What are Blue Chip cryptocurrencies?
The term blue chip is used in the corporate world to refer to financially stable companies with inherent profitability mechanisms even in challenging economic circumstances. In crypto, blue chip alludes to blockchain currencies with a market capitalization of at least $2 billion.
Reliability and dominance in the respective industry also account for the Blue Chip status. For instance, Bitcoin had its 10th anniversary in 2019 with its current market capitalization beyond $300 billion. Bitcoin was the pioneer cryptocurrency and has kept the top spot ever since.
When it comes to crypto blue chips, there’s a need to contrast the ordinary and DeFi coins. Though both utilize the blockchain concept, the normal ones refer to the pioneer coins. However, DeFi coins with more than just stores of value are on the rise and could perhaps overshadow the former.
The mainstream Blue Chip crypto coins
The top 17 cryptocurrencies in market capitalization fit the bill when it comes to the blue chip tag. The cryptocurrencies in their current order of prominence are; Bitcoin (BTC), Ethereum (ETH), XRP, Tether (USDT), Bitcoin Cash (BCH), Chainlink (LINK), Litecoin (LTC), Cardano (ADA), Stellar (XLM) and Polkadot (DOT).
Nonetheless, the top five give an insight into the best that the crypto ecosystem offers.
Bitcoin was the initial blockchain finance project, though its inception in 2009 was without much publicity. Although it assumed the simplest form of blockchain operations, it’s undoubtedly the most powerful. It’s the gold standard for the cryptocurrency market.
Bitcoin users operate personalized banks controlled by private keys and can send or receive value. The ease of opening new wallets and transacting complements its reliability perfectly.
The limited supply of 21 million BTC safeguards the value of bitcoin users’ investment from random inflation via mathematical puzzles. It’s an impressive fact that they can spend their money when they wish to. Still, its investment worthiness is on an upward trend.
Due to Bitcoin’s market dominance, it’s very predictable that more and more decentralized projects will form sidechains on the Bitcoin platform. Nonetheless, that will call for well-measured sophistication since Ethereum is currently king when it comes to subsidiary services on its blockchain.
Ethereum is an open-source blockchain, a brainchild of Vitalik Buterin in 2014. It emerged as the first blockchain development crowdfunded through pre-mined ETH. With a market cap of $ 58 billion, it is way behind Bitcoin, which is currently at $ 314 billion.
In hindsight, Buterik’s vision is a reality. Ethereum is a decentralized blockchain where users can transfer and receive digital assets. Moreover, Ethereum boasts of other impressive exchange techniques in smart contracts and EVM. Its open-source attribute creates room for hosting a myriad of decentralized apps on its blockchain. With an impending roll-out of Ethereum 2.0, the capacity to hold dApps is the point of competition with Bitcoin.
Although Bitcoin has a bigger market cap, speculations are rife that Ethereum may surpass it in terms of usage. It has already received investments from blue chip corporations like Intel and Microsoft.
XRP refers to the cryptocurrency hosted by Ripple’s payments platform RippleNet. The operations of the cryptocurrency are made possible by the decentralized XRP Ledger on which it operates.
Since the Ledger is open source, it cannot host decentralized applications. It’s just a decentralized public ledger but not a blockchain like Ethereum.
The RippleNet money transfer platform is famous for instant money transfers through RTGS to any destination worldwide. The project found shape in 2012 when OpenCoin sought to develop a faster but cheaper alternative of payments platforms like SWIFT.
XRP trails Ethereum at a market cap of $ 24 billion. Currently, there are around 45.3 billion XRP in supply.
The DeFi Blue Chip Cryptos
The DeFi (decentralized finance) craze is disrupting the cryptocurrency industry. Though Ethereum is practically the hosting pioneer of the DeFi platform, newer applications are emerging to offer financial solutions through smart contracts by carrying out agreements between two or more parties without an intermediary.
The DeFi’s absolute disruption to the traditional cryptocurrency scene appears to start a new crypto era.
The applications offer more than the primary exchange-of-value task, but allow for financial services like loaning, lotteries, and purchase of crypto coins whose value peg to that of a popular fiat currency or commodity.
The lack of intermediaries and round the clock accessibility coupled with swift settlements seem to be the best-selling points for DeFi’s.
We can consider, Chainlink (LINK), Wrapped Bitcoin (WBTC), and DAI as the blue chip DeFi coins. The three possess a relatively high market cap of over $1.0 billion. The Ethereum blockchain hosts all of them.
Nonetheless, in terms of combined scores in market capitalization, reliability, and price, these DeFi applications also form part of the list. Uniswap (UNI), Aave (AAVE), yearn.finance (YFI), Maker (MKR), Synthetix Network Token (SNX), Compound (COMP) and UMA.
With a market cap of almost $5 billion, it’s by far the most valuable DeFi platform catching investors’ attention.
Chainlink blockchain runs smart contracts with the Ethereum blockchain’s currency, ETH.
Since typical blockchains lack the connection to external platforms, Chainlink provides a link outside the Ethereum network.
Wrapped Bitcoin (WBTC)
Though hosted by the Ethereum blockchain, WBTC brings the liquidity associated with Bitcoin to DeFi platforms.
The ERC-20 token has a publicly declared amount of WBTC coins in circulation.
WBTC bridges the gap between Bitcoin and Ethereum. Since most Ethereum blockchain hosts, more than 90% of all DeFi’s, WBTC allows BTC holders to involve themselves in the DeFi business without selling their BTC.
With WBTC, Bitcoin users can send Bitcoin to the Ethereum blockchain without buying or selling BTC. Its current market cap is $2.09 billion.
Dai is a stablecoin whose value links to a reserve currency, that is, the US dollar. The pegging of its value boosts its chances of being used in payments.
It’s a digital token that mimics the Bitcoin. Dai proponents claim that it can be used by anyone, anywhere, and anytime.
DAI has a current market capitalization of $1.02 billion.
Mainstream Versus DeFi Blue Chip Coins
Drawing a boundary between the mainstream cryptocurrency and the emerging DeFi platforms is not so straightforward.
The DeFi platforms develop from the decentralized blockchain technology, though with a vision of morphing the global banking system to a permissionless structure without middlemen.
However, the financial services arena encompasses many other services like lending, loaning, investments, and ROI.
The growth of DeFi hinges on introducing decentralized blockchain applications that provide all these additional financial solutions alongside the critical store-of-value task.
The Ethereum blockchain hosts more than 90% of all DeFi applications. However, plans are underway to develop DeFi for Bitcoin for COMPLEX monetary contracts using the Bitcoin protocol. The development would cut the need for brokers in such contracts just like Ethereum’s smart contracts.
The top DeFi apps have seen an impressive uptake for users seeking payment services, lending services, and return on investments. Nevertheless, the inherent risk in these decentralized apps makes future projections uncertain.
If the industry leaders address the problems of DeFi bugs, hacks and exploits, we would expect the DeFi services to form an integral part of the mainstream cryptocurrency. Through sharding, Ethereum 2.0 could remain at the apex of DeFi.