Since its introduction in 2008, bitcoin has inspired an explosion of other cryptocurrencies. These ‘alternative’ cryptocurrency coins – altcoins – now number more than 5,000.
If you want to invest in cryptocurrency, one option is to diversify by holding a selection of coins beyond bitcoin, taking into account the functionalities they offer.
Bear in mind that cryptocurrency trading is unregulated in the UK and there is no provision for compensation should something go wrong. Your capital is 100% at risk, meaning you may lose some or all of your investment.
1. Ether (ETH)
Ether is the cryptocurrency native to Ethereum, the global software platform that runs applications including smart contracts, games and financial transactions through blockchain technology, as well as minting and storing NFTs (non-fungible tokens).
It was launched in 2015 and has accrued a market capitalisation of over £137 billion, as of October 2022. Each Ether token is worth £1,149. The crypto saw its all-time high of £3,815.79 in August 2021.
2. Litecoin (LTC)
Launched in 2011, Litecoin was one of the earliest competitors to bitcoin. It was developed by entrepreneur and computer scientist, Charlie Lee.
Like bitcoin, Litecoin is a proof-of-work cryptocurrency, meaning that new coins are created to reward miners for verifying and processing transactions on its blockchain.
However, Litecoin transactions are processed faster than transactions made through bitcoin because it uses a newer algorithm known as Scrypt.
As of October 2022, one Litecoin was worth £47.09 The crypto reached its all-time high in May 2021, with each coin valued at £326.41.
3. Dogecoin (DOGE)
What began as a tongue-in-cheek meme currency quickly became a crypto asset.
Dogecoin was created in late 2013, using blockchain technology derived from Litecoin, and accompanied by a Shiba Inu dog logo. The coin is known for its humorous origins and unlimited supply, which has made it an attractive entry point to crypto for new investors.
Dogecoin recently saw its value rocket to an all-time high of 58p, partly in response to Elon Musk’s tweet about buying Tesla merchandise with Dogecoin.
As of October 2022, Dogecoin’s value has fallen to about 5p.
4. Bitcoin Cash (BCH)
Bitcoin Cash forked from the original bitcoin in 2017 when a group of users wanted to increase the size of blocks in the blockchain, allowing them to contain more transactions.
Other than this change, Bitcoin Cash functions similarly to bitcoin itself, using the same proof-of-work mechanism to process transactions, and capping the number of coins that can be in circulation to 21 million.
As of October 2022, one Bitcoin Cash token is worth £102.
5. Tether (USDT)
Launched in 2017, Tether is one of around 200 stablecoins.
A stablecoin is tied to fiat currency, in this case, the US dollar. For every Tether coin issued, its creators keep $1 in reserve, and for every dollar cashed out, one Tether coin is destroyed.
In theory, Tether retains a value of around $1 (89p Sterling) at all times. This stability makes Tether a good option for transferring value between exchanges, since Tether holdings are more likely to retain a stable value than other, more volatile, coins.
However, stablecoins are not infallible. In early May 2022 another stablecoin, Terra USD crashed — dropping from $1 to a low ebb of just $0.30 a coin. In response, investors cashed out millions of dollars they had put into other stablecoins, including Tether.
In the following weeks, Tether’s market capitalisation dropped from $83 million (£65.6 million) to $73 million (£57.7).
6. Cardano (ADA)
Cardano was created by Ethereum’s co-founder, Charles Hoskinson, in 2017. It’s the native cryptocurrency of the Cardano blockchain platform, and uses proof-of-stake, rather than proof-of-work, to verify and process transactions.
Proof-of-stake blockchains require considerably less energy than their proof-of-work counterparts, since this process uses an algorithm to select just one device in the decentralised network to verify each block of transactions, rather than having every device compete every time.
On 3 October 2022, one Cardano was worth 37p. Its all-time high was £2.45, which it reached in September 2021.
7. XRP (XRP)
XRP is a cryptocurrency best-known for its use on the global money transfer network, Ripple.
The cryptocurrency was first launched in 2012 on its own ledger. Unlike bitcoin, XRP transactions are not verified through proof-of-work or proof-of-stake. Instead, transfers are processed by network participants known as validators.
Making a transaction through Ripple incurs a small fee — a tiny fraction of one XRP token, which is destroyed.
In May 2022, XRP had the sixth highest market capitalization of all cryptocurrencies. Each coin is worth around 39p as of October 2022.
The number of CRP tokens that can ever be in circulation is capped at 100 billion.
8. Monero (XMR)
Monero is a cryptocurrency best-known for its privacy features.
Launched in 2014, the coin operates on what’s known as an opaque blockchain. This type of blockchain keeps the transactions it records anonymous through measures like disguising users’ addresses and even the amount transferred.
The coin is so focused on privacy that it does not comply with anti-money laundering procedures.
Monero is worth around £123 as of October 2022. The coin reached an all-time high value of £409.86 in May 2021.
9. Avalanche (AVAX)
Launched in 2020, Avalanche is the cryptocurrency native to the Avalanche blockchain.
Like Ethereum, Avalanche is best known as a blockchain platform that uses smart contracts, but it also supports a wide range of other applications.
The main advantage it has over Ethereum is its emphasis on transaction processing speed and efficiency. The network claims it can process 4,500 transactions every second.
Avalanche users can also stake their coins and receive a small reward in exchange. Each coin was worth £14.87 in October 2022, and the crypto peaked at £115.78 in late 2021.
10. Solana (SOL)
Much like Ethereum and Avalanche, the Solana blockchain platform was built with the goal of hosting decentralised applications. Both the platform and its cryptocurrency launched in 2020.
One key advantage of Solana is the platform’s low transaction fees, which work out considerably cheaper than its competitors. The platform can process as many as 65,000 transactions a second, largely due to verifying them through a new ‘proof-of-history’ process.
This processing method adds a ‘time-stamp’ to each block, creating a permanent record of what transactions happened in what order.
As of 3 October 2022, Solana is worth £28.78.