If you’re wondering why are there so many cryptocurrencies, you’ve probably been overwhelmed by the sheer number of digital coins on the market. Maybe you need a refresher on crypto basics so you can better understand the surge in digital assets, or you’re looking to invest in a certain type of crypto.
Get the Tezro App
TEZRO is an all-in-one application for secure instant messaging and crypto payments, there is no need to have multiple chat applications or crypto wallets ever again. Your communication and finances are secure and encrypted under TEZRO. Try it now!
Regardless of the reason, this article will provide you with an overview of why there are so many cryptocurrencies and the factors that contribute to the growing number.
Why Are There So Many Cryptocurrencies?
There’re different explanations as to why there are so many cryptocurrencies. They include:
It’s Becoming Easier To Create Crypto
One of the reasons why so many cryptocurrencies have come up is because developers and entrepreneurs can now more easily create their own cryptocurrency. Smart contract blockchains such as Ethereum, Solana, and Binance Smart Chain make creating a new digital currency on their platform relatively simple. This has enabled small teams of developers to launch projects, which has created more competition in the crypto space.
Increased Interest In Crypto Investment
The reason why there are so many cryptocurrencies can also be attributed to an increasing interest in investing in digital tokens. As investors become more familiar with cryptocurrencies, they’re likely to invest in multiple options, which has helped increase the overall number of cryptocurrencies.
Better Use Cases
Another factor that has led to the proliferation of cryptocurrencies is the emergence of new use cases. Unlike traditional currencies, cryptocurrencies can be used for various applications, from payments and trading to security tokens and digital collectibles. This has led to creation of different types of tokens catering to different needs and interests.
How Many Kinds of Cryptocurrencies are There?
There’re currently more than 20.000 different kinds of cryptocurrencies in circulation, including popular ones like digital coins, stablecoins, and NFTs. Each cryptocurrency is different from the other in terms of features and technology used. For example, Bitcoin uses a proof-of-work consensus mechanism while Ethereum uses a hybrid proof-of-stake/proof-of-work system. Others rely on proof-of-stake, delegated proof-of stake, delegated Byzantine Fault Tolerance and other consensus mechanisms.
With so many different kinds of cryptocurrencies, it can be hard to keep track of them all. Fortunately, websites like CoinMarketCap provide users with up-to-date information on the most popular cryptocurrencies and their market capitalizations. Every time a new cryptocurrency is launched, it’s added to the list. We may also be the first to create a comprehensive guide on it, hence you need to keep an eye on our blog for timely updates.
What Are the Most Prominent Cryptos?
There are two major cryptos in the market:
Bitcoin
Bitcoin (BTC) is the world’s first and largest cryptocurrency by market capitalization. It was launched in 2009 as an open-source software project, and since then, it has grown to become a widely accepted payment system. Bitcoin is used for peer-to-peer transactions, with its value determined by market supply and demand.
Ethereum
Ethereum (ETH) is the second-largest cryptocurrency, and it’s a blockchain platform that enables developers to create decentralized applications (dApps). Ethereum also features smart contracts – digital agreements between two or more parties. Ethereum is used for various purposes, including creating digital tokens and facilitating complex transactions.
Why Are There So Many Altcoins?
We can’t talk about why are there so many crypto coins and fail to mention the rise and rise of altcoins. Altcoins are essentially alternative cryptocurrencies that are created to improve upon the already existing cryptocurrency. Altcoins offer various advantages over Bitcoin, such as faster transaction speeds, improved scalability, lower fees, and different consensus mechanism, among others.
Altcoins have grown rapidly in recent years thanks to their ability to provide an answer for those who feel that Bitcoin is too slow or too expensive. Many altcoins are also created to address specific needs or solve particular problems and introduce new features that Bitcoin doesn’t have.
Altcoins allow developers to experiment with different features and protocols which Bitcoin can eventually adopt. This has the potential to make cryptocurrencies much more user-friendly and efficient than before. They’ve also opened up a whole new world of possibilities for entrepreneurs and developers looking to create projects better tailored to their specific goals, needs, and preferences.
Altcoins have become a haven for investors looking to diversify their portfolios. With so many altcoins on the market, investors can spread their risk among multiple coins and maximize their potential profits.
What are the Most Common Types of Cryptocurrency?
To better understand why are there so many cryptocurrencies, below is a breakdown of the most common types of cryptocurrency:
- Digital Coins: Digital coins are cryptos in their native blockchain. They are used for making payments and are based on the original cryptocurrency. Examples include Bitcoin, Litecoin, Ethereum, Ripple, and many more. They’re used as mediums of exchange and/or stores of value.
- Utility tokens: Utility tokens are often released on smart contract platforms such as Ethereum. They’re made by dApp developers to boost engagement on their projects, incentivize users and provide access to specific features. Examples include Civic (CVC), used for digital identity management, Tron (TRX) used for entertainment, and Maker (MKR) used to back Dai stablecoins.
- Stablecoins: This type of cryptocurrency is designed to maintain a stable value despite the volatile nature of the crypto markets. They’re usually pegged to a fiat currency such as the US dollar and can be used for trading, hedging against market volatility, or making payments. Examples of stablecoins include USDT (tether), BUSD (Binance USD), and DAI (MakerDAO).
- Defi Tokens: Defi tokens are used to provide liquidity to decentralized finance (DeFi) protocols. They’re created and earned through staking or lending activities on blockchain-based platforms. Examples include Compound (COMP), Aave (LEND), and MakerDAO’s DAI.
- Security Tokens: Security tokens are cryptos that represent real assets like equity, stocks, or debt. They’re used to raise capital and facilitate trading traditional securities on the blockchain. Examples include Polymath (POLY) and Harbor (HRB). It’s worth mentioning that security tokens are federally regulated and require investors to go through a KYC/AML process before they can be bought or sold.
- NFTs: NFTs (Non-Fungible Tokens) are tokens representing physical or digital assets. They can be used to prove the ownership of anything from artwork and music to digital collectibles. Examples include CryptoKitties, Decentraland, and NBA Top Shot.
Are There Too Many Cryptos?
Now that you know why are there so many cryptocurrencies now, it’s important to understand if there are too many. The answer is that it depends on whom you ask and their opinion of the crypto marketplace.
For some, the sheer number of cryptos available may be overwhelming. With so many choices, newcomers may find it difficult to differentiate between coins and tokens and decide which ones are worth investing in.
For others, the fact that so many cryptos are on the market is a sign of their success and potential. The explosion of new altcoins shows that developers and entrepreneurs still find innovative ways to apply blockchain technology and create projects with unique use cases. This could lead to even more growth in the industry and the development of even more cryptos and tokens.
Today, there are over 21,844 cryptocurrencies on the market, and this number is likely to keep growing. Although some may see it as a deterrent, the sheer number of cryptos available should be an opportunity for investors to diversify their portfolios and maximize their potential profits.
Ultimately, it’s up to individual investors to decide if there are too many cryptos out there or if the market is still growing and expanding in a healthy way. However, it’s worth noting that not all cryptos are valuable investments. It’s important to research, understand the project and its technology, and ensure you’re investing in a legitimate cryptocurrency.
Will All Cryptos Survive?
Thanks to its decentralized nature, killing crypto isn’t as easy as it is with fiat currency. Despite the number of failed projects, cryptocurrencies have proven resilient, and many are still around years later.
The survival of any particular crypto depends on its use case, demand, and the team behind it. Projects with a clear purpose, strong community backing, and innovative technology are more likely to survive in the long run.
The future of cryptocurrencies is always uncertain, but there will likely always be some form of digital money around. Cryptocurrencies have already shown that they’re here to stay, and as the industry continues to mature, we can expect more innovation and growth in the market.
Key Takeaways
- Smart contract blockchains make creating a new digital currency on their platform relatively simple.
- There’re currently more than 20.000 different kinds of cryptocurrencies in circulation
- There are digital coins, utility tokens, stablecoins, DeFi tokens, security tokens and NFTs.
- You can expect more innovation and growth in the crypto market in the coming years.
Final Thoughts
Understanding why are there so many cryptocurrencies can help investors make more informed decisions when diversifying their portfolios. While some cryptocurrencies may be more reliable, investors should carefully research each before investing. The cryptocurrency landscape is ever-evolving, and new coins are constantly added to the market.
As an investor, you should stay abreast of the latest developments in order to make sound decisions regarding your investments. Ensure that you explore each new cryptocurrency thoroughly before investing, and be sure to monitor the market trends carefully. By doing so, you can maximize your profits while minimizing risks.
Remember, cryptocurrencies are a unique and volatile asset class that can provide significant returns. With the right knowledge, investors can capitalize on the current cryptocurrency market and make sound decisions that will benefit their portfolios in the long term.
One of the best decisions you can make as an investor is to store your crypto in a secure wallet, like Tezro. Download it today!
