Most of us have loved seeing the rise of a multitude of cryptocurrencies.
It’s an indication that people are genuinely interested in what digital currencies have to offer, and an endless landscape of opportunity for early work and investing.
But is there such a thing as “too many” cryptocurrencies? And are we at that point?
The Goals of Cryptocurrency
What do we mean by “too many” cryptocurrencies? What would be cause to call an abundance of cryptocurrencies a problem?
Ultimately, there’s a problem in the cryptocurrency world if it violates one of the main goals of the crypto community at large. Each cryptocurrency has its own set of individual goals, but overall, we’re trying to achieve:
- Public legitimacy. First, we want cryptocurrencies to be perceived as legitimate by as many people as possible. When digital coins are seen as legitimate, they’re accepted and traded more frequently. This, in turn, increases the price of digital coins, puts them in greater circulation, and eventually increases the likelihood that they could contend with major world currencies as the dominant form of global exchange.
- Accessibility. Currently, almost anyone can trade currencies from different countries using Forex markets, but trading crypto is trickier. If you have any technical expertise, you should be able to set up a cryptocurrency wallet and begin exchanging in an hour or two. However, average people tend to feel lost or confused when it comes to cryptocurrency; they find it hard to wrap their heads around how it works, and are intimidated to try and figure it out.
- Low transaction costs. One of the biggest advantages of crypto is its ability to support lower transaction costs. We’re still in the early stages of the rollout of cryptocurrencies, and transaction fees can be complicated, but eventually, this system could support much less expensive forms of exchange.
- Anonymity and security. Many people are attracted to Bitcoin and other cryptocurrencies because of their ability to support anonymity and verify secure transactions. This isn’t necessarily granted by all forms of cryptocurrency.
Long-term, we might be interested in dismantling governmental monopolies on currency control or achieving other world-changing goals, but these priorities stand as a great short-term focus.
So could an overabundance of cryptocurrencies jeopardize these goals?
The Perception of Failure
One key aspect of the “too many cryptocurrencies” problem is the perception of failure in the public eye—and how it could affect decisions to exchange crypto in the future. Consider the fact that more than 1,000 cryptocurrencies have failed. How do you think that sounds to an average person considering buying their first bit of Bitcoin? Does this inspire confidence that cryptocurrency is a long-term investment, or the way of the future? Or does it sound like an indication that cryptocurrency investing is a fad that’s gradually dying?
It should be obvious to anyone with experience that a failed cryptocurrency is no indication that cryptocurrency itself may one day be a total failure. However, the concern here is the perception of legitimacy within the general public—and this can be swayed by such measures.
Which Cryptocurrency to Buy?
If you’re new to the world of cryptocurrency, you might not know which coin to buy. Do you go with Bitcoin because it’s the most popular option, or Monero because it’s practically untraceable? To an experienced cryptocurrency user, there are valuable arguments on both sides.
However, to an average person, this question is confusing enough to give up on investing in crypto altogether. Nobody wants to invest in the wrong coin—especially if only a small handful will have any real staying power. This lowers the accessibility of crypto investing and can have a negative impact on public perception of legitimacy as well.
Blurred Lines and Public Confusion
To the average consumer, there isn’t much difference between Bitcoin, Litecoin, and even the tongue-in-cheek dogecoin. News of one may impact public perceptions of the others, and after hearing many different technical terms, users may only end up with more confusion and less interest in investing.
Advantages of Many Cryptocurrencies
It’s worth noting that while an abundance of cryptocurrencies can create issues with public perception and accessibility, there are also some advantages to having many different coins active.
This creates friendly competition, putting pressure on existing developers to innovate. It presents many different options with different strengths and weaknesses.
It also increases the likelihood that we’ll eventually get to the “perfect” coin, since we’ll see thousands of different experiments playing out in real time. Even the fact that so many cryptocurrencies exist could be convincing people that crypto is a topic worth exploring.
The Bottom Line
So what’s the bottom line here? An excessive number of cryptocurrencies and an endless rollout of ICOs can be problematic for the image of the crypto world.
However, it’s hard to tell exactly what that number is, or whether the negatives outweigh the positives. For the time being, we’re in an experimental and fast-growing phase of cryptocurrency development, and we’re all along for the ride.