Why are there multiple cryptocurrencies?

Why are there multiple cryptocurrencies?

Why are there multiple cryptocurrencies?

New cryptocurrency investors are often surprised by how many coins there are in the market. There are thousands of different cryptocurrencies, some of which are incredibly valuable and others that are blatant scams.

Some people have asked how many cryptocurrencies there are. This is a good question but there’s not a clear answer. The website CoinMarketCap claims that there are more than 8,000 cryptocurrencies on the market, but this number doesn’t reflect reality.

Most of the coins that CoinMarketCap lists are “dead.” No developers are working on the projects and the coins don’t trade on any major exchanges. These dead coins still show up on crypto tracking websites but they don’t serve any function.

In terms of viable projects there may only be several hundred cryptocurrencies that have the possibility of achieving mass adoption in the future.

In this article we’ll consider the question of why there are so many different cryptocurrencies, what these coins do and whether they’re good long-term investments.  

    Different Cryptocurrencies do Different Things

    The cryptocurrency ecosystem started with Bitcoin in 2009 and has been steadily growing since then. Bitcoin is a revolutionary technology because it solved the ‘double spend problem’ by introducing the proof of work consensus.

    Miners secure the network and prevent coins from being spent more than once. However, as revolutionary as the technology is, even from the beginning it was obvious that Bitcoin was going to run into a scaling problem. Because of how it’s designed, Bitcoin would be too slow to use as a day-to-day currency.

    That’s why Charlie Lee created Litecoin. Although Litecoin is based on Bitcoin’s code, it has faster block times and can clear more transactions than Bitcoin.

    A few years later, Vitalik Buterin had the idea for smart contracts. Bitcoin couldn’t support smart contracts so Vitalik created Ethereum, the original smart contract platform.

    These are just a few of the examples of the different cryptocurrencies that are solving, or trying to solve, different problems. Every time that someone creates a new cryptocurrency, they advertise it as having a unique feature, claiming to be:

    • Faster
    • More secure
    • Smart contracts that are easier to code
    • Better interoperability with other blockchains
    • Higher staking rewards
    • More environmentally friendly
    • Etc.

    Bitcoin is too slow… You get coins like XLM, XRP, NANO and LTC

    Bitcoin lacks privacy… You get XMR, DASH and ZEC

    Bitcoin doesn’t have smart contracts… You get ADA, XTZ, ETH and NEO

    How many cryptocurrencies are there?

    There are thousands of cryptocurrencies, although only a small percentage of those projects are actually viable. Anyone can create a new cryptocurrency which means that you get lots of scams and projects that have almost no chance of succeeding.

    Some people have asked how many Bitcoins are there? Technically there are several Bitcoin projects. Bitcoin Cash and Bitcoin Cash SV are both copies of the Bitcoin project. However, there is only one real Bitcoin and that’s BTC.

    Why should you invest in other cryptocurrencies?

    There are a few reasons why people invest in different cryptocurrencies besides Bitcoin. One of the main reasons is that altcoins can go up in value more than Bitcoin.

    For example, Polkadot DOT is up more than 600% in the last 90 days. Bitcoin BTC is “only” up about 200% in the last 90 days.

    Of course, altcoins can also fall much more quickly than Bitcoin. For example, Ethereum ETH recently crashed about 30% in just 48 hours. In traditional markets that would be a huge deal and would almost certainly indicate a serious problem. In the altcoin universe it’s just another day.

    Another reason to invest in other types of cryptocurrency is if you believe in what the project is trying to accomplish. The DeFi movement is trying to decentralize finance and create financial service products that anyone in the world can use.

    Monero and Zcash offer private transactions. These two coins could be an excellent investment for anyone who is concerned about privacy.

    There are lots of altcoins that do different things and investors can put their money into projects that they believe are going to do well.

    Bitcoin vs. the Rest

    Bitcoin is the original and most trusted cryptocurrency. In fact, it’s hard to overstate how important Bitcoin is to the cryptocurrency ecosystem. At some points, especially during bear markets, BTC can make up as much as 80% of the entire market cap for the cryptocurrency asset class.

    One of the reasons why Bitcoin is so valuable is that it has a limited supply. How many Bitcoins are there? There will only ever be 21 million BTC. That’s a hard cap limit.

    We don’t have to question how many Bitcoins there are because changing the Bitcoin code is extremely difficult. In order to make changes to Bitcoin’s code the developers and miners must agree to implement changes.

    Since the developers and miners are located all over the world, getting everyone to agree to a change is quite difficult. That’s especially the case if we’re talking about a modification like increasing the supply of BTC.  

    Another important reason why Bitcoin is so valuable is that it’s the most secure cryptocurrency in the world. Bitcoin has the largest security network out of all of the different cryptocurrencies. Billions of dollars of ASIC miners secure BTC. Since it was released in 2009, Bitcoin has never been hacked or compromised. The same cannot be said for many other cryptocurrencies.

    Using One Wallet for Different Cryptocurrencies

    Each cryptocurrency has its own unique wallet architecture and requirements. For example, it’s impossible to send Bitcoin to an Ethereum address, as the transaction would never go through. The only way to send a cryptocurrency is to send it to the correct type of wallet.

    There are two types of cryptocurrency wallets.

    Dedicated Wallet

    A dedicated wallet only works for a single cryptocurrency. The Electrum wallet for Bitcoin and the NEON wallet for NEO are two examples of popular dedicated wallets. These wallets do not work for different cryptocurrencies, they only work for BTC and NEO, respectively.

    The downside of a dedicated wallet is that it only works with a single cryptocurrency. If you only use dedicated wallets, you’ll need to download and install a new wallet for all of your different cryptocurrencies. This is inconvenient and downloading all of these wallets can create a security issue.  

    With multiple dedicated wallets you have to keep track of many different seed phrases. The wallets also need to be updated regularly. Frequent updates are important in case the developers release a new security patch.  

    The main advantage of a dedicated wallet is that it may have more advanced features. Dedicated wallets only focus on one coin. In many cases the dedicated wallet is created and maintained by core developers.

    For example, the Monero GUI wallet allows users to mine XMR with their laptop. It’s also possible to change various privacy settings. Users who want to pay higher transaction fees can send payments that are even more secure than normal.

    MyEtherWallet, commonly referred to as MEW, lets users add custom ERC20 tokens. A useful feature for DeFi yield farmers.

    Multi-Coin Wallet

    Unlike a dedicated wallet, a multi-coin wallet supports multiple types of cryptocurrency. The wallet includes the necessary software that allows it to receive many different cryptocurrencies. Some multi-wallets only support a handful of coins, while other wallets support dozens of cryptocurrencies.

    It’s common to see a certain set of coins always included in a multi-coin wallet.

    • Bitcoin
    • Bitcoin cash
    • Litecoin

    All of these coins, and others as well, have similar requirements so it’s easy for a wallet developer to add all of them. Other cryptocurrencies, like Monero, have unique code that requires more development time to add to a multi-coin wallet.

    With a multi-coin wallet you only have to download one application and remember one seed phrase. This makes a multi-coin wallet much more convenient than a dedicated wallet. However, multi-coin wallets tend to offer fewer advanced features.

    How to create a multi-cryptocurrency wallet app?

    Exodus is one of the best multi-coin cryptocurrency wallets. It’s available for PC, Mac and even the Linux operating system. The mobile app is also available for Android and iPhone.

    One of Exodus’s most convenient features is that you can sync your wallet balance between the desktop and mobile app. If you send crypto to Exodus’s desktop version, the coins will also show up in your mobile wallet.

    Exodus supports dozens of different cryptocurrencies. A full list of all of the coins that Exodus supports is available here.

    Hardware wallets also support multiple different cryptocurrencies. Most people consider a hardware wallet to be the safest way to store Bitcoin because you have to press a button on the device to approve a transaction. Even if a hacker gains access to your computer, they won’t be able to steal any crypto from a hardware wallet as long as you don’t approve the transaction.

    One of the most popular cryptocurrency hardware wallets, the Trezor, is compatible with Exodus. For many years the Ledger hardware wallet was very popular in the cryptocurrency community. Ledger became less popular, however, when hackers compromised their database and stole customer information from hundreds and thousands of people.

    The Cryptocurrency Ecosystem

    How many Bitcoins are there? There is only one Bitcoin, but many other cryptocurrency assets have a role to play as well. Ethereum with smart contracts, Monero with private transactions and XLM with fast transactions, just to name a few.

    Just remember, before you invest in any crypto asset do your research and make sure you understand what you’re investing in.

    This content is for informational purposes only and is not investment advice. You should consult a qualified licensed advisor before engaging in any transaction.

    Get insider crypto knowledge and product updates from the world’s leading crypto wallet
    Sign me up