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.
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Cryptoassets are highly volatile and unregulated in the UK. No consumer protection. Tax on profits may apply.
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 £189 billion, as of June 2022. Each Ether token is worth £923.61. 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 June 2022, one Litecoin was worth £43.33. 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 June 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 June 2022, one Bitcoin Cash token is worth £97.49.
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 (79p 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 capitalization 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.
In late June 2022, one Cardano was worth 41p. 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…