Too many Cryptocurrencies already? Let’s probe it

Fredrick Awino
24.07.2022
254 Views

The first cryptocurrency, bitcoin landed with a big bang and caused mixed reactions. With people used to physical money, the entrance of virtual currency was rather a shocker on one hand and a learning experience on the other. At least several years later, we now have learned important concepts related to cryptocurrency including but not limited to bitcoin mining, cryptocurrency halving, crypto wallet and many more.

WARNING: Investing in crypto, or other markets, can be of a high risk for your savings. Do not invest money you cannot afford to lose, because there is a risk for losing all of your money when investing in crypto, stocks, CFDs or other investments options. For example 77% of retail CFD accounts lose money.

From an initial situation of bitcoin being the pioneer and literally cryptocurrency bogeyman, we have so many new virtual currencies emerging every other day. Actually, a starting investor who approaches a cryptocurrency exchange with an aim to buy the first cryptocurrency will likely be spoilt for choices. All the same, an investor, as always, has to make conscious consideration of what every available crypto offering has to offer before settling on one.

Cryptocurrency offerings today

At the coinmarketcap.com, there are over 15, 000 listed cryptocurrencies. However, the question that most people are asking is the reasons behind the existence of many cryptocurrencies. Bitcoin, the first crypto was just introduced 13 years ago. Currently, several have been developed and people do not understand for what reason. On the other hand, for fiat currencies just about 180 exist yet they have been stable for the past 50 years.

A simple attempt at buying cryptocurrencies from an exchange will show so many coins. Aside from bitcoin, you will notice that Ethereum, dogecoin, Litecoin and many other altcoins. These coins have their own unique strong points as an investment option, payment choice or signing online contracts.

Why Several Cryptos Exist

Each crypto that is developed solves a particular problem. However, most people just buy and sell the cryptos without knowing that they serve more than that. For instance, coins such as Cardano and Ethereum build applications using smart contracts. Also, Ethereum has some cons such as high gas fee that ADA tries to correct. Therefore, apart from serving the purpose of selling and buying, they have other specific uses.

Furthermore, there are many cryptocurrencies because there is no barrier to entry. It means that any individual who wants to develop a crypto can do it. It does not matter if you do not know the technology behind it. For instance, you can just hire someone in Fiverr to do it.

Initially, it was not easy to create the cryptos. However, since the introduction of altcoins, several cryptos have come to exist. At first, the main reason of creating the altcoins was to improve Bitcoin’s performance. Because it is easy to create a crypto, amount of money in crypto has attracted several individuals who want to make quick money.

The cryptos have gone far beyond being an exchange of value. For example, Blockchain provides solutions to long standing problems. Apart from financing, they offer services in other sectors such as supply chain management, real estate, medicine, and law. It also provides services in other sectors such as gaming, healthcare, insurance, cybersecurity, agriculture, and fine art sectors.

Potential return is another reason behind the existence of many cryptocurrencies. Spreading money in different cryptos assist in minimizing portfolio. It is difficult to predict systematic risks including economic downturn.

Lastly, innovation makes people to come up with new cryptocurrencies. Cryptocurrency being fintech industry heart, it improves daily. Through this, developers have developed a safer blockchain system and find ways of reducing fraud. Every currency offers unique form of innovation. While others prioritize the safety of their consumers, others do not.

The main Types of Cryptocurrencies

Even though people use terms such as tokens, coins, and crypto interchangeably, they are different. There are two main types of cryptos including coins and tokens. Coins include Bitcoins as well as altcoins which are the other cryptocurrencies other than Bitcoin. The examples of altcoins are utility tokens, security tokens, stablecoins, and mining-based cryptocurrencies. On the other hand, tokens are the programmable assets living in a certain platform’s blockchain.

Will Many Cryptos Collapse in Future

There are high chances that some of the many cryptos may fall in the future. The number of blockchains may also fall. Moreover, Ethereum, a blockchain is the underlying technology in which most of the cryptos are built.

Recently, algorithmic stablecoin terraUSD collapsed as well as its linked digital token luna. This issue sent shockwaves in the market. It has also made some of the cryptos to wonder if they will survive. One of the reasons that made Terra to collapse is the existence of several blockchains as well as many tokens. It confuses the users and also bring them some risks.

The crypto industry believes that soon the bear market will remove the bad actors that exist. Some of the blockchains platforms including Solana and Ethereum want leadership position industry. This is because a large part of the traders uses Bitcoin. According to Brett Harrison who is the CEO of cryptocurrency exchange FTX U.S, in 10 years there will be just a few blockchains. It means that soon the market will sort everything.

Considering Crypto as More Than a Currency

Cryptocurrency has changed the way we live. A discussion on crypto value should address a crypto’s nature. Initially, even though gold was a useful currency, it was inconvenient. Paper money was a great improvement. However, it needed storage and manufacturing and also lacked digital currencies mobility.

Currently, most of the large banks now invest by collaborating with the existing crypto clients. Some have even developed their own cryptos such as the Bank of America. Soon, cryptos will be adopted by most of the sectors. This is because they are secure, the transactions are fast, and there is records preservation with no risk of data piracy.

Author Fredrick Awino