To date 1170 Crypto-Currency is represented on Coinmarketcap.com. In nine of them market capitalization exceeds $1 billion and in 377 – $1 million. This naturally raises the following questions:
- Do the world need all these crypto-currencies?
- The currency, which has the largest market capitalization, will survive, while the rest will disappear?
- Is it possible that a new currency destroys all the others?
- Can all these currencies coexist peacefully? (On the last point, it seems, no one believes).
The top-10 is the Crypto-currency by market capitalization on October 16, 2017. Source: Coinmarketcap.com
To answer these questions, it is quite natural to seek a familiar analogue, with which one can compare crypto-currencies. For example, fiat currencies or noble metal.
Are crypto-currencies similar to the fiat currency?
There are 164 fiat currencies registered in the world. However, when comparing them with crypto-currencies, we see significant differences: the fiat currencies are artificially limited by the borders of the country and monetary policy. If these borders disappear or (as in the case of the European Union), several countries decide to use a unified currency, the total number of currencies will decrease.
Are crypto-currencies similar to noble metal?
What about a comparison of crypto-currencies with noble metal? Eventually, the principle of supply and demand, the underlying crypto-currency and noble metal, is essentially the same – there is a demand for a specific element (gold, silver, platinum, nickel, lithium, etc.) and supply, provided by extraction and based on a price that exceeds the costs of discovery, excavation and processing of this material.
Nevertheless, between noble metal and crypto-currencies there is a weighty difference: theoretically, there can be one crypto currency that can perform all functions. In this case, you can’t have one metal that will have the properties of all other metals (at least, to date). Thus (again, in theory), crypto-currencies are able to merge, but metals not.
What else can we compare cryptocurrency?
Are the crypto-currencies similar to the network protocols?
There are in the world hundreds of different network protocols serving different communication needs at different levels. Some of them are responsible for basic movement, others for reliable data transfer, and others for applications. Although some protocols can be used for tasks for which they are not intended (for example, HTTP for streaming video), in most cases this will be suboptimal. At the same time, the ability to choose the right protocol is an extremely useful and necessary thing.
Like network protocols, different crypto-currencies are focused on different things: some at speed, others with privacy, and others with extensibility and scalability. Again, like network protocols, crypto-currencies are focused on different “levels up and down the stack” – some lightweight, others – more functional and flexible. In addition, often they can’t be updated to version 2/3/4, etc., because they use a huge number of devices, and that the network will be not broken, all of them should have been updated.
Are the Crypto-currencies similar to applications?
What if we compare crypto-currencies with software applications? This is not such a wild comparison, as it may seem at first glance. Each application is designed to perform specific tasks, the same applies to tokens.
There are many applications with similar functionality – some are better, some are worse. There are also several cryptocurrency or token-based smart contracts that do the same thing – some better than others. Some are developed for a particular region, others are integrated with other systems that are of practical value to a specific group of users. So, perhaps, crypto-currencies are akin to applications. And if this is so, then the presence of thousands and millions of crypto-currencies can be quite normal. As of March 2017, the Apple Store registered 2.2 million applications, on Google Play – 2.8 million.
Although crypto-currencies have characteristics of fiat money, noble metals, network protocols and applications, they have the greatest similarity with the latter two.
If you look at this point of view, the existence of a large number of protocols competing in the space of payments, developing and merging, is justified. Increasing the number of tokens also makes sense if you think of them as equivalents of applications.