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2 Cryptocurrencies That Could Surpass Bitcoin

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Whereas Bitcoin (BTC -1.73%) is still the No. 1 cryptocurrency in the world as measured by market capitalization, there are many reasons to believe that other cryptocurrencies could eventually surpass it. Prior to this year’s crypto market retreat, the conventional wisdom was that Bitcoin was a hedge against inflation and a long-term store of value. Some have even called it “digital gold”. But these assumptions are now very much in question.

So, which cryptos could move Bitcoin to the top of the crypto heap? Right now, the two best prospects are Ethereum (ETH -7.80%) and Solana (FLOOR -3.28%). Both cryptos offer more utility than Bitcoin, and both are innovation leaders in the blockchain industry, with promising growth prospects.

Ethereum

Ethereum stands out as a leader in innovation. The most recognizable developments of recent years – including smart contracts, decentralized applications (dApps) and non-fungible tokens (NFTs) – originated on the Ethereum blockchain.

By almost any measure, Ethereum is the dominant force in the blockchain industry. For example, Ethereum is the #1 player in the NFT market, with an estimated 80% share. In areas such as decentralized finance (DeFi), blockchain gaming, and the metaverse, Ethereum dwarfs all other blockchains in the world.

Wall Street traders celebrate.

Image source: Getty Images.

And with The Merge, a massive system upgrade, Ethereum will only get stronger. The current complaint about Ethereum is that it is too slow and too expensive. This is largely because it was based on a proof-of-work consensus mechanism. With The Merge, Ethereum will transition to a proof-of-stake consensus mechanism, reducing transaction fees and increasing transaction processing speed. Eventually, when Ethereum 2.0 is complete, it should be able to handle 100,000 transactions per second. In contrast, Bitcoin can currently only process five to 10 transactions per second.

Solana

The path to market dominance is more complicated for Solana as it is a direct rival to Ethereum. Both are layer 1 blockchains offering users the same features and utilities. Ethereum has smart contracts, just like Solana. Ethereum allows the creation of NFTs, just like Solana. The main selling point is that Solana can do everything Ethereum can do, but faster and cheaper. Solana already offers the capacity to process 65,000 transactions per second and transaction fees are close to zero.

While Ethereum has bogged down in all the technical steps needed to become a proof-of-stake blockchain, Solana has been on a tear of innovation. Solana has launched everything from a new merchant payment network (Solana Pay) to a brand new mobile crypto platform (Solana Mobile). In 2023, Solana plans to launch Saga, the very first “crypto phone”.

At the same time, Solana is making serious inroads into blockchain and Web3 gaming. More than any other crypto, Solana is taking steps to create a recognizable brand for early adopters of crypto. When you can layer that brand experience on top of super-fast, super-low-cost blockchain, it’s a very powerful value proposition.

How soon could Ethereum or Solana overthrow Bitcoin?

It might be a loose analogy, but you might think what’s happening in the crypto industry is similar to what happened in the tech industry a generation ago. Until the 1980s, IBM was the biggest name in the tech industry, then came Microsoft and Apple. The rest, as they say, is history.

In many ways, Bitcoin is today’s IBM crypto, Ethereum is the new Microsoft, and Solana is the new Apple. There is certainly room for all three to co-exist. The only real question is who can sit on top. Large institutional investors may prefer Bitcoin, while mainstream investors may prefer Ethereum and Solana.

Right now, Ethereum is about half the size of Bitcoin based on market cap and Solana’s is only 3%. So a lot would have to change for either to overtake Bitcoin. But again, look at what happened with IBM, Microsoft and Apple in the tech industry. Microsoft was launched in 1975 and it took Microsoft almost two decades to overtake IBM in terms of market capitalization. Then, after that, it took almost two decades for Apple to overtake Microsoft in terms of market capitalization. So obviously, this won’t happen overnight, and there will be many twists and turns along the way.

But Ethereum and Solana now offer too much utility to ignore. And they are both innovation leaders, which makes them long-term players if you believe in the future of the crypto industry. If you can handle the volatility of the crypto, you can put these two coins in your wallet and keep them forever.

Dominic Basulto has positions in Bitcoin and Ethereum. The Motley Fool holds positions and recommends Apple, Bitcoin, Ethereum, Microsoft and Solana. The Motley Fool recommends the following options: $120 long calls in March 2023 on Apple and short calls $130 in March 2023 on Apple. The Motley Fool has a disclosure policy.


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