A quick check on any cryptocurrency exchange can tell you there are now dozens of different mainstream digital coins available and hundreds of other aspiring coins that don’t get much attention. Is there now an overabundance of cryptocurrencies? Is there such a thing as too many cryptocurrencies, and have we crossed that threshold?
The Benefits of More Cryptocurrencies
Everyone has heard of Bitcoin by now, but a smaller number of people are checking in on Ethereum consistently – and even fewer people are actively monitoring the Evmos price.
The fact is, our markets are flooded with dynamic and interesting digital currencies. And in some ways, that’s a good thing.
Diverse ideas. New cryptocurrencies are a sign of newly emerging ideas. When crypto developers identify gaps and shortfalls with existing currencies, they often decide to make their own. They use new systems and new protocols to introduce new advantages to consumers interested in trading. This marketplace of diverse ideas is an opportunity for us to discover the next great leap forward in the crypto space – even if it also leads to a multitude of fizzling failures.
Fresh challengers. Just because a cryptocurrency is older and more established doesn’t mean it’s the best. Bitcoin, despite being a household name, isn’t very energy efficient – and it’s nowhere near as private as something like Monero. It’s good to have fresh challengers to shake up the status quo, if for no other reason than to reveal the weaknesses and downsides of long-established coins. Otherwise, we could be blinded to these negatives, with no real path for improvement.
Competition and innovation. Competition breeds innovation. In a marketplace rife with competitors, only the most ambitious and imaginative players survive. Accordingly, when the crypto market is flooded with different coins, crypto engineers are forced to come up with truly novel ideas and systems. If we’re hoping to build and support the best cryptocurrencies possible, high levels of competition are a practical prerequisite.
Public attention and overall hype. Another benefit of large numbers of new cryptocurrencies is increased public attention and overall hype for crypto. Every emerging coin that makes the news further legitimizes the very concept of cryptocurrency – and could potentially bring in more investors and consumers. Crypto requires widespread public adoption to succeed, so every step toward legitimizing digital currencies is a step in the right direction.
Investment opportunities. There’s a long list of people who became millionaires by investing in crypto. There are also plenty of people who went bankrupt chasing similar gains. Regardless of whether you fall into one of these camps or whether you’re somewhere in the middle, there’s no denying that each new coin that enters the market is a fresh investment opportunity, full of potential risks and rewards for interested consumers.
The Problems With Too Many Cryptocurrencies
Of course, there are some problems with the potential overabundance of cryptocurrencies we have today. Namely:
Concept dilution and consumer fatigue. While new coins do have the power to legitimize crypto in the eyes of the public, they also have the ability to dilute the market. With an endless parade of new coins, amateur investors and newcomers may begin to feel overwhelmed and out of the loop, effectively closing them out of this promising fintech development.
Scams, failures, and negative press. Cryptocurrency scams are unfortunately common, as are failures of new coins. Not every coin can be successful, so whenever bad news breaks, it blemishes the reputation of crypto overall (however slightly). These blemishes can add up, ultimately creating complications for crypto optimists and causing adoption rates to slow.
Volatility and risk. Crypto markets are already notoriously volatile and somewhat unstable. The tumultuous rises and falls of new coins don’t help matters. Investing in new coins is risky, especially if you don’t have much historical data or technical knowledge. This can cause problems for new and seasoned investors alike.
Community splintering. We also need to be wary of community splintering. If there are 1 million people interested in crypto, but 1,000 different coins in equal standing, we can expect an average of 1,000 active traders for each coin in existence. Obviously, this analogy is exaggerated to prove the point; but it’s true that an excessive number of small, unimpressive coins could pull users away from bigger, more prominent ones, thus impeding overall momentum.
So are there too many cryptocurrencies floating around out there? Or do we have some room for more?
While there are some downsides to excessive (and growing) numbers of cryptocurrencies, the benefits are impressive – and seasoned crypto enthusiasts know that low-value and suspicious coins can be easily ignored. For the sake of innovation and advancement, we should continue welcoming in new crypto developers and interesting coin projects – as long as we’re prepared to vet them with proper due diligence.
Featured image credit: Unsplash
