6 Lesser-Known Cryptocurrencies with Incredible Growth Potential

Key Points

• Utility is fundamental when searching for lesser-known coins with potential staying power.

• Build a diversified cryptocurrency portfolio with a mix of project types.

• Know the risks: Altcoins are more likely to fail than Bitcoin or Ethereum.

When cryptocurrencies last surged in 2020 and 2021, we also saw smaller cryptocurrencies take off in what is known as an “altcoin season.” These often-unknown cryptocurrencies skyrocketed and sometimes generated returns of thousands of percent.

Times have changed. While Bitcoin has repeatedly hit all-time highs over the past year, many smaller coins have struggled. Not only has Bitcoin become more dominant, but there are also millions of new projects compared to the last crypto boom.

The appeal of lesser-known cryptocurrencies is that you might discover the next big thing and see amazing gains. However, the project could also collapse or turn out to be a scam. Altcoins can carry significantly higher risks, especially because reliable information about them isn’t always easy to find.

That said, these six lesser-known cryptocurrencies deserve a closer look. All have established use cases, whether in decentralized finance (DeFi) or in the real world. There are no guarantees, but they certainly have potential.

1. Chainlink

Chainlink is an important gear in the blockchain machinery. Smart contracts (small pieces of code) need accurate information to operate, and Chainlink provides it. It gathers on-chain and off-chain data and feeds it into various blockchain ecosystems.

Recently, Chainlink announced it will work with the U.S. Department of Commerce to bring government data onto the blockchain. It is also collaborating with major financial players like the international banking cooperative Swift, Mastercard, JPMorgan, and more.

2. Monero

Monero is a privacy coin. There is a perception that these coins are mainly used by hackers and money launderers. This concern is valid, but as Chainalysis points out, the lack of liquidity in privacy coins means criminals are actually more likely to use Bitcoin.

It’s important to highlight that there are legitimate reasons to use privacy coins. Transparency is a core principle of blockchain, meaning pseudonymous transactions can be seen on the ledger. However, only the wallet address is visible, which in theory protects individuals’ identities. The challenge is that it’s increasingly possible to connect wallet addresses with real people or organizations.

As cryptocurrencies become more mainstream, this could be problematic. For example, a company using stablecoins wouldn’t want competitors to use blockchain transparency to find out what salaries they pay or which suppliers they use. Individual investors may also want to protect their privacy for various reasons.

As a result, the growth of stablecoins and tokenization could boost demand for privacy coins like Monero.

3. Cardano

Cardano may be the most well-known cryptocurrency on this list. Cardano is a smart contract coin, meaning other projects can be built within its ecosystem. It emphasizes real-world utility, particularly in digital identities.

The project relies heavily on peer-reviewed research, which isn’t always popular in the fast-moving world of digital currencies. However, as the industry matures, established companies are exploring ways to use blockchain. That could be the opportunity Cardano needs: the non-crypto world might appreciate its methodical approach more.

4. Render

Render highlights a different use case for blockchain technology. People can join its network and put their unused computer processing power to work, earning Render tokens in the process.

Render sells this idle computing power to those who need to perform intensive processing tasks, such as rendering graphics and videos. It divides the work among tens of thousands of computers on its network. Originally aimed at graphics, Render now also supports generative AI tools.

5. Arbitrum

Arbitrum is one of several Layer 2 (L2) solutions. These sit on top of existing blockchains like Ethereum to improve performance while still leveraging the security and foundation of the main chain.

Arbitrum makes Ethereum more scalable. Developers can do everything they could on Ethereum but with faster transaction times and lower fees.

There are quite a few Layer 2 solutions, but a look at DefiLlama shows that Arbitrum has attracted a good number of developers and users. As of September 4, it had the third-largest number of applications. It’s also among the top 10 chains by total value locked: the value of assets in its system.

6. Hedera

Did you know some cryptocurrencies don’t use blockchain technology? Hedera is one of them. It offers functionality you’d expect from a blockchain-based coin. You can use it for payments, transferring money, building smart contracts, and more. But the underlying technology works differently.

It uses something called hashgraph technology, where nodes communicate with each other in a process described as gossip-about-gossip. Because it doesn’t rely on a process of adding and verifying new blocks, it can process transactions faster than traditional blockchains.

One of Hedera’s big attractions is its energy efficiency. Many traditional cryptocurrencies rely on proof-of-work or less energy-intensive proof-of-stake systems to keep their networks secure. Hedera claims it consumes hundreds or thousands of times less energy without sacrificing speed or security.

It has heavyweight backers like Alphabet, Dell, and IBM on its governing council, but it still needs to prove itself in terms of DeFi activity.

Understand the Risks

Cryptocurrencies remain a relatively new asset class, and it’s wise to ensure they only make up a small percentage of your investment portfolio. If you move beyond Bitcoin and Ethereum into smaller-cap coins, projects can fail or drop sharply in value. Keep in mind that eight of the top 20 cryptocurrencies by market cap in September 2021 have fallen off that list today.

Even with relatively established altcoins, there’s considerable risk. Be clear about how much you want to invest and what your strategy is, especially what could cause you to sell your cryptocurrencies. Try not to get caught up in hype, especially around the latest Meme coin. The idea is to find lesser-known cryptocurrencies that will eventually be on people’s radar and stay there.