Juliet BThis is the question that novices usually ask themselves when they discover the astonishing number of cryptocurrencies on the market. Today, the Coinmarketcap site lists nearly 9900 tokens and cryptos. And, this figure does not include the dozens of shitcoins created every day!
Why such a variety of cryptocurrencies? Why are there so many? Does this really make sense?
It is very easy to create your own cryptocurrency.
To the question “why are there so many cryptocurrencies”, the first answer that we can give is the fact that it is very simple to create them today. Yes, it is with the appearance of blockchain Ethereum that the possibility of creating tokens has been made possible.
So, creating a cryptocurrency is within everyone's reach now. It was from there that we began to distinguish between:
- Cryptomonnaies : All tradable assets are fundamentally cryptocurrencies. That said, strictly speaking, these are assets that evolve on their own blockchains. Thus, ETH (Ether) is the cryptocurrency of the Ethereum blockchain. The same goes for bitcoin which is the crypto of the Bitcoin blockchain. Moreover, we can also use the term “crypto” only to refer to all cryptocurrencies.
- Tokens/tokens : We can use both terms depending on whether we prefer Anglicanisms or not. Here, we are talking about “cryptos” which are created and hosted on a given blockchain. Thus, USDT is a token that exists on several different blockchains. Many tokens are also created for specific uses. decentralized application (Dapp).
In addition, there are also non-fungible tokens (NFT) with works of crypto-art as the ultimate symbol of this type of token.
For NFTs, again, there are a plethora of styles and features. Some represent real estate contrasts, employment contracts, works of art etc.
🤓 Read the article: What is an NFT (non-fungible token) and what is it actually used for?
There are a variety of different cryptos with different uses
Since the creation of the first cryptocurrency in 2009 (bitcoin, therefore), the cryptographic ecosystem has continued to grow exponentially. New “types” of cryptocurrencies have emerged. We can cite for example the famous stablecoins which are cryptos indexed to FIAT currencies. Thus, the USDT worth (in theory) 1 US dollar. We can also cite the countless utility tokens of certain networks, such as BNB, the token of the Binance Chain blockchain.
Not all cryptocurrencies have the same characteristics or the same functions. Some will serve as currency while others will serve as tokens suitable for using this or that service.
The only commonality between all the token truths that we find on the market is that they are created and exist on a given blockchain. These are “currencies” or cryptographic assets, in absolute terms.
As for their own functions, each project has its own particularities. Likewise, it is also the founders who decide on the monetary policy of the crypto in question. Some will want it to be deflationary (with a limited quantity issued) while others will prefer it to be inflationary.
(👓 To go further, you can read our article to find out the difference between a deflationary and inflationary currency).
Cryptocurrency is not necessarily a “currency”.
When Satoshi Nakamoto invented Bitcoin, it was with the objective of creating an alternative financial system to the current banking system. For the cypherpunks, you had to be able to send money to another person, without needing to go through an intermediary.
This is the blessed origin of Bitcoin. The need to create a means of exchange, decentralized, anonymous and accessible to all.
Thus, bitcoin serves as a currency just like the blockchain that underlies it (Bitcoin with a capital letter) allows its various transfers.
However, since then, many other cryptocurrencies have appeared with other objectives. Many of them are not considered currencies, but rather (financial) assets. A cryptocurrency is not intended to be solely a currency of exchange. This is even the biggest myth circulating about cryptocurrencies.
So, it is certainly an abuse of language to talk about cryptocurrency when we should rather be talking about crypto-asset. This is in fact the term to be preferred when we talk about cryptos which are not means of exchange, therefore.
Somehow, this is also what makes cryptocurrencies so exciting. The fact that they cover different functions and that they are so adaptable to all (or almost) our industries.
Cryptocurrencies have scalable and adaptive characteristics
Cryptocurrencies, by definition, have sought-after characteristics such as security, decentralization, accessibility, among other things. In reality, it is blockchain technology that gives them these much sought-after characteristics.
If we stay in the category of currency and money transfer, then cryptocurrencies prove to be much more efficient than their FIAT counterparts. Simple to create, easy to transfer, requiring no technical intermediary, central banks are even considering creating their own cryptocurrencies. These are what we call CBDCs (Central Bank Digital Currency).
Like the cryptographic Chinese Yuan, the European Commission is currently working on a cryptographic euro.
For central banks, the idea is to use cryptocurrency technology (only) from current state currencies. These currencies being already digitalized, the transition will not be difficult, beforehand.
In any case, what we can be sure of is that cryptocurrencies are here to stay... This is also why so many people are looking to invest in cryptocurrencies.
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Note: No opinions or information expressed in this article represent the editorial line of Zonebitcoin. Likewise, no information presented here and in other articles on this site should be considered financial advice.
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