Which Of These Two Cryptocurrencies Will Stand Out In 2021?
Interest is high in cryptocurrency with the Bitcoin (BTC) price breaking past the $60,000 mark recently. With Coinbase (NASDAQ: COIN) being the first major cryptocurrency company going public next week, interest in cryptocurrency stocks is on the rise. Adding fuel to the hype, Tesla (NASDAQ: TSLA) also announced in March that it would begin accepting Bitcoin as payment. Why is the highly volatile nature of cryptocurrency a hot topic in the investment world? Simply put, investors who bet on Bitcoin and Ethereum (ETH) in the very early stages have made enormous profits. Now that prices for the two major cryptocurrencies have soared tremendously, it may be difficult to get in on the action. The good news is there are still cryptocurrencies out there that have great potential, and they have lower entry barriers. Some have been compared to Ethereum. That said, here are two cryptos that are worth the mention.
Both Cardano (ADA) and Polkadot (DOT) have seen an unprecedented amount of development and adoption over the past year. Consequently, they are neck and neck in rankings by market cap and both are among the top ten cryptos. Cardano blockchain hosts smart contracts and applications similar to Ethereum. What makes Cardano unique is its double-layered architecture which enables more flexibility for its smart contracts. Polkadot on the other hand aims to efficiently connect individual blockchains into a single unified network. It has been known to be called “The Internet of Blockchain”. Interestingly, both blockchain platforms share some hints of familiarity with Ethereum. Before making any decision on which cryptocurrency to buy, here’s what you need to know about these two hot cryptocurrencies.
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Cardano is a proof-of-stake (POS) blockchain, the first to be founded on peer-reviewed research. The innovative platform requires transaction validations and the validators would need to “stake” some of their ADA coins. It was founded by Charles Hoskinson, who is also the co-founder of the popular altcoin, Ethereum. The ADA altcoin has been gaining investor’s attention in recent months and it is having a spectacular year.
The altcoin ended 2020 at $0.18, but it has been one of the biggest winners thus far. Cardano has been rallying more than 500% year-to-date. For stocks, this kind of rally can be disconcerting and usually will end in a pull-back afterward. But cryptocurrencies are a totally different species. With big rallies, it could potentially draw big attention and that could lead to more bidding. At least, that’s what we’ve been seeing so far.
Cardano Blockchain is Now 100% Decentralized
Cardano has been striving to decentralize its network as quickly as possible. If you recall in late July 2020, the Shelly upgrade was one of its initiatives. Starting off Q2 on a positive note, the blockchain network announced it is now 100% decentralized on block production. What does this mean in layman’s terms? Essentially, this means that the community stake pool operators are now fully responsible for block production. In comparison, Bitcoin reportedly relies on its ten prominent mining pools that account for more than 80% of block production. This significant milestone certainly comes as encouraging news for potential investors. Specifically, the fully decentralized network makes it less susceptible to 51% attacks and reduces other significant risks.
Coinbase IPO & NFT Developments Are Boons To Cardano
ADA is now available for trading on the largest cryptocurrency exchange platform, Coinbase. For starters, ADA will be available on Coinbase Pro. This is pleasing news to investors and traders alike as it opens the coin up to a much bigger audience.
Cardano has other selling points as well, including its potential connection to a red-hot trend in digital collectibles. Some traders are eyeing Cardano for a possible connection to non-fungible tokens, NFT. Admittedly, if it’s possible to create NFTs on the Cardano blockchain, this could potentially act as a catalyst for ADA price. But investors have to note that up to date, Cardano doesn’t yet support smart contracts, nor does it have an NFT token standard. If you’re anticipating a rally of NFT stocks, it doesn’t hurt to put Cardano on your watchlist.
It may have a funny name but Polkadot means serious business. For starters, Polkadot uses a system where trusted validators do the “mining”. Polkadot is a blockchain platform that allows its individual blockchains (parachains) to interoperate with other parachains on the network. Through its parallel processing, it has the potential to address common core issues associated with blockchains, which appear to work in a more efficient manner compared to Bitcoin or Ethereum. Polkadot is also founded by another co-founder of Ethereum, Gavin Wood.
What Does Tether Going Live On Polkadot Mean?
Tether (USDT), currently the world’s largest stable coin, recently announced plans to launch its coin on the Polkadot network. The company has yet to determine the schedule. While Polkadot does not seek to displace competing blockchains, the inclusion of Tether will make it possible for users and projects to transition between networks smoothly. The launch is an attempt to accommodate the growing number of DeFi projects with a need for stable coins across multiple networks. And the launch of tether on Polkadot is a crucial step in achieving that vision.
This new development adds value for both Polkadot and tether by fusing stability with scalability and affordability. Together, these two projects are forging a promising relationship that can overcome some of the challenges that hinder the growth of other networks.
Will Polkadot Replace Ethereum?
Many are speculating that Polkadot could become the next Ethereum. But that’s not really a good comparison. Many die-hard Cardano fans believe it will eventually displace Ethereum thanks to its high-speed tech and fee-free transaction setup.
These appeal to developers to utilize Polkadot’s network for future blockchain projects. Why? It provides developers with technical freedom and makes functionalities easily accessible. Not to mention, Polkadot comes with a much lower transaction fee. As Defi grows, the market’s appetite for Polkadot’s token has been exceptional. If you believe that there will be strong adoption and attention from developers (like how Ethereum has achieved its success), Polkadot is one cryptocurrency to watch.
Given everything we’ve covered, it’s not hard to see how both Cardano (ADA) and Polkadot (DOT) rank among the top 10 cryptocurrencies by market cap now. Both networks have great potential in integrating blockchains. If you believe Cardano could eventually display its strengths through lower transaction fees and higher-speed tech, Cardano could be the next Ethereum.
On the flip side, if Polkadot can demonstrate sustainability in its operations, we may see an influx of developers and investors to the platform. And that is likely to see more investors jumping into Polkadot. Both cryptocurrencies are likely to remain as popular bets in the near term and are solid names to potentially spread your bets on if you are looking for the best cryptocurrencies to buy right now.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.