Why are There so Many Different Cryptocurrencies and what Function doe

Why are There so Many Different Cryptocurrencies and what Function does Each One Serve?

Since the creation of bitcoin, the first cryptocurrency, in 2009, the crypto economy has evolved exponentially. Currently, there are more than 5,000 digital currencies, which go far beyond the most well-known cryptocurrencies, giving rise to new crypto assets, such as stablecoins or altcoins. The level of acceptance of crypto is increasing. According to data from Coinbase, 4 out of 5 adults are familiar with this asset class in countries such as Spain, France, Italy, Germany, and England.

Cryptocurrencies have strong potential as a payment method due to the various characteristics they could offer, such as globality, security, decentralization, immediacy, and fraud mitigation. From Empirex Capital we analyze cryptocurrencies and explain the reason behind the great diversity of cryptocurrencies and their investment attractiveness they have. For Empirex Capital, not all cryptocurrencies are the same, most have been designed to solve specific problems or for different purposes. Bitcoin is known as the original cryptocurrency and is now widely accepted as a store of value, much like traditional commodities like gold. However, unlike physical gold, Bitcoin can be used to make payments, can be easily divided into very small parts, and exists virtually, meaning it does not require expensive storage methods.

In this sense, the fact that some cryptos are designed from their technology and operating logic for the transfer of value stands out.

And it is that some cryptocurrencies allow faster payments, while others play a fundamental role in various forms of value transfer, such as allowing people to borrow, lend, trade or play video games, all without a centralized intermediary. . The net effect of all these currencies is that value can now be transferred instantly around the world, cryptocurrencies remove many of the friction points in the process of moving value.

From a financial point of view, this variety of technological proposals allows investment portfolios to be diversified. More risk-averse customers can invest in assets such as stablecoins, many of which now generate a return far above what can be found in a bank savings account. Those willing to accept more risk can invest in more advanced cryptocurrencies that offer potentially higher returns.

The other side of the coin is the use of cryptocurrencies as an exchange token in transactions, that is, their utility in the so-called real economy. For our part, we hope that further progress will be made in the coming years. It is very likely that cryptocurrencies will increasingly take over what is currently considered Finance 1.0, removing the frictions and pain points currently associated with the transfer of value.

Created on 18th Apr 2022