Merriam-Webster defines blue chips as assets that have “high investment quality that usually pertains to a substantial well-established company and enjoys public confidence in its worth and stability.” But what about the best blue chip cryptos that everyone is fond of talking about?
Blue chip cryptos are usually the first cryptocurrencies beginners meet when entering the crypto market. Blue chips are digital assets with a great reputation, often promising equally great returns. Today’s article introduces you to the best blue chip cryptos and lists those with the largest market cap, best worldwide adoption, and the longest history.
What are Blue Chip Cryptos?
The world of traditional finance defines blue chips as widely recognized stocks that have performed well for a long period of time. The blue chip analogy stems from the fact that next to red and white chips, blue chips are the most valuable. These are stocks that almost every investor owns, stocks such as: Amazon, Apple, Microsoft, Tesla, and so on.
Defining blue chips in crypto can be more difficult at times. Their number one defining feature is market cap (market capitalization). Market cap indicates the size of a cryptocurrency. You can calculate market cap by multiplying the number of coins in circulation with the value of an individual coin.
A large market cap provides several effects. Most importantly, it makes a cryptocurrency less volatile as large market caps require larger injections of capital for large price swings to take place. Although that doesn’t necessarily mean that such assets do not experience, at times, volatile moves, they are still less volatile compared to small market cap assets.
Market cap also adds to the credibility of a cryptocurrency. Large market cap means that the cryptocurrency is backed by a large number of investors who believe in the project’s future. However, do keep in mind that some cryptocurrencies might have an unrealistically high market cap due to the project’s circulating supply.
But market cap isn’t all it takes for a blue chip to be a blue chip. The crypto in question must also have provable utility, high adoption rate, high trading volume, good reputation, and institutional interest.
Bitcoin and Ethereum are notable examples of blue chip cryptos. Bitcoin is strongly adopted as an alternative currency and payment option. It has a long-standing operation starting from 2009 and it is the de-facto cryptocurrency of the entire crypto market. On the other hand, Ethereum is a smart contract giant with a vast dApp ecosystem that dominates the altcoin market.
What Are the Best Blue Chip Cryptos?
There are many disputes as to which assets are the best blue chip cryptos. But no matter how you analyze the market, one thing is certain: some cryptocurrencies are simply unbeatable. There are certain assets that people won’t argue about, their quality is proven and tested.
The following section briefly discusses the top 5 crypto blue chips in 2022. Keep in mind that this is not financial advice and that the section simply considers each asset’s fundamental value.
1. Bitcoin (BTC)
Bitcoin is the first and oldest cryptocurrency to exist. Satoshi Nakamoto invented Bitcoin in 2009 when he launched the project’s blockchain and mined the first Bitcoins. The anonymous founder describes Bitcoin as a “peer-to-peer electronic cash system.”
Bitcoin was initially sold for mere dollars during its initial first years. However, the cryptocurrency reached heights of up to $69,000 per coin in the most recent bull market. It took Bitcoin less than 10 years to become a widely recognized currency and alternative payment system.
Bitcoin’s value is backed by a cryptographically-proof consensus model revolving around Proof of Work. Proof of Work establishes decentralized and anonymous consensus by distributing voting power to the entire network, rather than one centralized entity. The Bitcoin network is supported by miners who confirm transaction blocks in return for small fees.
Bitcoin has a finite number of coins. Only 21 million Bitcoins will ever see the light of day. And the final Bitcoin is estimated to be mined somewhere around 2140. Many compare Bitcoin’s price growth and adoption to the one of the internet in the early 90s.
Bitcoin has an incredibly active developer community and the person to create the project has remained anonymous and disappeared from the face of the earth. Bitcoin is used all around the world as a payment method and many vendors support Bitcoin payments. Some even consider Bitcoin a Store of Value asset due to its safe haven properties.
2. Ethereum (ETH)
Ethereum is a blockchain network with smart contract functionality that powers a vast ecosystem entailing decentralized applications (dApps). Ethereum’s smart contracts allow developers and users alike to create transactions that automatically execute certain actions based on preimposed rules.
dApps are decentralized applications such as lending, trading, and yield farming protocols. They run automatically in a decentralized fashion and have no input from developers apart from the code itself. Investors can access dApps without the need for KYC or exchange accounts. dApps are non-custodial, anonymous, and user-oriented.
Vitalik Buterin and several other co-founders introduced Ethereum to the world in 2013. The project was shortly after launched in 2015 after an ICO that raised $14 million. Ethereum is currently the largest altcoin and has the second largest market cap at $150 billion.
Ethereum currently leads the way in DeFi and NFT adoption. Ethereum has recently migrated to a proof of stake consensus model that significantly cuts token inflation, reduces energy expenditure, and creates room for more decentralization. The Ethereum Foundation will introduce sharding next year, a new scalability feature that will decrease fees.
3. Litecoin (LTC)
Litecoin is crypto’s first ever altcoin. The asset’s history begins in 2011 when computer scientist and ex-Google employee Charlie Lee invented Litecoin by forking Bitcoin’s source code. The so-called hard fork entailed copying Bitcoin’s design, retaining its transaction history, while changing a few features.
Lee forked Bitcoin in order to create a cryptocurrency that’s focused towards facilitating lighter transactions. Per Lee’s words, Litecoin is supposed to be a coin that is silver to Bitcoin’s gold. The project targets facilitating peer-to-peer cash transfers, but for smaller transactions.
Litecoin replaced Bitcoins SHA-256 cryptographic algorithm with Scrypt. Scrypt makes mining more difficult compared to Bitcoin and adds an additional layer of protection by adding randomly generated numbers to cryptographic mining.
Another notable difference is that Litecoin has a maximum token supply of 84 million coins. This is because Litecoin miners produce a new block every 2.5 minutes compared to Bitcoin’s 10 minute block creation time. However, Litecoin retains the halving model that periodically makes mining more difficult.
Litecoin has a market cap of $4 billion. It is currently ranked 19th in CoinMarketCap's crypto leaderboard. Charlie Lee has left Litecoin as its main developer, leaving all developer activities to the Litecoin Foundation.
4. Solana (SOL)
Solana is a layer one blockchain network attempting to scale up for billions of everyday users. To understand the relevance of Solana's mission, think of Visa. People worldwide swipe Visa cards at such high volume that, at any given time, several thousand transactions are happening per second.
However, Visa is centralized and just does one thing — process transactions. On the other hand, Solana wants to go beyond Visa's capabilities using a decentralized network that can also host apps on a new type of internet called Web3.
Until now, no blockchain has achieved the blockchain trilemma problem. The trilemma refers to scaling, security, and decentralization. Usually, to attain any two of those qualities, you must sacrifice one — unless you're Solana.
Solana uses a combination of proof of stake consensus and proof of history to solve the blockchain trilemma. The significant innovation here is proof of history because it's how Solana scales its performance up to 50,000 TPS.
Solana has a market cap of $6.3 billion and it is ranked 12th on CoinMarketCap’s leaderboard. Solana’s main utility lies in supporting decentralized applications that can cater to investors at a much higher transaction speed and drastically lower fees.
5. Binance Coin (BNB)
Binance Coin is an utility token on Binance, the world’s leading cryptocurrency exchange. BNB has been on the crypto market since 2017 and it represents the strength and value behind its native exchange. The token mainly facilitates crypto trading at much lower fees.
BNB also plays an important role in Binance’s very own DeFi ecosystem called Binance Smart Chain (BSC). Investors holding BNB can make use of DeFi’s decentralized features and yield farm, trade tokens, and lend funds much like their peers on Ethereum.
BNB holders can save 25% on all spot trading fees, 25% on margin trading fees, and 10% on futures trading fees when trading BNB-denominated crypto pairs. They can also stake BNB, access exclusive token sales on Binance launchpad and send or receive crypto payments via BNB with Binance Pay.
Binance Coin has a market cap of $46 billion and is ranked fourth place on CoinMarketCap’s crypto leaderboard. The token has had one of the best performances in the crypto market and is widely regarded to perform well even in a bear market.
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Marko is a crypto enthusiast who has been involved in the blockchain industry since 2018. When not charting, tweeting on CT, or researching Solana NFTs, he likes to read about psychology, InfoSec, and geopolitics.