How Many of Today’s Cryptocurrencies Will Still Exist in 2040?
A few days ago, I was listening to episode 597 of the Bad Crypto Podcast and it was rather insightful listening to how Joel Comm and his co-host Travis Wright randomly picked cryptocurrencies from listings on CoinGecko and evaluated them on the spot using a variety of techniques and standards.
With just a cursory glance at key data points, they assessed the cryptocurrency’s market cap, years in business, professionalism of the website, underlying business model, blockchain capabilities, leadership team, major engagers, and historic fluctuation. It’s a lot of data, and once combined, can tell a pretty good story about the coin’s past and future.
The last I checked there were 13,660 different coins listed on CoinGecko, and from a newbie’s perspective it’s incredibly challenging to weed through the hype and make sense out of everything that’s taking place.
Before I continue, let me make it clear; nothing in this article is to be taken as financial advice. I am simply stating my observations and experiences. Past performance is not a guarantee of future return, nor is it indicative of future performance. Investing involves risk and the investment will fluctuate over time, and you may gain or lose money. As with all financial decisions, you should consult a licensed professional.
What’s Different About Crypto?
Cryptocurrency is the next evolution of currency and mediums of exchange in our world. We’ve already progressed from barter systems to tradeable certificates of value, to printed notes, to currency that’s based on the full faith and credit of governments, and to electronic manifestations of these notes and currencies.
What’s different about cryptocurrencies of course is they represent the privatization of currency, and thus they often struggle to compete with traditional government-backed currency in the everyday kinds of commerce. It’s not easy to transition a global or even a nation-state’s economy and commerce from a traditional national or regional currency to cryptocurrency, which has been very apparent in El Salvador.
That’s why cryptocurrencies still only fill a relatively tiny niche. But still only being a tiny niche is because of many more things than just that. They are still too geeky, too complicated, too hackable, too confusing, and too risky for the average person on the street. In short, they’re not user-friendly.
From a usability standpoint, cash is easy to understand. The denominations are clearly printed on the bills, it’s widely accepted, you don’t need a device like a phone or a computer to work with it, and even a third-grader can understand the basic elements of a transaction. But the crypto universe has a long way to go to make its coins and tokens as stupidly simple as cash.
For example, most first-time users have conventional payment systems in mind when making a transaction, similar to online banking. They instantly assume transactions have fixed fees, are reversible, and can easily be canceled, none of which are true in reality.
Most are confused about the terminology and the fundamental building blocks of crypto, including blockchain, public-key cryptography, recovery mechanisms, how to perform a transaction, and even the role of a wallet.
So far, crypto has managed to carve out a niche as an alternative investment asset. They can also be used for metaverse-based commerce (e.g., for NFTs), smart contracts, and DeFi engagement. Some retailers in the physical world are willing to accept them, but usually, as a way to enhance their brand or to entice a specific customer demographic. Outside of the metaverse, our economies still need both options.
Why So Many?
We’re still in the early days of cryptocurrency, and there’s a lot of weeding out that will happen. Cryptocurrencies are plentiful because they’re new, trendy, easy to create, and relatively unregulated – especially at the global level.
It’s also important to note that there are many different categories or types of cryptocurrencies.
For example, some are intended to serve as a global currency for mainstream transactions and investments. Within that category, we also have stablecoins, cryptocurrencies that are tied to a fixed asset (like a national currency or a commodity), which theoretically protects them and their holders from extreme price fluctuations.
Other cryptocurrencies are “project tokens” tied to specific DeFi platforms to provide ownership stakes and as a tool for governance within those spaces.
Still, others are considered “meme coins,” designed and marketed as trendy, serving primarily as speculative investments.
Moving forward, all of these types of cryptocurrencies will continue to be offered, but many individual ones will fail, putting a damper on the impulse to start new ones.
How to Choose
Here are some of the common approaches people will use to evaluate a cryptocurrency, regardless of the category:
- Check the market listing and review data points such as Project Ranking, Market Cap, Price History, Trading Volume, Liquidity, Circulation Supply, Total Supply, Today’s Price.
- Visit the Website for information about who’s on the Team (founders, executives, developers, partners, advisors), Roadmap, Vision, Investors, and Tokenomics.
- Assess the cryptocurrency’s White Paper and review its information related to Objectives, Details on open-source code, Target Demographic, Roadmap, Tokenomics, and Distribution Scheme.
- Review the cryptocurrency’s social media profiles and commentary (especially on Twitter, Telegram, Reddit, and LinkedIn) to get a feel for the experience.
- Understand the utility and use case.
- Check for scam alerts.
- Assess the competing cryptocurrencies in that space.
Learning from History
In fact, roughly 1,000 cryptocurrencies have failed or were ended by their owners, including OneCoin, BitConnect, GetGems, SpaceBIT, and The DAO.
Why did they fail? Some were publicity stunts. Others were the victim of unregulated, Wild West markets at their worst, with massive fluctuations that caused investors to lose confidence. Others were mismanaged, and still, others were done in by hacker thieves.
The breathtaking fluctuations in the significant global cryptocurrencies seem to be getting more under control and are less concerning to investors. But some experts say that a broader economic crash, possibly due to geopolitical events, could bring many more of them down. At this time, 75 cryptocurrencies are worth more than $1 billion.
How Many Cryptocurrencies Do We Need?
In the future, we’ll need as many types of cryptocurrencies as it takes to satisfy all the purposes for cryptocurrencies, and we’re still a long way from all of the potential uses. For example, some cryptos may carve out a unique niche for specialty insurance, financing land on Mars, or funding eldercare, medical tourism, childcare, or barter networks.
Additionally, we should expect limited-time business-specific cryptos to fund startups during their initial growth phases.
We will also see a number of cryptocurrencies that will both complement and replace national currencies. These will be designed to support specific geographical constituencies.
Token-based cryptocurrencies will continue to be developed to match metaverse and other DeFi experiences, the number of which will naturally consolidate over time reflecting normal market forces.
There will always be room for meme-type, hyper-speculative cryptocurrencies offered in an appropriately regulated environment.
To the extent that stablecoins are tied to a national hard currency, they’ll be offered primarily as investment options. Those that are based on a global commodity, for example, gold or possibly a globally accepted national currency like the Euro or U.S. Dollar, might serve as a (not “the”) global currency.
And in the last category, the truly global cryptocurrencies are used for investment and for international commerce. In all likelihood, we’ll see just 3-4 win out in the end.
Keep in mind, that today’s use of widely accepted credit cards emerged in the 1950s, and today consumers and market forces have caused us to settle on just a handful of companies – Visa, Mastercard, Discover, AmEx, etc. The same will happen with global transactional cryptocurrency options. The strongest global cryptocurrencies will squeeze out the rest as merchants choose which ones to accept.