There are now more than 12.000 cryptocurrencies and counting. The number of cryptocurrencies more than doubled from 2021 to 2022. By the end of 2021, about 1 came in every month.000 new cryptocurrencies on the market.
This is not only good news. Many new cryptocurrencies have the sole purpose of making money for their developers, which means investors need to be picky. Only a small portion of cryptocurrencies are worth learning about and potentially buying.
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Why has the number of cryptocurrencies grown so quickly? We answer this question and present the most important and influential cryptocurrencies below.
|Bitcoin (WKN:BTCEUR)||The first cryptocurrency and the largest by market capitalization.|
|Ethereum (WKN:A2YY6X)||The cryptocurrency with the first programmable blockchain that developers can use to build decentralized apps (dApps).|
|Tether (CRYPTO:USDT)||A stablecoin that follows the US dollar and is the cryptocurrency with the largest trading volume.|
|Cardano (CRYPTO:ADA)||A cryptocurrency that is more environmentally friendly due to its low energy consumption.|
|Binance Coin (CRYPTO:BNB)||The native cryptocurrency on the Binance Smart Chain, which was developed by the popular Binance exchange.|
|XRP (CRYPTO:XRP)||Ripple's native cryptocurrency and the subject of a lawsuit by the SEC alleging that it is an unregistered security.|
|Polkadot (CRYPTO:DOT)||A cryptocurrency that allows different blockchains to communicate and work with each other.|
|Solana (CRYPTO:SOL)||A cryptocurrency with a high-performance blockchain that enabled ultra-fast and low-cost transaction processing.|
|Dogecoin (CRYPTO:DOGE)||The first Memecoin, which gained great popularity.|
|Monero (CRYPTO:XMR)||A donation-based cryptocurrency that is supposed to offer absolute privacy through untraceable transactions.|
Why there are so many different cryptocurrencies?
The main reason there are so many different cryptocurrencies is that there is virtually no barrier to entry. Anyone who wants to create a cryptocurrency can do so. Even if you don't have any technical knowledge, you can hire someone to create a cryptocurrency for less than $20 at Fiverr (WKN:A2PLX6).
This was not always the case. In the first days there was only bitcoin. Then developers began to create altcoins. An altcoin is a different cryptocurrency than bitcoin. Most early altcoins were meant to improve Bitcoin's performance or serve some other purpose.
Most successful cryptocurrencies still have a purpose or goal. Developers create cryptocurrencies in hopes of using blockchain technology to solve a real-world problem.
Since it has become extremely easy to create a cryptocurrency, the amount of money involved in cryptocurrencies has attracted people trying to make the fast money. If you look at the charts of recently launched cryptocurrencies, you'll see many of them with "Elon," "Shib," or "Doge" in some form of their name.
If you're looking for a good investment in cryptocurrencies or just want to know about some notable projects, here are the cryptocurrencies that have had the biggest impact.
Bitcoin was the world's first cryptocurrency. An anonymous founder who called himself Satoshi Nakamoto started Bitcoin in 2009. It should be a decentralized digital currency, not dependent on banks or financial institutions.
Newer cryptocurrencies are more technologically advanced and offer much more efficient transactions, so Bitcoin is now mainly used as a store of value. Bitcoin has enjoyed a significant first-mover advantage, being by far the best-known and most valuable cryptocurrency.
Ethereum introduced the idea of an open source programmable blockchain. Developers can build on the Ethereum blockchain to create their own cryptocurrency tokens and decentralized apps (dApps). This has led to the creation of decentralized financial platforms (DeFi) that offer decentralized versions of traditional financial services.
Although there are now more cryptocurrencies with programmable blockchains, Ethereum was the start of it all. Its early development has helped it establish itself as the second largest cryptocurrency.
Tether is the largest stablecoin, which is a type of cryptocurrency that is based on the value of another asset. In the case of Tether, it is supposed to follow the value of the U.S. dollar, which means that one Tether usually has a value of 1 U.S. dollar.
This cryptocurrency is not without controversy. The company behind it, Tether Limited, lied about its reserves when it falsely claimed that each Tether was backed by one US dollar. Despite these and other problems, Tether is usually the cryptocurrency with the largest daily trading volume.
Cardano is an open source blockchain platform developed by one of the co-founders of Ethereum. It aims to solve a variety of problems, including making financial services and proof of identity accessible to all. Cardano's development is based on peer-reviewed research and therefore tends to progress more slowly than other projects.
Cardano was one of the first major cryptocurrencies to use proof of stake to verify transactions. This is a more energy-efficient alternative to the proof of work used by Bitcoin and many other major cryptocurrencies.
Binance Coin is the native cryptocurrency on the Binance smart chain. This blockchain platform was developed by Binance, one of the most popular crypto exchanges in the world. It quickly became a popular alternative to Ethereum, as the gas fees (transaction fees) are significantly cheaper.
Gas fees on the Binance smart chain are paid in Binance Coin, so you must own it to use this blockchain. The Binance exchange also offers discounts on trading fees for customers who own Binance Coin.
XRP is the native cryptocurrency for Ripple, a payment protocol designed for fast and low-cost transactions. It is specifically designed for international money transfers and there are hundreds of financial institutions that have partnered with Ripple to use its technology.
Ripple is known for being embroiled in a legal battle with the SEC. In late 2020, the SEC claimed that Ripple sold unregistered securities in the form of XRP. Although Ripple denied the allegations, many leading crypto exchanges have stopped trading XRP as a result.
Polkadot is a platform designed to expand interoperability between blockchains. Blockchains that connect to Polkadot can exchange any type of data or assets with each other.
Polkadot is similar to Ethereum in that it is a programmable blockchain, but it goes a step further. Developers can create their own blockchains on Polkadot. It also allows for parachains, which are parallel blockchains that work together and each have their own purpose.
Solana is a blockchain platform designed for speed and efficiency. It regularly processes thousands of transactions per second and is capable of 65.Process 000 transactions per second. Its average cost per transaction is well below one cent.
Solana uses Proof of Stake to validate transactions, but has also introduced a new method called Proof of History. This method records when transactions have taken place and is one of the keys to Solana's rapid processing.
Dogecoin is a cryptocurrency based on the meme Doge. The coin's creators started it in 2013 to poke fun at cryptocurrency speculation. It is widely considered the first Memecoin and has spawned many imitators over the years.
Although Dogecoin has no competitive advantage or unique use case, it has managed to become one of the most popular cryptocurrencies. Dogecoin and the Memecoins that followed it are proof of how important hype can be to the crypto market.
Monero is a cryptocurrency that uses privacy-friendly technologies for transactions. Making transactions anonymous and untraceable. Most cryptocurrencies have public blockchains that contain all transaction data, but with Monero, observers can't see that information.
This has made Monero very popular among privacy-conscious crypto enthusiasts, but it can also be used for criminal endeavors such as money laundering and tax evasion. The IRS has offered a hefty bounty for whoever can crack Monero.
Why cryptocurrencies are important?
Cryptocurrencies improve aspects of traditional fiat currency. They don't need a government and handle their transactions independently without financial institutions. With a cryptocurrency, people on the other side of the world can transfer money quickly, cheaply and without payment services.
Although the original purpose of cryptocurrencies was to replace traditional currencies, that's no longer their only use. Developers are always finding new ways to use cryptocurrencies and blockchain technology to solve real-world problems.
With so many cryptocurrencies to choose from, it can be hard to know where to invest. It's important that you carefully research any cryptocurrency you want to buy. When in doubt, cryptocurrency stocks and larger coins are the safest investment options.
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This article was written by Lyle Daly in English and published on 25.02.2022 on Fool.com published. It has been translated so that our German readers can join the discussion.
The Motley Fool owns and recommends Bitcoin, Ethereum and Fiverr International.
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