Why So Many Cryptocurrencies?

The world of cryptocurrencies is pretty young, given the fact that the first digital currency, Bitcoin (BTC), appeared in 2009. However, during the following years, hundreds of new cryptos, so-called altcoins, started appearing. The market exploded in terms of the variety offered to users looking for cryptos that offer different functionalities, from fast transactions to full privacy.

This proliferation of digital coins raises the question: Why are there so many cryptocurrencies?

In this article, we’ll answer that question in detail and take a brief look at some of the most popular cryptocurrencies and their characteristics.

How Many Cryptocurrencies Are There?

There are about 20,000 cryptocurrencies in existence right now. However, this number fluctuates regularly as new projects are continually created and others are discontinued.

Remember, blockchain technology makes it really easy to create digital assets. But that doesn’t mean every project will become successful.

What Are The Most Prominent Cryptocurrencies?

Bitcoin

BTC is the first and most popular cryptocurrency in the world. It has the highest market capitalization and is definitely the most traded digital asset available. Bitcoin went a long way from being worth almost nothing when it was launched by Satoshi Nakamoto in 2009, to a value of thousands of USD per coin a decade later. 

Bitcoin has introduced the concept of decentralized, digital cash based on blockchain technology, which offers lightning-fast transactions that are totally secure from scams. Apart from this, BTC introduced an authentic alternative to fiat money when it comes to storing value.

Bitcoin vs Altcoins: What’s the Difference?

The initial rise of Bitcoin’s popularity in the years after 2009 motivated numerous developer teams and programmers to create hundreds and even thousands of new cryptocurrencies, popularly referred to as altcoins.

Not all altcoins have the sole purpose of being an alternative to fiat money. In fact, using them as digital cash is only one aspect, only one potential utility of altcoin functionalities.

Most developer teams behind altcoin projects tend to offer users special functionalities that differentiate their cryptocurrency from other altcoins.

Below are some of the most popular altcoins on the crypto market:

Ethereum

Ethereum (ETH) is the second most popular cryptocurrency in the world, right after BTC. It was launched in 2015 by Vitalik Buterin as an innovative blockchain-based ecosystem that offers much more than just a cryptocurrency (Ether). The ETH blockchain enables users to conduct smart contracts with each other written directly in the Ethereum programming code.

These smart contracts are self-executing agreements that are highly versatile and can be used in various real-world use cases such as healthcare, data storage, logistics, and even art and entertainment. 

The main advantage of smart contracts is that they can facilitate the development of decentralized applications (DApps) which don’t use centralized, mainstream technological resources like solutions based on Google or Microsoft platforms. Instead, DApps offer developers full autonomy and control over their applications, facilitated by the Ethereum blockchain and ETH programming languages such as Solidity. This makes ETH especially popular among start-ups and tech enthusiasts.

Ripple

Ripple (XRP) doesn’t have a classic blockchain. Instead, it runs on a distributed consensus ledger that utilizes a network of servers as validating points for transactions. XRP is ideal for business transfers between companies that need to move large sums of money internationally.

Ripple uses an advanced digital payment protocol that allows money transfers regardless of currency. Its network can process up to 1,500 money transfers per second, which is an enormous amount compared to other popular cryptos.

Cardano

Charles Hoskinson, one of the founders of Ethereum, left the project after a disagreement with the rest of the team and went to launch Cardano (ADA) with a group of crypto enthusiasts, mathematicians, and engineers.

After extensive research that involved over 90 scientific papers regarding blockchain technology, they launched Cardano as a fully sustainable cryptocurrency based on a proof-of-stake algorithm. Some predictions say that it is possible Cardano will surpass the popularity of ETH at one point because of the advanced smart contract functionalities that offer more flexibility than Ethereum.

Litecoin

Litecoin (LTC) was one of the first altcoins, launched in 2011, just two years after BTC, by Charlie Lee, a former Google programmer and crypto enthusiast. LTC based its blockchain heavily on the Bitcoin network, but it aimed to improve some of the key solutions of BTC by producing new blockchain blocks faster. This enabled a faster fluctuation of funds and a better transfer confirmation rate.

Bitcoin Cash

The Bitcoin blockchain has a block size limit of 1MB. This means that 1MB of transaction data can be stored in a single blockchain block. A considerable part of the BTC community disagreed with this policy, and this is why, in 2017, Bitcoin Cash (BCH) was created as a hard fork of Bitcoin.

BCH has an increased block size of 8MB which allows a far larger number of transactions to get processed within one block, making the fluctuation of funds more flexible than classic BTC transfers. Even so, BCH didn’t manage to even remotely reach the popularity of Bitcoin, but it’s still very popular among users that want to facilitate quick and frequent cash transfers.

Stellar Lumens

Stellar Lumens (XLM) are the native crypto of the Stellar platform. It is in many ways similar to Ripple, which is no surprise since one of the founders of XLM is Jed McCaleb, a member of the initial Ripple developer team. XLM is mainly used as a means of facilitating cross-border payments between companies and enterprises that want to move large amounts of money quickly and reliably. 

Stellar Lumens are more focused on connecting financial institutions around the world than Ripple, and they are a great payment method for companies that don’t have the time to wait on bank transfers, paperwork, and unnecessary bureaucracy. Large transfers involving central banks can take days or even more than a week if there are several intermediaries involved. This is where the Stellar network excels in facilitating international transactions quickly, saving companies valuable time and resources in the process.

Monero

Among numerous altcoins, Monero (XMR) stands out because it is focused on user privacy and secure transfers. This crypto was launched in 2014 by a developer team that came up with the idea to create a cryptocurrency that would offer users full privacy from government institutions and agencies, enabling them to freely transfer funds without worrying about the safety of their identity and other sensitive, personal information.

XMR uses a special system of ring signatures that fully protects sender and receiver privacy. If someone would try to uncover the identity of a sender or receiver, it would literally be impossible, as the Monero blockchain creates numerous crypto signatures for each transfer, but only one of them is real, and it can’t be isolated in real-time, thus making the system impenetrable by cyber attacks.

While Monero is a great crypto for protecting privacy, it is also rumored to be used by people and groups that engage in illegal activities, exactly because of the top-notch security and privacy it provides.

Neo

NEO is popularly referred to as an Ethereum competitor ecosystem from China, developed by programmer and crypto enthusiast Erik Zhang. The goal of NEO is to become a globally accepted digital platform with its specific blockchain called Onechain. It provides all the functionalities of the Ethereum network such as smart contracts, DApps, and fast money transfers.

One of the advantages of NEO compared to other cryptos is that, similarly to ETH, it can seamlessly be integrated with various programming languages, providing developers and programmers with flexible development assets on a reliable blockchain network.

Binance Coin

Binance Coin (BNB) is the native coin of Binance, one of the largest cryptocurrency exchange platforms in the world. The platform has numerous functionalities that range from the buying and exchanging of cryptos and its own crypto wallet, all the way to its own currency.

BNB is widely accepted, and it has a high market cap, giving special benefits to Binance platform users, who get lower transaction fees on the platform when they use BNB, as well as numerous other benefits.

Dogecoin

Dogecoin (DOGE) is an example of the unpredictability and volatility of the crypto market. This coin was launched in 2013 as a joke meme crypto. Still, its popularity exploded in 2021, reaching a 54 billion USD market cap at one point, which illustrates how people can’t predict what crypto will actually achieve widespread use and popularity.

DOGE was regarded as a joke coin for years before it started being extremely popular and totaling a market cap far above some of the most valuable companies in the world.

So, Why Are There So Many Cryptocurrencies?

Let’s look at some of the reasons why there are so many cryptocurrencies today.

• Technological advancement – Because of blockchain technology’s decentralized and secure nature, creating cryptocurrencies has become quite easy for developers. There are no central authorities that control projects, and transparency is the name of the game.
• Market demand and potential for high returns – Developers of digital assets aim to satisfy market interest through their unique creations. We’ve seen how the early investors of Bitcoin and Ethereum have benefited from the said projects – so now, people are always looking for the next big thing.
• Use cases for digital assets – Different types of cryptocurrencies serve different purposes. For example, utility tokens power decentralized applications, and security tokens represent digital ownership of assets. These specialized tokens and cryptos support the digital ecosystem we all live in.
• Privacy and security – Security in digital transactions has always been the main concern among users. And so, certain types of cryptocurrencies have been created to address such problems. For example, Monero and Zcash carry anonymity features for those who are very particular about their privacy. Cryptocurrencies also carry advanced security features to deter fraud, hacking, and scams.
• Decentralization – Since cryptocurrencies allow users to bypass traditional banking systems, low fees are achieved even for global transactions.

Here’s a Question: Are There Too Many Cryptos?

It depends on one’s perspective if we can consider 20,000 cryptocurrencies too many.

For one, having a lot of options is good. Cryptocurrencies are tailored to serve different purposes and solve particular problems such as privacy, security, and more. However, the sheer volume of the existing cryptos today can be very confusing (and even challenging) for most people.

While it can be beneficial to have all these available options to choose from, the overproduction of cryptocurrencies can prove disadvantageous for the truly legitimate ones in the sense that it can dilute their usefulness. This can also affect people’s trust in the overall usability of cryptos and thereby affect their widespread adoption.

Also, we need to be aware of the environmental impact of running cryptocurrencies on numerous blockchain networks.

And so, the question remains: Do we really need all these cryptocurrencies?

A Few Words Before You Go…

The various cryptocurrencies on the market are produced with the different needs of people, companies, and entrepreneurs in mind. Some people look to cryptocurrencies as a means of facilitating highly secure transactions that don’t leave any chance for their privacy to get compromised, like in the case of Monero. Other users, such as companies, need convenient cryptos for making large cross-border transactions and, therefore, look for assets like Ripple or Stellar Lumens.

Individuals may just want to have a convenient method for transferring cash and making payments and, therefore, look for crypto such as BTC, Litecoin, or Bitcoin Cash, while developers want smart contract functionalities provided by the likes of ETH, ADA, or NEO.

With the variety of cryptocurrencies available, users can find assets meeting their specific needs, whether for privacy, quick transactions, smart contracts, or investment. Current market caps and trading volumes for these cryptos can be tracked on platforms like Coinmarketcap.

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