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What are Major Concerns for Each Crypto in the Top 5?

The top five projects in the cryptocurrency market are a cut above the rest. For a myriad of reasons, they have positioned themselves to take a substantial percentage of the crypto market.

Keep in mind that the path to dominance is not a sprint but a long game with leaders constantly jostling for position. How far will Elon Musk really carry Dogecoin? And, given we are still in the early days of crypto, how much can we expect the market to change? My bet is, a lot. The race is not nearly over.

As the permeation of crypto into society evolves, the top five will need to stay on their toes. Here, we are going to take a look at each of the top five cryptocurrencies (by market cap at this time this article was published), and see what they have stacked against them.

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Bitcoin: What Happens When All the BTC Has Been Mined?

Since Bitcoin’s inception, there have been many innovations in the cryptocurrency space.

One might expect another project to surpass Bitcoin. At nearly half the market capitalization of the entire crypto market, Bitcoin’s dominance is massive, yet declining. The next largest cryptocurrency, Ethereum, has about half the market share of Bitcoin, and is gaining quickly.

All other cryptocurrencies have the advantage of learning from Bitcoin’s architecture to improve their own designs. Despite these factors, it doesn’t look like any pose a real threat to Bitcoin’s mission. As of writing, other cryptocurrencies are gaining in market share mostly because the overall market is growing.

So what does cause concern for Bitcoin? Perhaps the largest concern is, what happens to Bitcoin once all Bitcoin is mined? Will miners still have the incentive to process transactions without the benefit of block rewards? The answer to this question is not clear. Given the amount of value locked up in Bitcoin, chances are the public will have the incentive to pay the cost to keep the Bitcoin network going.

It’s worth mentioning this is more of a long-term concern as all the Bitcoin won’t be mined until roughly 2140 (although we could see the reduced rewards for mining come into play much earlier).

Ethereum: Will Competitors Dethrone the DeFi King?

Ethereum is the second largest crypto project but, unlike Bitcoin, has clear competitors.

With the explosion of DeFi reliant on the Ethereum platform, it looks like Ethereum will do very well in the short to medium term. Long-term, Ethereum has cause for concern. Throughout its growth, there have been various hacks, exorbitant gas fees, and delayed deadlines as the project fills holes in their design.

Their circumstance can be likened to the idea of “an airplane being upgraded in mid-flight”. It’s possible, but sometimes it’s just better to start over.

For example, Ethereum started based on a proof-of-work consensus model. As of today, they are in the process of converting to a proof-of-stake model. This will benefit Ethereum in the long-term, but is a significant transition that could have been avoided. Ethereum is benefiting from first-mover advantage, but other projects are catching up.

Cardano: Will People Actually Use It?

One of Ethereum’s competitors is currently right behind them in the top 5: Cardano.

The founder of Cardano, Charles Hoskinson, was one of Ethereum’s founders. He noticed many of the holes in the project, then set off to build a new airplane. He based the design of Cardano on an evidence-based, peer-reviewed process. Cardano launched a number of years after Ethereum, and has grown at a significant pace. Currently, ADA has captured a market capitalization of about 20% that of Ethereum.

The biggest concern for Cardano at the moment is the lack of activity in their ecosystem. The number of active applications on Ethereum is substantial. It is difficult to find similar examples on the Cardano network. This should change soon as Cardano approaches full functionality with the launch of smart-contracts on their public testnet.

Tether: Is the Biggest Stablecoin Backed Sufficiently?

Tether is the largest stablecoin in the crypto market, and is the largest liquidity provider to cryptocurrency users. This is a significant role to play.

If anything happens to stablecoins, especially Tether, then the whole market will respond accordingly. For example, in a market downturn, stablecoins are often used as a hedge to minimize losses. If Tether’s ability to mitigate risk is affected, then the whole market becomes more risky and volatile. Liquidity services essentially allow stablecoins to act as a central bank to the cryptocurrency market.

Historically, stablecoins reserve a higher ratio of asset-backed tokens compared to fractional reserve banking. Viewed this way, stablecoins seem to be less risky than conventional banks. This is where the main concern for Tether lies. Given the growth and influence of stablecoins, they are drawing attention from banks and governments. This attracts regulation, which is good, but too much regulation can hurt Tether, and ultimately the cryptocurrency market.

Binance: Will Centralization Dissuade People from BNB?

Binance is the most successful exchange, but seemingly for all the wrong reasons. Contrary to the crypto mission, Binance is very centralized, and unashamedly so.

Changpeng Zhao, the CEO of Binance, has been open about his intentions with the company. He sees Binance’s efforts as a means to “accelerate crypto and DeFi’s mass adoption”. Whether Binance’s profiteering methods are ethical or not, they seem to be successful thus far in accelerating crypto adoption. They offer more features and tokens than any other exchange and bolster what can be considered crypto’s biggest derivatives market.

Binance’s centralization gave them an edge to quickly capitalize on the crypto market, but this is also their greatest downfall. Centralization allows for quick decisions that serve the interests of fewer parties. In an industry built on decentralizing technologies, this is a short-term game. Changpeng Zhao acknowledges this fact, claiming that they will move toward decentralization.

Will a mid-flight restructuring work for Binance? They could pull it off, but it’s certainly a risk.

Far Ahead But Far To Go

Each of the projects mentioned in this article have proven to be leaders in the world of cryptocurrency.

No project is perfect, and there is a lot of innovation happening in this young industry. Though each of the current top five are a cut above the rest, expect to see this list change over time.

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Gerrit van Sittert

About the Author

Gerrit van Sittert

Gerrit van Sittert is a cryptocurrency investor keenly interested in the ramifications of blockchain technology. Since graduating from a commerce and entrepreneurship degree, he has specialized his knowledge of how cryptocurrencies are set to impact the global supply chain and emerging markets. He started his crypto journey in 2017 while hosting an entrepreneurial focussed meetup group in Victoria, BC.

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