Don’t just say bitcoin to a cryptocoin. There are more than a hundred digital coins that use the blockchain. Some are shameless bitcoin copies, others are their own creatures. We dive into the digital economy and investigate the difference.
Blockchain and bitcoin are still synonymous for many people. Anyone who follows the blockchain technology will know that the potential outside the financial sector is immense. The future for secure digital logistics, smart contracts and digital equities is bright. However, the blockchain was born as the foundation of the digital bitcoin coin coin. It is therefore not surprising that there are many digital coins in existence today. Bitcoin you know, Ethereum probably also. Litecoin and Ripple are already a lot less well-known. Did you know that (at the time of writing) there are 209 different digital coins with a market capitalisation (total value of the coins in circulation) of more than ten million dollars? If we take one million dollars as the lower limit, then we already count 411 different cryptocoins. A person would have less headache.
Coins that are less well known than the biggest names go through life under the name’ altcoins’. They want to offer an alternative to the established values and often have some small assets in their hands to distinguish themselves from the competition. Think of faster or safer transactions, or a very specific purpose for which you can use them. However, all coins have one thing in common: they are based on a blockchain (see box). A blockchain has the property that it is transparent, yet safe. New coins are created when so-called miners add new information to the blockchain. In this way they are rewarded for their work. As a result, a limited number of digital coins are in circulation of any cryptomint. It is not the case that suddenly ten thousand bitcoins can’ contribute’ to a person’s life.
Although digital coins are not tangible, they are scarce. That makes them economically interesting. Inherent has no cryptomint value at all. Bitcoin was only able to break through because people were prepared to exchange the digital currencies for dollars and euros. Start-ups like Coinbase jumped on those trolleys and rolled out digital fairs where people can exchange cryptom coins for classic money. This automatically creates an exchange rate based on supply and demand.
This immediately explains the existence of hundreds of different cryptocoins. As long as there is a marketplace somewhere where someone is willing to exchange a given currency into dollars or euros, you can attribute a value to the currency. The system is completely free from regulation, so that the only restriction on the creation of new cryptocoin is the interest of investors.