There are more than 5000 cryptocurrencies listed as of now. This number is significantly higher compared to the 180 fiat currencies that are recognized by the United Nations. This is why many people are asking, why are there different cryptocurrencies?
After Bitcoin was launched nine years ago, it becomes so popular that many other coins emerged. The different cryptocurrencies have different functionalities. In this article, we will discuss how other cryptocurrencies emerged and what are their functions. Read on!
Types Of Cryptocurrencies
Some cryptocurrencies function as currencies. These currencies work much like a traditional fiat currency. Bitcoin is one example of a cryptocurrency that falls into this category. There are also those that currencies that have a utility function. This type of cryptocurrency develops as an infrastructure. This means they let other cryptocurrencies to be created on top of their networks. One of the best examples of this type is Ethereum with its Ethereum Virtual Machine. This machine allowed the creation of several tokens on its network. The other major types are referred to as app or platform cryptocurrencies, which are built on top of the utility currencies. Augur cryptocurrency that was launched on the Ethereum network is one example of this type. Talking about all different types of cryptocurrency, here are some of the most popular cryptocurrencies in the crypto world.
- Bitcoin (BTC)
This cryptocurrency was launched in 2009 by Satoshi Nakamoto. Since it was launched, Bitcoin never had a downtime. This allows its users to transfer this crypto money continuously. As of now, Bitcoin has a market value of over $10,000 and a market cap of a little less than $190 billion. A Bitcoin trader can send and receive Bitcoin similar to fiat currency. This is why many considered it as an alternative to the traditional currency and gold. And since its supply is limited to 21 million coins, it certainly can have a store value as gold.
- Litecoin (LTC)
Litecoin was created in 2011 by Charlie Lee, a former Google employee. This cryptocurrency works like Bitcoin, although it intends to improve transaction time, lower fees, and concentrated miners. Litecoin miners have more complicated hardware than ASIC, which is designed for Bitcoin mining because of the use of the script for the proof of work algorithm.
- Ripple (XRP)
Ripple is a popular cryptocurrency that is not based on blockchain. It is ideal for large companies and corporations that move large sums of money quickly. Its coinage, XRP, is more famous for its digital payment compared to the cryptocurrency. One of its popular services is transferring different forms of money, dollars, Bitcoins, and many more. It also claims to support more than a thousand transactions per second while Bitcoin and Ethereum can handle three to six and 16 transactions per second, respectively.
- Stellar (XLM)
Stellar was launched in 2014 by Jed McCaleb, Ripple’s co-founder. It focuses on money transfers, and its network makes it faster. This can benefit several economies that do not access to traditional banking and financial systems. As Stellar does not charge its users for using their network, they accept tax-deductible public donations to cover its costs.
Factors Why Are There Different Cryptocurrencies
One of the reasons why there are so many cryptocurrencies is the underlying blockchain technology. This technology provides developers the chance to make their own cryptocurrency for different functionalities. No one controls blockchain technology. People who know about this technology can easily use it and develop their own digital currency. The other factors are the following:
- Massive Returns
The massive returns are another explanation as to why are there different cryptocurrencies. It is significantly related to the huge success that Bitcoin and a few other altcoins are enjoying now. Nine years ago, not so many people paid attention to it. Over the years, its value continues to appreciate, and in 2017, when almost all altcoins boomed, people became millionaires overnight. Suddenly, people are now learning, investing, and creating their own cryptocurrencies.
Forking also contributed as to why are there different cryptocurrencies. It is not precisely the main reason for the wealth of many cryptocurrencies, but it is still a factor. A good example is the three known cryptocurrencies that are “branched off” from Bitcoin, namely Litecoin, Bitcoin Cash, and Bitcoin Gold. Litecoin has Litecoin Cash, and Zcash has now Zclassic (ZCL); there is also a twin fork between Zclassic and Bitcoin called Bitcoin Private.
The nature of innovation and humans’ nature to desire for constant improvement are also factors as to why cryptocurrencies keep on increasing. Cryptocurrencies can be compared to the apps that are being used and developed these days. Many apps work similarly; however, there are still plenty of people who are using and creating new developments that are the same as the old ones. Say, for example, Ethereum. Think of it as the best platform for smart contracts, but these days, there are already several platforms with tokens with the same type of network.
- The ICO Boom
Another possible reason why there are many different cryptocurrencies emerging is the ICO boom. Because of the lack of regulatory checks on the ICO system, the spur on more token sales becomes easier. In 2013, the first coin offering was recorded as Mastercoin. Soon after, many followed due to the success of crowd sales like those of NXT, Stratis, IOTA. Many ICOs launch their own blockchain platforms, while others are built on host platforms, like Ethereum. Each ICO has its own native currency. This means that if there are a thousand successful ICOs, there will surely be a thousand cryptocurrencies.
Wondering why are there different cryptocurrencies is normal, especially when you have just started learning about cryptocurrency. It is important to note that each currency has its own features and functionality and that there are already several cryptocurrencies that are not successful or will be successful due to some factors, like lack of users, developers, funds, and more. Learning about cryptocurrency is interesting, and if you are thinking about investing, it is wise to do your homework and start researching as early as now. Learn more about cryptocurrencies here!