Note: This is not financial advice. This is for educational purposes only. Please note that cryptocurrency is a highly volatile asset class; only invest what you can afford to lose.
The best cryptocurrency of 2021 is a digital asset that demonstrates the most practical utility, making it an explosive disruptor in the decentralized finance (DeFi) world.
Bitcoin (BTC) is the show-stopping cryptocurrency star that climbed to an all-time high of $64,000 in mid-April. Bitcoin outperformed Wall Street’s best-performing sectors, and heck, there’s even news that it’s coming to hundreds of banks soon. Dogecoin, a meme token that launched as a joke, also shocked the world as it climbed to an unprecedented peak of 70 cents on May 5. With their jaw-dropping price activity, Bitcoin and Dogecoin became media darlings, but come on — there are plenty of underrated cryptocurrencies that deserve some spotlight, too!
There are a slew of crypto projects that are working on promising ventures that could potentially upend the fintech world. They're not just stores of value; they offer practical services for businesses, developers, digital artists, and more. That being said, let's dive into the best cryptocurrencies of 2021 by utility.
What is the best cryptocurrency in 2021?
The best cryptocurrency that offers utility is ETH: the digital currency of the Ethereum blockchain. It is the second most popular cryptocurrency next to Bitcoin, but if you ask me, ETH could gain enough traction to surpass BTC thanks to the booming non-fungible token (NFT) market. NFTs are digital collectibles (e.g. music, artwork and tweets) that often run on the Ethereum network.
As celebrities like Eminem, Tony Hawk, Snoop Dogg and Rob Gronkowski cashed in on NFTs, ETH soared. Even the National Basketball Association (NBA) created a trading platform that lets fans trade NFT-based video highlights of their favorite players; it’s called NBA Top Shot.
Unlike Bitcoin, you have to pay “gas fees” to process transactions on the Ethereum blockchain. Gas fees compensate for the computing energy required to validate transactions. In other words, if you’re an artist who wants to turn your artwork into an NFT, you have to pay a gas fee ranging from $30 to $150. The same is true for folks who want to purchase NFTs. These fees are paid using ETH, which is a boon for Ethereum investors.
That being said, you can see why Ether’s price skyrocketed to more than $4,000 in May when it was trading at only $200 last year. As silly as it sounds, NFTs such as Jack Dorsey’s first tweet, this quirky GIF of a Pop Tart-bodied cat, and the popular Disaster Girl meme all played a role in ETH’s sudden success.
The best cryptocurrency 2021 ranked by utility
ETH is the best cryptocurrency in terms of utility due to the booming NFT market. Although NFTs played a part in Ether’s meteoric surge, its support for DeFi likely contributed to its rally, too.
Ethereum, launched in 2015, sought to create a platform for developers to build and host apps without centralized entities like Google and Apple. Ethereum allows decentralized apps (dApps) to run on the blockchain (a peer-to-peer network of computers). You also can’t talk about Ethereum without mentioning its smart-contract functionality. Smart contracts cut out middlemen by using code that auto-executes actions after certain terms and conditions are met. Think of smart contracts as well-programmed, trustworthy robots that carry out transactions between two parties without pesky, authoritative, industry-dominating intermediaries.
One downside of Ethereum, however, is the blockchain's ridiculously high gas fees, which may turn off the general public. Ethereum is also slow in processing transactions.
Where to buy Ethereum: Binance, Bittrex, Coinbase, Coinmama, Gemini, Kraken
The most popular blockchain protocols are proof of work and proof of stake. Solana uses neither. In fact, it uses a revolutionary new protocol called proof of history (PoH). The concept is a little complex, but to keep it short and simple, PoH is touted as being faster than PoW and PoS because it maintains its own clock — crytographic time stamps if you will — to "prove" that time has passed. Other blockchains, on the other hand, rely on a sequential production of blocks to prove a passage of time. This can cause some delay as the network waits for confirmation and consensus before advancing transactions.
Solana is also an Ethereum competitor. Many dApps (decentralized apps) run on the Ethereum network, but Ethereum has several issues, including slow transaction times and high gas fees. Solana, on the other hand, plans to offer a more scalable, faster network that Ethereum is struggling to offer.
Keep in mind, though, that Solana is still an experiment. The Solana team has hopes to surpass Ethereum, but it has yet to prove that it can outperform the world's most popular crypto network (after Bitcoin).
Monero is the cryptocurrency you’d purchase for high-level privacy and anonymity. Bitcoin and Ethereum have transparent blockchains: transactions can be traced and linked to real-world identities. Monero, on the other hand, has an opaque blockchain; recipients won’t know who you are or how you received your money because Monero uses privacy-enhancing technologies to ensure anonymity.
Monero boasts that it offers fast electronic cash: there are no multi-day holding periods, check-clearing fees or other impediments. Monero is also decentralized, so users don’t have to worry about a single controlling authority overseeing their transactions. There’s always a demand for private, anonymous currency, so Monero is an eye-catching investment.
However, there is a downside; it’s often delisted from exchanges. Bittrex is the most recent platform to kick Monero to the curb.
Where to buy Monero: Binance
VeChain is an enterprise-centric blockchain that targets several industries, including healthcare, logistics, automobile and even luxury fashion. In fact, the CEO of VeChain, Sunny Lu, is the former CIO of Louis Vuitton China.
VeChain was originally launched as a way to thwart knock-offs. How did it work? Well, according to Decrypt, each product is given a unique identifier with sensors that track its progress throughout each supply-chain stage. With this technology, companies can ensure its products are handled correctly and customers can verify their purchases are legitimate. Because VeChain uses blockchain technology, the data can’t be changed, which is a huge plus for businesses. If anything goes wrong on the supply chain (e.g. goods are shipped to the wrong place), the blockchain record will unveil where things went haywire.
VET is a cryptocurrency that lives on the VeChain network. The more VET an enterprise holds, the more priority it gets while using VeChain’s resources. VeChain also uses a token called VTHO, which pays for the power and energy needed to conduct transactions (like Ethereum’s gas fees). The downside of this two-token system is that it can confuse investors.
It’s also worth noting that VeChain already secured partnerships with established companies such as BMW and Sam's Club.
Where to buy VeChain: Binance
In the same way some games are exclusive to one platform (e.g. The Last of Us 2 on PlayStation), many cryptocurrencies are solely linked to one blockchain (e.g. ETH on Ethereum). However, Polkadot is swooping in to change that with a concept called cross-platform interoperability (CPI). Think of CPI as cross-platform play, but for cryptocurrencies.
Polkadot’s primary mission is to unite independent blockchains under one network so that they can communicate and carry out operations together. For example, a use case for CPI is a smart-contract event on Ethereum triggering a payment on the Bitcoin blockchain. The downside of DOT is that its CPI concept has not yet materialized into reality.
Where to buy Polkadot: Digifinex, Binance
ADA is a cryptocurrency that lives on the Cardano blockchain. Ethereum co-founder Charles Hokinson founded Cardano in 2015, so it’s no surprise that, similar to Ethereum, Cardano aims to feature smart-contract functionality.
Cardano has several objectives; one of them is offering speedy cryptocurrency transactions. Bitcoin uses the proof-of-work (PoW) algorithm to validate BTC transactions on the blockchain, which relies on a peer-to-peer network to mine new blocks. This process, however, is slow and wastes too much computing power.
Cardano, on the other hand, uses the proof-of-stake (PoS) algorithm. At the risk of getting too technical and boring you to death, all you need to know is that PoS is quicker and consumes less energy than the electricity-guzzling PoW method.
Another interesting facet of Cardano is that it prides itself on being a peer-reviewed blockchain, meaning any updates to the platform are thoroughly researched and validated by experts. One thing to consider about Cardano, however, is that it’s still in development; it doesn’t have smart contract or dApp capabilities yet.
Where to buy Cardano: Coinbase, Binance
AAVE could potentially be one of the most useful cryptocurrencies due to its peer-to-peer lending ambitions. AAVE first launched in 2017 under a different name: ETHLend. In 2019, the crypto project was rebranded as "AAVE."
AAVE runs on the Ethereum blockchain (another reason why ETH is ranked as one of the most useful cryptos of 2021). According to WealthSimple there are three advantages to AAVE's peer-to-peer ending project.
The first one is, of course, allowing users to take out loans for cryptocurrencies. The second is that users don't need to submit personal information to get approved for loans: AAVE doesn't care about your credit score, race, socio-economic status and other social factors. As long as you have cryptocurrency that you can use as collateral, you can borrow on AAVE. Thirdly, acquiring loans on AAVE is reportedly damn-near instant.
AAVE certainly has the potential to completely disrupt retail banks and the current lending industry. However, cryptocurrency is still a new concept to the general populace and may not be the most beginner friendly.
Where to buy AAVE: Binance, SushiSwap