There are tens of thousands of digital assets on the market, with the reality being that more than 90% of them will likely fail as projects at some point in time. This is especially true of gambling type assets like memecoins such as Pepe or previously Shiba Inu. Yes, there are certainly people who made money flipping those tokens, but there are far more people left holding the bag for assets that are literally memes. If you shouldn’t buy memecoins, then what should you buy?
When buying crypto assets to create a solid portfolio, there are types of cryptocurrencies that you should pick from. We’re going to categorize them into three fairly broad categories: store of value, smart contract capable, and stablecoin. For each of these categories we’ll first define the category and then provide you with some of the most solid digital asset projects that fall into them. These are much more fundamentally sound cryptocurrency projects, especially when compared to something like Pepe. Let’s start with store of value assets.
Store of Value
Store of value assets are those that either remain at a stable value or increase in value over time. They’re assets that don’t really suffer from depreciation or inflation. Historically, these are assets such as gold, silver, and other similar precious metals. Similarly, when it comes to crypto, these are proof of work digital assets that have to be mined.
The most obvious store of value digital asset is Bitcoin. It’s often referred to as digital gold. Bitcoin must be mined using computer processing power and electricity, in a process referred to as Bitcoin mining. The mining reward for Bitcoin diminishes over time, which in conjunction with its fixed maximum supply of 21 million BTC, makes for a deflationary store of value asset. There’s a reason why Bitcoin makes up almost 50% of the entire crypto market.
Bitcoin Cash (BCH)
Bitcoin Cash is actually also Bitcoin, but it’s a fork of it. A fork occurs when there is a difference in opinion regarding the direction of a blockchain project. A fork allows a new chain to be created while allowing for the old one to still function, but a new asset is required for the new chain.
Bitcoin Cash resulted from constantly rising transaction fees on the original BTC network. Some BTC holders wanted an increase to the size of blocks to reduce these costs. A debate within the Bitcoin community regarding the purpose of BTC occurred, and a hard fork resulted on August 1, 2017. This fork caused everyone holding BTC to now also be holding an equivalent amount of BCH. Bitcoin Cash can process more transactions per second than regular Bitcoin, but the Lightning Network on the regular Bitcoin blockchain mitigates this advantage somewhat.
Litecoin (LTC) is a cryptocurrency that was created based on Bitcoin’s code. However, Litecoin differs in terms of the hashing algorithm used for mining, the supply (84 million), block time (2.5 minutes rather than 10 for BTC), and more.
LTC has extremely low transaction fees, making it possible to use for micropayments and point of sale. It has remained a top crypto asset throughout its existence, and like Bitcoin it has a decreasing emission rate over time, as it halves in the same way Bitcoin’s does.
Smart Contract Capable
Smart contracts are the future, which means buying digital assets that are smart contract capable is a must. These assets are those that have entire ecosystems including decentralized exchanges, lending platforms, and more. As development on smart contracts improves over time, these networks could increasingly be a part of global crypto use.
Ethereum (ETH) is the second largest cryptocurrency by market cap, following Bitcoin (BTC). It switched from a proof of work consensus algorithm to a proof of stake one in September 2022. This switch dramatically reduced the network’s energy consumption and prepared it for future growth as the blockchain continues to be developed. Ethereum is a direct competitor to all the other smart contract capable networks on this list. Ethereum can be staked to receive a reward over time, as can all the other assets in this section.
Ethereum, and all the other smart contract capable assets on this list, allows users to access a variety of services. Some of the most popular services on Ethereum are Uniswap (UNI), the decentralized exchange with the most trading volume in the world, and AAVE (AAVE), a lending and borrowing platform.
Cardano was created by Charles Hoskinson, who was one of the founders of Ethereum. He didn’t like the direction of the project and left to start Cardano. The main difference between Cardano and Ethereum (and the other assets in this section) is its unique native token system. This system enables Cardano to support a wide variety of transactions and eventually will allow for transaction fees to be paid in any asset on the network.
Cardano’s network has a steadily increasing transaction speed and low fees that are known precisely in advance, meaning there is no need to adjust gas like with Ethereum or Binance Coin transactions.
Solana quickly rose up the crypto market, hitting an all-time high in 2021 of over $260 per SOL. Its growth can be attributed to its low-cost transactions that are also lightning fast, along with an array of DeFi and NFT platforms.
It emerged as a serious competitor for both Ethereum and Cardano, but it has also faced a series of network outages throughout its history in addition to criticisms of its decentralization which could be reason for pause when looking to invest.
On the other hand Solana has received considerable acclaim for its user-friendly UX and app ecosystem. It’s also the second most popular platform for NFTs.
Founded by another former Ethereum developer, Dr. Gavin Woods, Polkadot (DOT) aims to be a next generation blockchain protocol. This will be done by uniting an entire network of purpose-built blockchains so that they can operate seamlessly together at a large scale.
Polkadot is a sharded blockchain network. This means it connects several chains together in a single network, allowing them to process transactions in parallel and exchange data between chains, with security guarantees. Polkadot is often considered a layer-0 blockchain network because it underlies a series of layer-1 protocols known as parachains. Polkadot can update without forking through on-chain governance votes that are done using the DOT token. DOT can be staked in order to help secure the network and earn passive income as well.
Polygon (MATIC), formerly known as Matic Network, is a layer 2 blockchain network built on top of Ethereum, meaning Polygon is an ERC-20 token. Polygon aims to be Ethereum’s Internet of Blockchains, much like Polkadot (DOT). Transactions on the network take place on child chains. This keeps the majority of traffic off of the Ethereum parent chain, which results in faster and cheaper transactions.
Polygon exploded after its mainnet launch in early 2021, with projects such as Uniswap, AAVE, and 1Inch being accessible on the Polygon network with much lower fees than their Ethereum versions.
Binance Coin (BNB)
Binance Coin (BNB), like Polygon, was created as an ERC-20 token on Ethereum by Binance cryptocurrency exchange in 2017. Binance Chain later launched in the first quarter of 2019 with a decentralized exchange built on top of it, known as Binance DEX. BNB was migrated from being an ERC-20 token to a BEP-2 token.
Then, in 2020, Binance launched the Binance Smart Chain (BSC), further expanding the usefulness of BNB because of the array of decentralized apps that could then be launched on the chain. The Binance Smart Chain is extremely similar in function to Ethereum, but is certainly marketed more towards Binance customers.
Stablecoins are assets that have a stable, pegged value to a real world currency. For the most part, they’re all USD. For each stablecoin we’ll just mention how much their issuance is currently and how they’re backed.
Tether USD (USDT)
USDT is the most popular stablecoin on the market, with an issuance of over $80 billion tokens. Tether backs up its assets with a variety of reserve assets, with the majority being cash or cash equivalents.
USD Coin (USDC)
USDC is the second most popular stablecoin on the market with an issuance of over $28 billion. USDC is backed by a mix of cash and short-term U.S. Treasury bonds.
DAI is the third most popular stablecoin on the market with an issuance of over $4.5 billion. It works differently from USDT and USDC in that it is issued through the MakerDAO platform. In order to mint DAI a user must provide collateral, and then they can borrow DAI as long as they maintain a collateral ratio of at least 101%. So rather than being collateralized by cash, DAI is collateralized by a mix of other cryptocurrencies that are deposited into smart contracts.