Cryptocurrencies are digital assets secured by cryptographic proof stored on a blockchain. They can potentially provide a more decentralized, flexible alternative to traditional currency.
More than 19,000 different cryptocurrencies are available on the market as of June 2022. Interest in cryptocurrency has snowballed in recent years, mainly since it is more accessible to retail investors than traditional investments.
Why Are There So Many Cryptocurrencies?
There are many reasons why there are over 19,000 cryptocurrencies and dozens of blockchain platforms. Some of the reasons are good, and some of them are bad. On the positive side, the industry has a lot of enthusiasm. Many investors believe they can use cryptocurrencies to solve a specific problem or offer an innovative project.
The main reason for the excessive number of cryptocurrencies is that anyone with enough knowledge can create one. In contrast to SEC-registered securities, no regulatory body decides which “initial coin offerings” (ICOs) can be listed. As a result, some people, unfortunately, use cryptocurrencies as get-rich-quick schemes and “rug-pull” scams. Scam cryptos are more likely to be found on decentralized exchanges (DEXes) because CEXes like Crypto.com or Gemini do not list a token until its legitimacy has been proven over a more extended period. That’s why ensure you read the whitepaper thoroughly if you decide to invest in a new altcoin on a decentralized exchange.
Another explanation for the excessive number of cryptocurrencies is the remarkable success of Bitcoin and a few of the altcoins. When Bitcoin was first created, not many people took it seriously.
However, its value has continued to rise over time. Even in early 2017, Ethereum was almost worthless. This is despite the massive returns for those who invested in the Ether token. However, by 2017, Bitcoin and nearly every other altcoin had exploded. People became millionaires overnight as Bitcoin reached an all-time high of around $20,000 per BTC.
What Are the Most Prominent Cryptocurrencies?
Let’s look at two of the most popular cryptocurrencies today: Bitcoin and Ethereum.
Bitcoin
Bitcoin is the largest and most well-known type of cryptocurrency. Generally, you can create, trade, and store bitcoins using a decentralized ledger system known as a blockchain. You can keep balances on this public ledger which gives access to anyone. Physical bitcoins do not exist, but we can accept them as payment methods for products and services. Even though none of the government organizations issue and control bitcoins, they have value like traditional currencies and commodities such as gold and silver. According to Mufti Faraz Adam, a crypto asset with lawful utility can be considered maal and property, and it is permissible to utilize it.
Ethereum
Ethereum is one of the cryptocurrencies that has gained worldwide popularity over the last few years. Ethereum operates on an open-source, blockchain-based decentralized global computing platform or distributed ledger called a blockchain. Blockchain manages and tracks the currency. As demand for computing power on the Ethereum blockchain grows, so will demand for ETH.
Is it Bad to Have Too Many Cryptocurrencies?
The rapid development of new crypto projects is not always a bad thing. This demonstrates significant interest in the area, and many see the potential for various applications.
The investor’s challenge is that there are many tokens to sort through to find projects that will take off. Because there are so many different crypto projects, finding a good cryptocurrency is like looking for a needle in a haystack. At worst, funding for speculative projects with little to no utility could indicate a bubble.
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