Why are there so many digital currencies?
More than 15 years after its launch, Bitcoin is no longer the only one on the scene. Rather, it was the beginning of an entire industry that currently includes approximately 22 thousand digital currencies. So why are there so many digital currencies? This is what we will discuss with you in this article!
All of these currencies carry monetary value, but not all of them are used as a means of long-term storage of value or for transactions between people. So why are there so many digital currencies? This is what we will discuss with you in this article!
❍ Versatility of uses
Thanks to the emergence of smart blockchain networks like Ethereum (ETH), developers are coming up with unique uses for cryptocurrencies and tokens. Some currencies can be used as a means of payment, while others are used to power smart contract applications, in decentralized finance (DeFi), or even in electronic games.
❍ Easy to create
There are several reasons behind the increase in the number of digital currencies. It has become easier for developers to create new cryptocurrencies thanks to platforms like Ethereum, Solana (SOL), and BNB Smart Chain that allow building decentralized applications (dApps) with digital tokens. Even people with no coding experience can now create NFTs (non-fungible tokens) on platforms like OpenSea and Rarible.
❍ Challenges and opportunities
Although there are many scam currencies and fake projects, there are also many developers and companies that use blockchain to achieve unique goals. As good information about Web3 and how to use it spreads, more developers and buyers are introducing products and services that can boost the cryptocurrency space.
❍ Types of digital currencies
1. Digital currencies: such as Bitcoin, Litecoin, and Dogecoin, are used as a means of exchange or store of value.
2. Functional tokens: These are often issued on smart blockchain networks and used for specific purposes within their ecosystem.
3. Non-Fungible Tokens (NFTs): These represent any form of digital media such as photos, art, and videos.
❍ Examples of notable currencies
• Bitcoin (BTC): Developed in 2008 by Satoshi Nakamoto, it is the market leader and is used as a means of storing value.
• Ethereum (ETH): Created in 2015, it introduced smart contracts into the world of blockchain, allowing various applications to be built in areas such as DeFi, NFTs trading, and electronic games.
❍ Stablecoins
Stablecoins are digital currencies that maintain a 1:1 ratio with other assets, often the US dollar. Among the most prominent of these currencies are:
• Tether (USDT): The oldest stablecoin and was issued in 2014.
• USD Coin (USDC): A stablecoin released in 2018 that is very popular on the Ethereum network.
• DAI: A decentralized stablecoin based on the decentralized protocol MakerDAO.
❍ Ethereum competitors
Even though Ethereum has been updated to a Proof of Stake (PoS) system, there are many projects that claim to be superior to Ethereum. Among the most prominent competitors:
• Binance Coin (BNB): A coin that was initially used as an incentive for Binance users, but now plays a larger role in decentralized applications.
• Solana: A fast blockchain with speeds of up to 65,000 transactions per second.
• Cardano: A blockchain created in 2017 led by Charles Hoskinson, one of the founders of Ethereum.
• Polkadot: Focuses on the intersection between different blockchain networks.
❍ The future of digital currencies
Thanks to the decentralized nature of blockchain, it is difficult to eradicate any currency. However, success depends on strong foundations, loyal developers, and supportive communities. As with the dot-com bubble of the 1990s, only projects with strong fundamentals are likely to continue to achieve success.
❍ Conclusion
We always advise traders to do their own research before investing in any currency, as the huge number of digital currencies and the ease of creating digital currencies in addition to the decentralization of the market make novice traders more vulnerable to scamming currencies.
Do not invest in any currency just because you saw an advertisement for this currency on Twitter or Telegram, but rather invest based on research and knowledge.
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