As we already know, there are more than two thousand active cryptocurrencies on the virtual market at this moment. This figure of sounds like a lot, but when you dig deeper into the nature of cryptocurrencies, you start to understand that it isn’t. The philosophy behind cryptocurrencies is the philosophy of freedom, of independence from third parties. Nobody likes the middleman in the world of finance, and cryptocurrencies decided to remove them. But what does this idea of freedom has to do with the number of available cryptocurrencies?
Although everything started with bitcoin that was promoted as a digital substitute for cash, things got a lot more complicated over the years. Let’s say that you want to remove the middleman from your financial realm entirely — what would that mean exactly? Let’s see!
- It would mean that you will need a substitute for greens — that’s a start.
- Then, it would mean that you will need a substitute for all of the legal matters that include monetary exchange, such as buyers contracts.
- After this, it would mean that you will need a substitute for the methods of funding, receiving funds, and investing in business.
- Finally, it would mean that you will need a substitute for ensuring your legal and monetary activities.
These four points are the cornerstones of cryptocurrencies as they exist today. And here lies the reason why there are so many of them. However, the need and high demand for different functions of cryptocurrencies is not the only reason why there are so many of them; it’s just the main reason. So let’s discuss the factors that influenced this rapid growth in the number of cryptocurrencies.
Function — Different Purposes and Different Demands Create Different Currencies
We have already made an introduction for this factor. The rise in demand for various functions of cryptocurrencies caused this increase in their number. Let’s get acquainted with the main types of cryptocurrencies.
1. Digital Cash
The potential of blockchain technology was immediately recognized, and pretty soon, the bitcoin was created. This cryptocurrency is the most famous one; everybody knows that digital currency is a substitute for hard, cold cash.
2. Smart Contracts
Soon after the digital currency was invented, experts recognized the need for “liberated” contracts. Smart contracts are safer, more reliable, and they don’t come with hidden expenses — there is no third party, no middleman that takes a percentage from you. However, the best thing about smart contracts is that their “law” is in the code! That’s the beauty of smart contracts; if any clausula is violated or breached in any way, the penalty is instant. So if you break a smart contract, the code reacts immediately and impartially. Smart contracts can be used for any type of exchange — the exchange of shares, property, or anything else of value.
Now, aside from smart contracts, there are also DApps — the invention that gives a new meaning to the words “free of the middleman.” Decentralized Applications are open-source applications that give you the full liberty of launching your app without the need for a centralized hosting. Ethereum has provided its users with a decentralized platform that uses 25,000 nodes, making the app that is hosted by this platform virtually untouchable. So why are DApps so great?
Well, because they reinvented the app principle that is based on front end/back end and centralized hosting in between. The front end of an app communicates with the back end through JSON messages, and the app is dependant on centralized hosting. When you base your app on decentralized hosting, that means many great things for you, but mostly, it means two things — more security and no censorship. There is no main server that can be hacked, and with it, all apps that depend on it. Thanks to decentralization, your app is safe. Also, traditional hostings often answer to governments or influential institutions that can just ban your website for whatever reason. With decentralization, this can’t happen. Aren’t you in love with DApps already? Well, many people are; that’s why there are so many cryptocurrencies!
4. Financial Exchange
In each traditional financial exchange, you give some of your money to some beneficiary;
and when we say each, we really mean it — literally each time when you use your credit
card. Banks earn on their clients on every transaction, every action, on everything
their clients do with their money. Basically, banks earn every time you use your card,
withdraw money, get a loan, or anything like that. So what about getting liberated from all
of that? Well, you can, with a special category of cryptocurrency, such as dividend coins.
There is a liberal digital way of making payments, giving loans, getting loans, receiving
Payments — you name it. Cryptos let you operate your funds in a safe virtual
ecosystem, where every communication is direct, without the middleman. So you see how the demand for new cryptocurrencies grows, and more and more of them are launched.
Now, aside from all of these factors that caused an increase in the number of cryptocurrencies, there are some other factors as well. These are factors of constant improvement and experimentation with the product and the market.
Improvement Factor and Experimentation — It Can Always Be Better!
Cryptocurrency is a rather new invention. So it’s natural that the brains behind the first cryptocurrencies failed to see and predict everything that the market is going to demand. People who made some new cryptocurrencies learned from the mistakes of their predecessors. It’s a normal thing in any field.
Technology improves, the market expands, and new possibilities are being recognized every day. That’s also one of the reasons why virtual currencies have changed so much over the past few years. Remember the day when ethereum was some poor little thing at the end of a stock list? Let’s see how it stands now compared to the current top ten currencies.
|Name||Symbol||Market Cap||Price||Circulating Supply|
So we have explained how the improvement factor and the need for many various functions of cryptocurrency have led to us having such a large number of them today. However, that’s not all; there is one more thing that contributed to this. Let’s see what it is.
Conclusion: Convenience and Safety Factors Play an Important Role
Although constant improvements and various functions led to this impressive number of over two thousand cryptos, there is one more important thing that should be mentioned. Cryptos value your privacy, and with cryptos, your funds are safe. Keeping cryptos on a device that has no internet connection is the safest thing in the world to protect your funds — online wallets can be hacked, but it happens rarely. But when we say that your funds are safe with crypto, we don’t mean just from hackers but from banks too! People soon recognized the convenience and safety that come with using cryptos. That’s why the cryptocurrency market has flourished so fast! The purpose of cryptos is not only to substitute cash but every financial action that exists, and even further, to liberate you from the middleman!