Thirteen years ago, when Bitcoin was developed by a mysterious individual or group of individuals using the pseudonym Satoshi Nakamoto, there was no other crypto to challenge its supremacy. But the time has passed and things have changed a lot since then. People soon picked up on Bitcoin’s potential and started using blockchain technology to create new crypto projects. And so began the competition. There are now over 10,000 digital currencies in existence, each of them adding to the complexity and diversity of the ever-growing crypto environment.
As the oldest cryptocurrency on the market, Bitcoin benefited from the first mover advantage and the network effect that came with it. This propelled the original crypto far above the rest, to heights that developers of other projects can only dream about. But even though Bitcoin retained its leadership position all throughout these years, being the crypto with the highest market cap and the face of the industry for that matter, we can’t ignore the fact that the cryptocurrency space extends far beyond the bubble created by it. There’s a whole world that many people know nothing or very little about, which is incredibly unfortunate because they’re missing out on many amazing opportunities to grow their wealth.
One possible explanation is that people expect Bitcoin’s remarkable growth to repeat itself again. Bitcoin price spiked several times over those past few years, leading to massive profits for those who traded at the right time. However, what many don’t realize is that if we’re ever to witness something similar again, it’s probably not going to come from Bitcoin’s front, but from a different project.
Another aspect that might contribute to this state of affairs is the fast-paced environment and the rapid evolution of the crypto market. It’s only been little over a decade since Bitcoin launched and the number of cryptos has already surpassed that of fiat currencies which have been around for centuries. Even for die-hard crypto enthusiasts, it’s difficult to keep up with all the news, developments and new crypto projects that seem to pop up left and right. So, instead of trying to make sense of what’s going on, many users choose to stick to a coin that’s already well-known and established.
However, if you really want to become crypto savvy, you need to expand your horizons and learn your way around the crypto universe, and that obviously starts with understating the nuances, differences and variations that make up this highly innovative and incredibly intricate space.
All different and all the same
With the sheer number of digital currencies that are currently being traded, it’s logical to assume they are not all created equal. If there would be no differences, there would be no competition and no point in constantly creating new crypto projects.
But before we start analyzing the things that separate them from one another, let’s first look at the aspects that bring them all together in this new and intriguing asset class because there’s obviously a common foundation on which they’re built. Firstly, all cryptos, regardless of their scope and specific features, have decentralization at their core. They are not issued or governed by a central entity as in the case of fiat money. Instead, they rely on nodes and miners in their network to verify and validate transactions, add them to the blockchain and release new coins into circulation.
Then there’s the use of cryptography which ensures transactions are anonymous, secure and trustless. Also, digital currencies are usually stored in virtual wallets, which can be software-based or physical devices, allowing users to hold their funds and easily perform transactions. So, the blockchain, cryptographic algorithms and mining are the three elements that define every crypto project out there.
As you can see, the technology behind crypto is extremely complex, and that’s what makes digital assets so intriguing and difficult to understand. That’s also why no two crypto projects are alike. The blockchain technology has massive untapped potential and developers have only just begun to scratch the surface of what they can do with it. While many cryptos that follow Bitcoin’s principles are created primarily as an alternate means of exchange, others are designed as stores of value, turning them into efficient investment instruments. Then there are those projects that bring a host of different features that go beyond trading and investing, offering solutions for a wide range of industries from agriculture and healthcare to retail and law.
It’s also important to mention that while the technologies underpinning cryptocurrencies are similar, there are notable variations. The cryptographic algorithms differ from case to case, so there are different methods of encrypting data and ensuring the safety and reliability of a network. Apart from that, the mining process can also present significant differences, as does the coin supply. So, while the main elements are mostly the same, there are many specificities that provide uniqueness to each crypto initiative.
Different strokes for different folks
The crypto ecosystem is populated with a variety of assets that fall into different categories, such as tokens, coins, altcoins, stablecoins, NFTs, and so on. So, you may be wondering what fueled the crypto rise and led to the emergence of so many new crypto projects. Well, for one thing the blockchain technology is open source which means any developer can use it to bring to life any type of project they desire, depending on their skills and vision. Everyone has access to the original source code; thus, the possibilities to develop something new based on it are virtually endless.
Then there’s also the fact that cryptocurrencies have evolved a lot over the years, transitioning from a relatively obscure asset class sitting on the fringes of the economic system to a promising financial instrument with plenty of benefits that’s getting closer to mainstream acceptance and adoption with each passing day. Add some FOMO to the mix and you’ve got all the main ingredients of the crypto phenomenon we’re witnessing today. And we have all the reasons to believe this is just the first chapter in a story that’s going to transform the world of finance in the future.