Why Are There So Many Cryptocurrencies?
August 10, 2020
With a huge number of new assets in the market, you might be wondering why are there so many cryptocurrencies? Cryptocurrencies gained massive popularity rapidly with the advent of the internet and online financial services. Bitcoin was one of the first cryptocurrencies in the market with the highest market value to date.
With Bitcoin being so popular, many other coins emerged. The main aim of most cryptocurrencies is to provide a decentralised form of digital currency that can serve as the perfect alternative to traditional currency.
Cryptocurrencies are built on a blockchain. This provides developers with a lot of opportunities to create different functionalities for different cryptocurrencies.
Blockchain is a technology open for all, meaning; anyone can develop their own cryptocurrency if they know their way around the blockchain.
How Many Cryptocurrencies are There?
There are over 5760 cryptocurrencies listed on CoinMarketCap, with Namecoin being the first altcoin (alternative cryptocurrency) in 2011. Between 2011 and 2014, the rate of altcoin launches grew exponentially. Soon there were a myriad of altcoins such as Ripple, Litecoin, Mastercoin, and more.
Many altcoins were developed on the Bitcoin codebase, where developers made a few minor changes. However, some cryptocurrencies were built on their unique codebase such as Bytecoin. There are more cryptocurrencies in the market compared to fiat currencies in the world, and it’s only been 11 years since the launch of Bitcoin. However, over a thousand cryptocurrencies are dead.
Types of Cryptocurrencies
Bitcoin was launched in January 2009, after the great recession of 2008, by a mysterious identity Satoshi Nakamoto. It is one of the first decentralized cryptocurrencies, and since its launch, Bitcoin has experienced no downtime, allowing its users to transfer Bitcoin seamlessly.
Currently, Bitcoin has a market value of $10,259 and a market cap of $189 billion.
Bitcoin is often considered as an alternative to fiat currencies as well as gold. You can send and receive Bitcoin like traditional currency, and due to its limited supply of 21 million coins, it can have store value like gold.
Bitcoin released its codebase to the public as open-source, paving the way for thousands of other cryptocurrencies ever since. These coins were referred to as ‘altcoins’. Bitcoin can be mined, and it provides miners rewards that are halved approximately every four years or after 210,000 coins are mined. Mining also helps to verify transactions. Anyone can access the transactions as they are stored in a public ledger.
Bitcoin Cash (BCH)
Bitcoin Cash forked from Bitcoin in August 2017. It accommodates more transactions with its increased size of blocks between 8MB and 32MB (as opposed to 1MB block in Bitcoin). One block of bitcoin can handle between 1,000 to 1,500 transactions, whereas Bitcoin Cash can handle up to 25,000 transactions.
Bitcoin Cash itself went under a fork in 2018 into Bitcoin Cash ABC and Bitcoin Cash SV (Satoshi Vision). Bitcoin Cash ABC incorporated several changes to the blockchain such as the Canonical Transaction Ordering Route (COTR) and more. Bitcoin Cash SV rejected the use of smart contracts. This version of Bitcoin is yet to live up to the promises over its predecessor. Through the Bitcoin and Bitcoin Cash fork, have benefitted investors by providing multiple cryptocurrencies to the market.
Litecoin was created in 2011 by a former Google employee, Charlie Lee. It functions quite similar to Bitcoin, intending to improve transaction times (every 2.5 minutes), lower fees, and more concentrated miners.
Due to the use of script for the proof of work algorithm, Litecoin miners require more complicated hardware than the traditional ASIC designed for Bitcoin mining.
Ethereum is a blockchain more focussed on decentralised applications (dApps) than on its digital currency (Ether). It aims to provide more control to the app creators than Apple or Google. Only the creators have the right to make changes to the app.
Ether is used as a token by app developers and users. It can also be mined, just like Bitcoin. Like Bitcoin, the ethereum network consists of nodes that replace the traditional server-client model.
Ripple is another popular cryptocurrency not based on blockchain. It is perfect for large companies and corporations that move larger amounts of money quickly.
XRP is Ripple’s coinage, and it is more popular for its digital payment protocol than the cryptocurrency. It can transfer any form of money, be it dollars, Bitcoin, and many more. Ripple also claims to support 1,500 transactions per second, whereas Bitcoin handles 3-6 transactions per second and Etherum can handle 16 transactions per second.
Stellar was launched by Ripple’s co-founder, Jed McCaleb in 2014. It is operated by a non-profit organization called Stellar.org.
XLM focuses on money transfers, and the network makes it faster, even across borders. The benefit of this is it can be very useful for economies that do not have access to traditional banking and financial systems. Stellar does not charge users for using the network. It rather covers its costs by accepting tax-deductible public donations.
NEO was developed in China, and formerly known as Antshares. It is built to take on Ethereum by focussing on smart contracts that help users to create and execute agreements.
NEO has three main advantages – better architecture, developer-friendly smart contracts, and digital identity assets that can be easily integrated into the real world.
Developers can work on smart contracts using common programming languages such as Java or C#, whereas Etherum requires developers to learn a whole new programming language to create smart contracts.
Charles Hoskinson, the co-founder of Ethereum, founded Cardano. Its crypto coins ADA can be used to send and receive digital funds. Cardano claims to be the most scientific, philosophical, and research-driven. The cryptocurrency undergoes rigorous reviews by scientists and programmers to deliver top-notch performance.
IOTA or Internet of Things Application works with smart devices on IoT rather than on a blockchain. You need to verify two other previous transactions on the IOTA ledger known as the Tangle or Directly Acyclic Graph. The IoT devices need to purchase more electricity, bandwidth, storage, and data. They can sell these resources when they don’t need them.
New Cryptocurrencies in 2020
ODE is a digital currency aimed to provide a new financial ecosystem for baking and financial systems. It offers a decentralised individual retirement account, the first of its kind in the world of cryptocurrency. There will be only a total of 50 million ODE coins in existence.
The products and services provided by ODE are built on highly secure bank-grade technology platforms. ODE can be integrated into the existing financial infrastructure. It makes money transfers smoother and much quicker. When using ODE there is little or no transaction fee.
Nexus Mutual (NXM)
Nexus Mutual is an alternative to traditional insurance companies. You can get covered for smart contract failure or you can also invest in NXM directly. It is run by its members and not by a specific company.
Nexus Mutual uses the Ethereum blockchain, to share risk with others using the platform. It is a quite transparent platform with real-time reporting of capital position and risk exposures. Anyone can purchase NXM from the exchange. This can be useful to bind the mutual insurance together, purchase cover, and also to participate in assessment, underwriting and governance.
Datamine Network (DAM)
Datamine Network is a decentralised open-source cryptocurrency that uses smart contracts for Adaptive Money. Its dual token DeFi generated dividends every 15 seconds. One of its token DAM is an ERC-777 standard token with a fixed supply of 16.8 million tokens.
The DAM tokens are used to lock in special smart contracts that generate dividends to provide FLUX tokens. The DAM economy consists of the investor, seller, buyer and the burner. The investor accumulates FLUX in the market. The seller provides liquidity to the buyers and burners. The buyers and burners help mint FLUX.
A Final Word on Altcoins
Not all cryptocurrencies are based on Bitcoin, and each of them has its own distinguishing features and functionality. Every new cryptocurrency aims to be better than the existing ones, by working on the flaws and limitations of the current crypto market.
This is the reason why many altcoins developed; however, not all of them were successful (or will be). A significant number of altcoins are no longer in use. This may be due to the lack of users, developers, and funds.
To date, Bitcoin is at the top of the crypto market, and no altcoin has been able to dethrone it. Only a few cryptocurrencies are focused on providing a new digital currency and decentralised finance (such as Bitcoin). Some cryptocurrencies work with decentralised applications and smart contracts such as Ethereum, while some do not operate on a blockchain such as IOTA and Ripple.
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