up over the years.
This network effect is also what will allow Bitcoin to receive much of the “institutional money” that’s been expected to flood the crypto markets. Institutional money is a term that gets thrown around a lot in the crypto space, as, up until this point, much of the capital that has fueled crypto investment has been from everyday investors.
The next big influx is expected to come from institutional investors, such as banks, pensions, hedge funds, and mutual funds. However, suffice to say, they surely won’t be buying random altcoins (non-Bitcoin crypto assets) with little to no liquidity or infrastructure. Bakkt, for example, a Bitcoin exchange, custody, and payments platform created by ICE, which also owns the New York Stock Exchange, deals with Bitcoin.
Regardless, In the short or medium term, certain assets might outperform Bitcoin. However, when faced with literally thousands of different assets to choose from, what are the chances of picking the right one? In addition, is it reasonable to expect that one can hold through the insane ups and downs, which would force the vast majority of people, even experienced traders, to sell too early (due to never seeing that much money in their lives) or panic sell?
In fact, it’s likely that very few early Bitcoin investors held from then until now without taking any profit. Seeing something go from $1 to $50, let alone nothing to $20,000, would be considered basically unheard of in the investment world. Investors who sold Bitcoin for a 50x sum probably felt like they were the next Warren Buffett.
The only people who actually held onto their BTC from the early days were probably those diehard believers who were in Bitcoin for reasons that weren’t just to make a quick buck.
Anyway, if Bitcoin has the ability to “be the next Bitcoin” in terms of wild investment returns, how much further could it grow in value?
One famous Bitcoin maximalist (only believes in Bitcoin) who also graduated from the elite Princeton University predicts $10 million per BTC! Although this implies the collapse of all government currencies as well as BTC absorbing part or all of the value of other asset classes, such as real estate.
Of course, with thousands of crypto assets out there, it’d be impossible to cover all of them, and I’m sure there are some diamonds in the rough that we probably missed. That said, what do you think is the next Bitcoin? Let us know in our public Slack community!
And no matter what the next big cryptocurrency is, be sure to keep it safe and in a wallet that you control. Don’t be like the guy who lost over $100 million of BTC by throwing away his laptop with his Bitcoin private keys! Or like countless people who’ve collectively lost billions of dollars over the years by entrusting their crypto to centralized exchanges.
This content is for informational purposes only and is not investment advice. You should consult a qualified licensed advisor before engaging in any transaction.