Why Are There So Many Cryptocurrencies?
Cryptocurrencies have been around for quite a while, and they don’t seem to be leaving the scene any time soon. Among the most significant steps in the growth of cryptocurrencies is the adoption of bitcoin as a legal tender in El Salvador. What’s more, the incumbent mayor of New York Eric Adams has expressed his interest in transforming New York City into a cryptocurrency hotspot.
A recent survey by the Pew Research Center shows that although only 16% of Americans invested, used, or traded cryptocurrencies, approximately 86% have heard at least a little about it. Crypto advocates generally claim that cryptocurrencies are more transparent and anonymous than centralized fiat currencies. Blockchain technology has made this possible, and naturally, we have to ask: what is the science behind cryptocurrencies?
How Cryptocurrencies Work
Cryptocurrencies are based purely on computer programs. Using the blockchain network, pieces of code transfer value (coins) from one wallet to the other. To transfer coins, you need to create a digital wallet, from which you will send or receive coins. The blockchain network (eg. Bitcoin and Ethereum) may offer their users recommendations on which wallet works best with the cryptocurrency. Specialty exchanges such as Gemini and Coinbase also offer digital wallets.
Once you have completed setting up a new digital wallet, a private key and a public key will be automatically generated by the cryptocurrency’s algorithm. The private key is your proof of ownership while the public key acts as an address or account number. The public key allows you to transfer and receive value (coins) to and from other digital wallets. The system distributes ledgers as proof of transaction and ownership, making it safer from fraudsters than conventional fiat currencies. While the addresses typically reject other types of cryptocurrencies, platforms like cross-chain bridges and exchanges allow exchanges across different cryptocurrencies.
All cryptocurrencies derive their model from Bitcoin’s groundwork. Satoshi Nakamoto’s, the pseudonym of Bitcoin’s creator, had the intent to create a programmable, decentralized currency. True to his vision, Bitcoin has proved to be more secure and anonymous, sparking the development of thousands of cryptocurrencies across the globe. From Bitcoin to Ethereum and Tether, there is a horde of different cryptocurrencies in the market today. Though their infrastructures differ, they are all based on the blockchain technology used to create the first cryptocurrency: Bitcoin.
Why Are There So Many Cryptocurrencies
There are as many as 1,583 cryptocurrencies currently listed on coinmarketcap.com. This is more than the number of fiat currencies across the globe, and more cryptocurrencies are set to be launched. The beauty of blockchain technology is that it allows developers to offer different functionalities for different sectors of the economy. The aim of these currencies is to revolutionize different sectors such as finance, privacy & security, health, and energy by leveraging blockchain technology.
The most popular cryptocurrencies basically function as digital currencies, acting as a store of value similar to the conventional fiat currencies. There are cryptocurrencies that serve utility functions. This type of cryptocurrencies allows other cryptocurrencies to be built and accessed through their network. A good example would be Ethereum, which allows numerous token coins to be built on its network.
There are other types of cryptocurrencies that are built on top of utility currencies and are often referred to as platform or app cryptocurrencies. The best example of an app cryptocurrency is Augur, which was launched on Ethereum’s network. A large number of cryptocurrencies is basically due to the decentralized and unrestricted blockchain technology. Nevertheless, most developers exploit Satoshi’s model with a vision of creating better versions of the original.
Which are The Biggest Cryptocurrencies?
Since the launch of Bitcoin in 2009, cryptocurrency has only grown trendier. Though Bitcoin leads the way, there are several coins that have made significant leaps. To help you get a footing in the crypto world, here are the five biggest cryptocurrencies based on their current market capitalization. Market cap is the total value of the cryptocurrency’s coins currently in circulation.
- Bitcoin (BTC): Market cap over $560 billion
- Ethereum (ETH): Market cap over $230 billion
- Tether (USDT): Market cap over $72 billion
- Binance Coin (BNB): Market cap over $53 billion
- U.S. Dollar Coin (USDC): Market cap over $53 billion
How to Make Sound Investing in Crypto
Getting into the world of crypto for the first time can be overwhelming with the horde of cryptocurrencies currently available. The only way to successfully invest in cryptocurrencies in 2022 is by staying ahead of crypto updates and trends. Nevertheless, it might still be confusing to accurately tell which cryptocurrency is the best investment choice for you. It is essential to keep in mind that any choice is as risky as it is potentially profitable; make sure to invest cautiously.
With crypto being an unregulated instrument, there is no recourse when things go out of hand. It is only wise for investors to do their own due diligence before trading these instruments. Crypto is one of the most volatile assets in the markets, and it is essential to maintain your focus on the fundamentals of investing.
Like every other asset, crypto is affected by macroeconomic factors too. It is, therefore, handy for investors to remember that risk and reward are directly correlated. That means investing after sound research is often abundantly fruitful for crypto investors. Nevertheless, each investor’s risk-reward tolerance varies from others’.
Understand your own risk-reward tolerance by finding out what amount you are willing to invest for the return in question. Most new crypto-investors often find themselves in need of a financial advisor to assess their risk tolerance. It is also advisable to keep off new crypto investment projects as they are more likely to be scams.
Trade Crypto Today
So, are you interested in crypto investment? There are plenty of options out there, and it could be pretty hard to choose. The crypto world is always changing, with infrastructure improvements and investor interests constantly changing. Nevertheless, thanks to the mainstream appeal earned by several coins, they are great prize assets that you should consider investing in. There are also plenty of platforms available to trade crypto, but few are better than Blockbank. Download the Blockbank app today and begin your crypto investment journey on the right foot.