Lesson 4 – How many cryptocurrencies are there worldwide?

How many cryptocurrencies are there worldwide?

As of November 2023, there are around 10,000 different cryptocurrencies. Given this vast number, it’s unsurprising that even seasoned crypto experts are not familiar with all of them. Not only is the sheer quantity impressive, but also the rapid growth rate of new cryptocurrencies entering the market.

Altcoins explained

Since Bitcoin has by far the highest market capitalization and was the world’s first cryptocurrency, it is often viewed as the benchmark. Therefore, all other cryptocurrencies are referred to as “altcoins”, short for alternative cryptocurrencies.

The most significant alternative crypto project is the Ethereum network. Many development teams opt for the Ethereum network as the base for their cryptocurrency projects. According to the crypto app tracker “State of the Dapps,” around 3,000 tokens now operate on the Ethereum blockchain.

Stablecoins explained

Stablecoins maintain a stable price through automated price fixing mechanisms, aiming for minimal price fluctuations. They are usually pegged to a fiat currency* or another reference asset, stabilizing the crypto market and serving as a medium of exchange on crypto platforms.

Tether, for example, is pegged to the US dollar, where 1 Tether is generally equivalent to exactly 1 US dollar. Stablecoins, like Tether (USDT), are cryptocurrencies designed to maintain their value close to a fiat currency like the US dollar. This allows large traders, often referred to as institutional investors, to have significant amounts of money immediately and trade without delay. They eliminate the need to first convert U.S. dollars into other cryptocurrencies, allowing direct trading at a value of 1 USDT, which is equivalent to one U.S. dollar, thereby promoting liquidity and efficiency in the crypto markets.

In addition to the many Ethereum-based cryptocurrencies, a large number of independent tokens have emerged from the original Bitcoin blockchain. This was achieved by decoupling the original Bitcoin blockchain and modifying the open-source code, creating cryptocurrencies like Litecoin, Bitcoin Cash, or Bitcoin Gold.

Why are there so many different cryptocurrencies?

hout needing in-depth expertise, anyone can hire “experts” from freelancer platforms and launch their own crypto project for relatively little investment. Creating cryptocurrencies can be particularly easy and quick on existing base blockchains.

Many new crypto tokens are created with the sole intention of quick financial gain. As a result, many new projects tend to get sidelined. Ideally, developers should aim to solve real-world problems with their blockchain technology. If you are looking for a good investment in a promising altcoin, you should always thoroughly screen them beforehand. A careful market analysis, particularly DYOR (Do Your Own Research), can be helpful in assessing the viability and potential success of a crypto project, as well as in minimizing risks.

Crypto assets with a purpose beyond being merely a means of payment

Bitcoin was developed to serve as an independent alternative to traditional currencies. Numerous altcoins, however, were created to improve Bitcoin’s performance or to fulfill purposes other than currency functions. So far, many projects have gained traction, but they have not been able to challenge Bitcoin’s dominance.

Most successful cryptocurrencies therefore have a specific goal or purpose. They seek out a niche function that they can serve with their blockchain. Ethereum, for example, might not have become so successful if its primary purpose wasn’t to serve as the leading platform for decentralized applications (dApps) and smart contracts. Other examples of crypto assets with specific purposes include the following: 

1. IOTA, essentially a communication and payment protocol, is designed to serve machines, vehicles, and devices in various ways in exchanging information with each other. Its full functionality is more of a pipe dream, and is intended for the so-called “Internet of Things”. One potential application is the automotive industry, as evidenced by interest from companies like Jaguar or Volkswagen.
2. Ripple, or XRP, is an open-source protocol for a payment network, developed to assist banks in making international payments faster, cheaper, and more efficient.
3. Broadly put, Polkadot aims to enable independent blockchains to communicate or dock with each other.

*A fiat currency is a currency issued by the government or central bank of the respective country. It is not tied to the price of a commodity such as gold or silver. Its value is largely based on the public’s trust in the issuer of the currency.