Why so many cryptocurrencies?
To get to the bottom of this question, it helps first to have a certain understanding of blockchain, the technology on top of which all cryptocurrencies operate. In simple terms, a blockchain is an immutable, distributed public ledger of transactions. Often thought of as the internet's cryptographically-secured 'upper layer,' blockchains are developed by many kinds of organizations in order to fulfil a number of different use cases.
The blockchain concept was first proposed by Satoshi Nakamoto in 2009 and was intended to serve as the technical infrastructure for a new kind of internet-native money. The original goal for this electronic cash, which Nakamoto called Bitcoin, was to prove that it was possible to transfer value online in a way that eliminated fraud and that didn't depend on central authorities, like banks or payments processors (i.e. PayPal).
As we all know today, this idea has turned out to be revolutionary. Bitcoin has not only proven itself to be the most secure infrastructure for payments ever conceived, but it has also attracted a massive network of enthusiastic users who carry out around 350,000
transactions each day. Over time, Bitcoin has settled into its use case as a store of value, with a market cap gradually approaching the one-trillion-dollar mark. The rise of the altcoins
Fairly early on, though, certain flaws in the Bitcoin network were noticed by the community. These issues namely related to scalability, transaction time, programmability, and energy use. The first altcoins arose as attempts to resolve these concerns.
First issued in 2011 as a source code fork of the Bitcoin core, Litecoin (LTC) was one of the first major altcoin projects. Litecoin's initial aim was to reduce transaction times and increase scalability by reducing block processing time from ten minutes down to two and a half. Ripple (XRP) is another early project, launched in 2012, that powers a payments network which reduces transaction times to a few seconds.
By the second half of the 2010s, the concept of fast, effective, and secure crypto payments had been proven. It was realized, then, that decentralized ledger technology could be used for so much more. The Ethereum network, with its native Ether token, was the first major attempt to use blockchain technology in order to decentralize… well… just about everything. This ultimately would facilitate the launch of an infrastructure for the development and deployment of decentralized applications (Dapps) and smart contracts.
Ether (ETH) was initially issued in 2015 as the first true utility token
. A utility token is a cryptoasset whose value lies in its role on the network (i.e. its 'utility'). Ether's utility on the Ethereum network is to pay for transaction fees and Dapp usage. As of the current time, Ethereum has secured market dominance among crypto projects, and most new tokens today are issued using smart contracts hosted on the network. Going into the third decade of the 21st century, Ethereum may have one major issue that could be holding things back:
Today, one of the biggest concerns among crypto users and crypto critics alike is energy consumption. The proof of work protocols used by major cryptocurrencies, including BTC, LTC, and ETH mean that miners consume an enormous amount of electrical power when confirming transactions. As proof-of-work blockchain networks grow, the ecological harm they cause only increases.
While the Ethereum foundation has announced an eventual shift to the much more energy-efficient proof-of-stake protocol, several other projects are coming out ahead. Now, everyone has their eyes on such emerging PoS blockchains as Cardano, Polkadot, Solana, and Algorand, as well as on their native tokens, with ticker symbols ADA, DOT, SOL, and ALGO, respectively.