Cryptocurrencies and their underlying technology, blockchain, are widely recognized as one of the most innovative technologies of the 21st century.
From humble beginnings, the technology has inadvertently become a force to be reckoned with today. Many see cryptocurrencies as a solution to the problem of devaluation, a major problem that regular fiat currencies face every day.
The idea of a decentralized currency that works globally appeals to a lot of people. However, the current situation in the cryptocurrency space is far from this expectation.
There are more cryptocurrencies in the world today than the total amount of fiat money available, roughly 200 cryptocurrencies to 1 fiat currency.
Then the question remains; why are there so many cryptocurrencies?
Before discussing this crucial issue, let us first understand the history of cryptocurrencies.
History of cryptocurrencies
Many attribute the first-ever cryptocurrency to the anonymous founder of Bitcoin, Satoshi Nakamoto, who first published the Bitcoin white paper in 2008. However, the theoretical aspects of cryptocurrencies date back to the early 1980s. I prefer to call them the ” pre-Bitcoin era “. The theoretical aspects of cryptocurrencies were first proposed to address the drawbacks of traditional fiat currencies. These theories are designed using mathematical principles and computer-based principles.
American cryptographer David Chaum first realized cryptocurrency. He developed an algorithm that now forms the basis of web-based encryption as we know it today. This algorithm enables information to be stored in a secure and immutable manner. At the time, money transferred in this way was known as “blind money.”
Pre-Bitcoin Era
In the late 1980s, Chaum moved to the Netherlands with the help of some supporters, where he founded DigiCash. However, unlike modern encryption, DigiCash is not decentralized. In short, it is still very similar to a central bank. Since this was a major problem, and the Dutch central bank called it out, DigiCash closed shop in the 90s.
Besides DigiCash, several other virtual currencies also appeared around the same time.
Wei Dai released the b-money white paper. The white paper includes some of the features advocated by modern cryptography, such as decentralization and anonymization. Unfortunately, b-money never made it to market.
Chaum’s partner, Nick Szabo, also designed and deployed a cryptocurrency called Bit Gold. The cryptocurrency also employs blockchain technology as its underlying technology. Encryption has been around for a while, but is no longer used. Others include WebMoney in Russia and Electronic Gold in the United States.
Despite various attempts to create cryptocurrencies in the “pre-Bitcoin era,” Bitcoin is currently regarded as the first-ever modern cryptocurrency. This is because it combines several important features such as decentralization, anonymity, scarcity, immutability of records, etc. Many schools of thought consider it a true cryptocurrency, while many refer to it as the “Crypto King”.
bitcoin
Satoshi Nakamoto first described Bitcoin in a white paper published in 2008. The cryptocurrency was then first launched in 2009, followed by other alternatives such as Litecoin in 2010. In 2012, Bitcoin attracted the attention of a dozen institutional-based clients including WordPress, Microsoft, Expedia, and others. Bitcoin became even more popular in 2017 when its price climbed to nearly $20,000.
Governments all over the world currently have huge influence over people’s money, causing problems such as devaluation. Many crypto enthusiasts see the crypto space as the key to shifting power from governments back to ordinary people.
Why is there more than one cryptocurrency?
Since Bitcoin is still the most recognized cryptocurrency today, why are there so many cryptocurrencies and more popping up every day? Do we need more cryptocurrencies? Can Bitcoin adequately meet the financial needs of the global population, etc.? These and many more questions will be answered in this article.
First, why are there so many cryptocurrencies? Or simply why is there more than one cryptocurrency? First, cryptocurrencies on a global scale aim to provide solutions to specific problems in specific domains. For example, Bitcoin was designed to help enable smooth, fast and convenient peer-to-peer (P2P) transactions. Cryptocurrencies also act as a primary store of value and form of crypto investment.
Ethereum, on the other hand, is designed to facilitate the creation and deployment of smart contracts. Many cryptocurrencies like Dash and Electroneum are dedicated to helping the unbanked. While some other cryptocurrencies such as Enjin Coin help power specific virtual ecosystems, Elastos aims to power the new internet. Another major reason for providing an answer to the question; why there are so many cryptocurrencies is because cryptocurrencies are built on blockchain technology.
Currently, more blockchain use cases are being invented every day. From the health sector to voting, finance, logistics, mining, supply chain and more. In each new use case, a new blockchain and subsequently a new cryptocurrency are formed. No single blockchain can fully capture all the potential embedded in this innovative technology. Therefore, there is a need to bring together several blockchains and their cryptocurrencies in one niche.
How many cryptocurrencies are there?
According to CoinMarketCap (CMC) , there are a total of 22,034 cryptocurrencies as of December, 2022. That’s a huge number, with new cryptocurrencies joining the list every day.
pros and cons
advantage
- Faster transaction times – By completely removing the need for middlemen, transactions can now be conducted using crypto trading real-time. This is also made possible thanks to blockchain technology.
- Reduced Transaction Costs – Using cryptocurrency transfers helps to reduce costs significantly compared to traditional cross-border fiat transfers.
- Privacy – Apart from the aforementioned advantages, cryptocurrencies also provide users with the ability to conduct confidential transactions.
Other important advantages include: Users are the sole controllers of their funds. Crypto transactions are also immutable, secure, decentralized, inflation proof, etc.
shortcoming
Despite their many advantages, cryptocurrencies still suffer from some inherent problems.
- scalability issues
- Cyber Security and Theft Risk
- volatility
- unfavorable regulatory conditions
next big cryptocurrency
Currently, the crypto space is filled with many potentially successful cryptocurrencies. So marking a hashtag as the next major cryptocurrency is not something that has to be done lightly. Bitcoin is currently the top cryptocurrency available today, and all other cryptocurrencies are often referred to as alternative coins “altcoins”.
A cryptocurrency with the potential to be the next big cryptocurrency must have some important features. Sadly, most cryptocurrencies available today do not meet one or more of these standards.
1. Scalability
The main problem most crypto and blockchain platforms face is scalability. The next big cryptocurrency should be able to have near-infinite scalability. That is, about a few million transactions can be efficiently executed in just one second.
2. Decentralization
To ensure decentralization, voting rights should be distributed to no fewer than 10,000 to 100,000 voters. To this end, cryptocurrencies cannot utilize Proof-of-Work (PoW) consensus mechanisms. This is because PoW requires pool centralization. They also must not use Proof-of-Stake (PoS) or Delegated Proof-of-Stake (dPoS) consensus mechanisms.
3. Fast transaction speed
I’m talking about confirming crypto trading transactions in no more than 3 seconds.
4. Not allowing and distrusting
The next big cryptocurrency will be trustless and permissionless. That said, there is no centralization or third-party control of any kind on the blockchain.
Furthermore, a potentially successful cryptocurrency will require low energy consumption with little or no fees, among several other features.
Currently, Ethereum appears to be on track.
in conclusion
Despite a rocky start, cryptocurrencies (Bitcoin and Altcoins) around the world are here to stay. While the idea of using a single common encryption has been expressed several times, the chances of this happening are very slim. Imagine only one bank serving the financial needs of every person on the planet, or only one taxi operator (Uber) providing the same globally. That’s an almost impossible feat. In order to provide top-notch service, it is recommended that service providers target and serve specific market segments.
We also expect more cryptocurrencies in the near future. This is because as more use cases are formed, designed and thought through, more blockchains will be developed and more cryptocurrencies will be born. So, the answer to the question is: why are there so many cryptocurrencies? While Bitcoin is still the first cryptocurrency to be used, we look forward to an era where altcoins will dominate the cryptocurrency space.
