Why so many Cryptocurrencies?
So far, CoinMarketCap, shows on top that there are 17,543 cryptocurrencies out there, but lists 9,358 on its index.
Heyy theređđ»âšhere comes my 4th edition of FM newsletter!
Web3 economy is bound to Cryptocurrencies. In a lot of cases, to understand projects and ecosystems, itâs all about studying the tokens! Web3 canât function without it. Itâs a core tool.
As the market keeps crashing and going up, I think itâs a good thing since it allows people to become more resilient and more and more self-aware that cryptos are no joke đ At some points they will not only see the surface đ
Today I want to explain the reasons behind all these Cryptocurrencies!! Many questions and people still donât know why itâs possible that so many cryptos are created and why it is still rising. â Its perfectly understandable, there are so many crypto and stuff happening thatâs almost suffocating to understand the fundamentals.
But first, here are some important updates about the web3 world đ°đ°:
Coinbase launches NFT Marketplace in beta (Source)
BAYC Otherside NFT launch sold out within 24 hours. (Source) Yuga Labs generated around $560 million from the sales of its new NFT projet âOthersideâ expected to advertise its upcoming Metaverse.
NBA Announces 'Dynamic' Ethereum NFTs for Playoffs (Source)
Real Madrid metaverse offers virtual stadium and real-time translation tools (Source)
So far, CoinMarketCap, shows on top that there are 17,543 cryptocurrencies out there, but lists 9,358 on its index.
Thatâs a lot of cryptođ
Itâs important to know whatâs the difference between Coins vs Tokens in the crypto world. They are both Cryptocurrencies but they are significantly different.
Crypto coins vs Tokens
People often misinterpret whatâs the difference between the 2.
A Crypto Coin is created on its own blockchain and acts in much the same way as traditional money. Mostly people use it to store value and as a means of exchange between two parties doing business with each other. (example: Bitcoin, Litecoin)
A token, on the other hand, has far more usage possibilities. They are created on top of an existing blockchain.
The main usages for a token are:
Giving Right: they can represent digital art (like with NFTs, or "non-fungible tokens" that certify something as unique). They can also be used for payment,
As Value Exchange: Selling/buying something for example
Toll: usage fees or other deposits
Function: Joining a network, connecting with other users for example
Earnings: Distribution or other benefits sharing features
Thatâs a lot of stuff you can do with a token đȘ
But in the end, we tend to categorize tokens by their main functions used within a network. Here come "token typesâ.
So what are the different types of Token then?
1) Utility token
They are used to gain certain access to a product or service run or operated by the token issuer. Depending on the product or service the token issuer provide, these tokens can be mandatory or not. You can allow your users to get access to some functionalities using these tokens. The main idea is that they are not âinvestment productsâ so they can lose value completely at the expense of the holder. Because they are categorized that way, they are not regulated.
For example, a concrete example would be to give access to a limited edition of NFTs, or even physical products (ex: Nike snickers) to people who hold a certain amount of tokens.
2) Security token
They represent a stake, share in stock or equity, voting rights, and rights to the dividend in the asset represented. Owners or holders receive part of the profit from the issuersâ or managerial actions and decisions. They are also called âinvestment tokensâ or âequity tokensâ. Their value correlates directly to the valuation of the company issuing the token. They are securities so they are regulated by the government, which makes them less âriskyâ in terms of scam potential.
An example well known security token is Blockchain Capital Token ($BCAP) Blockchain Capital is a blockchain-focused venture capital firm, they are credited for facilitating the growth of numerous companies in the industry.
3 ) Non-Fungible Token (NFT)
A non-fungible token is a digital certificate of ownership to a unique, non-replaceable item or one not tradeable with another, and a one-of-kind asset on the blockchain.
Example: The first twitter made was sold as NFT for $2.9m
4 ) Payment or Exchange Tokens
Payment and Exchange Tokens are very similar. They are used as means of payment or value exchange for specific products or services. You buy something in the network that is only buyable by a specific Token. You might exchange your tokens in other cryptocurrencies. For example they are tokens that are used to reduce fees or for engaging your community. *Exchange tokens* are mostly used to make things easy to exchange between other tokens. In certain networks, they are used to increase liquidity. (easiness to buy/sell/cash-in/cash-out)
Wrapping up
To have a general picture, itâs nice to have in mind that a token can be used for tons of reasons, and you donât need to absolutely have one token for one specific purpose. In general, engineers and entrepreneurs try to make things as easy as possible but itâs not uncommon to see one token having more than 2 functions.
Many Crypto = Many functionalities. They do different things, in different ways for different purposes. That concludes how many possibilities there are still to come.