For investors new to the space, the myriad of coins can be daunting. Here’s an overview of the five biggest cryptocurrencies.
Launched by an anonymous creator in 2009, the digital currency runs on blockchain technology — another crypto buzzword. Essentially, the blockchain is a decentralized ledger system where records of transactions are stored. That’s the key difference between bitcoin and traditional fiat currencies like the US dollar or the euro, which are controlled by central banks.
Part of bitcoin’s value is determined by the finite number — 21 million — of coins that can be created. Not all of them are in circulation yet. Bitcoin “miners” use computers to solve complex puzzles to create a new block on the chain. That process is in turn rewarded with bitcoin, though the reward halves for every 210,000 blocks mined.
These “halving” events have in the past led to volatility in the bitcoin price. And the mining process eats up a lot of computing power and electricity, which has led to concerns about bitcoin’s environmental impact.
Ethereum is the perennial second fiddle of the crypto world.
The value of Ethereum, launched in 2015 as open-source blockchain-based software with its own cryptocurrency, has risen more than 540% this year. It’s been boosted by investors who believe Ethereum, also called Ether, will be key for decentralized finance including smart contracts and NFTs (non-fungible tokens).
The software was created to expand the use of the blockchain beyond bitcoin so it could be used in wider applications, which makes it more than merely a cryptocurrency.
And unlike bitcoin, ether supply isn’t capped. New tokens are created constantly through a similar mining process.
The third-largest crypto, with a market cap of more than $100 billion, Binance Coin, or BNB tokens, is a different beast. A product of the Binance Exchange, the largest cryptocurrency platform by volume traded, it was created as a means to pay for fees on its own platform.
It has a cap of 200 million BNB tokens, but tokens are regularly destroyed — or “burned” — to reduce the total supply and stabilize the their value over time. That means that people’s Binance holdings shouldn’t fluctuate in value as much as other cryptos.
Binance Coin is also different in that it can be exchanged only into other cryptocurrencies, and not into dollars or any other fiat currency.
Last summer Binance hired Brian Brooks, who was acting head of Office of the Comptroller of the Currency during the last eight months of the Trump administration, to head its US business. Brooks resigned in August after only a few months on the job. He is now the CEO of Bitfury, another bitcoin mining company.
Tether has moved up to rank fourth among the five biggest digital currencies, with a market cap of nearly $74 billion.
Solana is basically a competitor to Ethereum. It’s a blockchain network with its own digital currency called Sol.
That’s right: The crypto went from being worth a modest $2 per unit to a value over $200, bringing its market cap to more than $70 billion and outpacing fellow cryptos Cardano and XRP, which have also spent time in the top five.