- September 17, 2021
- Posted by: admin
- Category: Blog, Media
In recent years, the face of cryptocurrency has undergone many changes. Some bringing about great innovation while others leave a bitter aftertaste. Despite all the naysayers and “winters” that cryptocurrencies have been through, it’s still going strong with hundreds of new coins and tokens being created each week. So what makes these tokens different? how have they evolved? and most importantly, what is the future of cryptocurrency?
In order to understand the future, we must first acknowledge the past.
The creation of Bitcoin (BTC) was formed during the depth of the 2008 financial crisis by a pseudonymous person called Satoshi Nakamoto. He described Bitcoin as a “Peer-to-peer electronic cash system” and laid out the foundation of BTC to be a decentralized, digital currency. What this means is that there is no one administrator but a ledger that anyone can access and store on their PC. The value of BTC back then was largely arbitrary, with people negotiating goods and services in exchange for BTC. From here we have our first wave of crypto “evolution” – Etherium (ETH) and Litecoin (LTC). These coins strive to increase the utility in the cryptocurrency that is Bitcoin by improving its code and blockchain, allowing it to be adapted for various uses. This in return drove the value of Bitcoin higher as more and more businesses accept BTC as a form of payment — making it the most expensive cryptocurrency to date.
These coins were created around the core fundamental of disrupting the major power that is centralized finance. By removing the monopoly that is FIAT; BTC, ETH, and LTC aim to facilitate financial transactions at its core value — unaltered by any central figure. In addition, ETH also comes with its own programming language running on its own blockchain, allowing creators to run and build their own decentralized applications and contracts.
This leads us to our next subject, meme coins. As attention on major cryptocurrencies such as BTC and ETH continues to rise and plateau, newer coins started popping up in recent years. Enter the meme coin. Meme coins are cryptocurrencies that enjoy mass publicity and attention, mostly through the use of key opinion leaders such as celebrities and influencers. This method has proven to be tremendously effective as they leverage the popularity of said influencers to drive promotion and as a result, enjoy explosive growth in a relatively short manner of time. One such token is DOGE coin, made immensely popular by Elon Musk, it was originally created as a parody token and has no actual real uses apart from tipping on Reddit.
It is not all flowers and rainbows, however, as meme coins, though popular, serve absolutely no real-world purpose. Much unlike its bigger cousin; BTC, ETH, etc. which were created as an answer to real-world issues. Memecoins tend to be plagued with numerous loopholes ranging from unsound business models to shaky tokenomics which might end up losing lots of investors’ monies. Most of these coins were created for the sole purpose of driving crypto prices up in a bid for investors to cash out shortly after a rise, their low entry prices also appeal to less wealthy investors, allowing more people to take the gamble. Many of these tokens die out in a few years as investors get more educated and ditch the hyperbole which is the meme coin.
So what of the future? Are there only 2 major types of cryptocurrencies?
Short answer, no. Crypto developers are starting to go back to their roots and focus on addressing issues rather than create them. These tokens are dubbed “utility tokens” with core fundamentals similar to that of Bitcoin, ETH, etc. — to satisfy real-world needs. Utility tokens are skewed towards providing investors access to a future product/service and are commonly linked to a business or product that serves a certain niche in the community. E.g, if you buy CANDY token, you can use it to book travel goods and services while earning rewards. Creating such a token is no easy task, as developers have to be well-versed in both cryptocurrency and business, failing to do so will result in a fairly short lifespan for the token.
A utility token, however, encompasses the best of both worlds. Its contract has to be rock-solid such as that major cryptocurrency such as Bitcoin in order to facilitate transactions without flaws on its product/service as well as be easily marketable such that it can attract a large number of users to its product/service. Developers have to balance their budget and manage their investors as the process from ideation to creation to fruition of a product/service can take a very long time, this calls for a different type of investor that recognizes strong core values and growth potential in a given token. Apart from that, utility tokens tend to begin with an Initial Coin Offering (ICO), with starting token prices comparable to that of meme coins, this allows investors to have the flexibility of purchasing small or large amounts of tokens, greatly increasing its appeal.
That being said, it is apparent that cryptocurrency has come a long way and is still ever-evolving as blockchain technology improves and newer ideas are birthed; and with more people learning about crypto, tokens with fleeting foundations will soon lose their appeal as a crypto’s long-term growth and survivability is ultimately determined by its utility and ease of use, not by a celebrity’s social media post.