Cryptocurrencies: why there are so many of them?

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On coinmarketcap.com, there are approximately 13,506 different cryptocurrencies listed. There are 180 fiat currencies in circulation around the world, all of which are issued by governments and recognized by the UN. Thirteen years ago, there was just one cryptocurrency, Bitcoin, which had the goal of decentralizing money and removing it from the control of central banks while also establishing a public accounting system for exchange. Bitcoin was the first blockchain cryptocurrency, and it is still the most popular. Since then, a slew of additional cryptocurrencies have developed, each attempting to use blockchain technology to solve a different problem. A handful of them features new functionality that is intended to make up for some of the shortcomings of previous cryptocurrency versions. The majority of them are essentially speculative instruments with no intrinsic value or a distinct use case.

Many of the new cryptocurrencies attempt to develop their own proprietary underlying blockchain technology in order to address issues such as proof of work energy consumption, transaction speed, transaction volume, and gas fees, among others. Others attempt to be the tokens that innovate in areas of finance such as data storage, exchange, privacy, security, machine learning, yield, smart contracts, non-fungible tokens, payment processing, social networks, supply chain logistics, digital content ownership, or physical ownership, amongst other things. The blockchain technology that underpins cryptocurrencies allows developers the ability to create a variety of cryptocurrencies with a variety of use cases and purposes.

The majority of cryptocurrencies are used purely as exchange currencies and for trade purposes. They can be used as a store of value and a hedge against the depreciation of fiat currencies, as well as for blockchain transactions and in-person purchases in the real world. Traditional currency usage is represented by many of the first and most well-known of these types of currencies.

Others have a utility role and are a part of more extensive blockchain architecture. With its Virtual Machine, Ethereum, for example, enables alternative cryptocurrencies to be constructed and launched on top of its blockchain networks, allowing them to compete with Bitcoin. Ether is a cryptocurrency that is utilized on the Ethereum blockchain platform. Bitcoin is a cryptocurrency that runs on its own blockchain that is completely self-contained. Bitcoin was the first cryptocurrency to use blockchain technology, Ethereum was the first cryptocurrency to use a blockchain development platform, and all other cryptocurrencies are new versions of these technologies in some form or another.

Satoshi Nakamoto invented blockchain technology, which he then used to the development of Bitcoin. Other developers rapidly realized that they could use the same blockchain technology to establish their own platforms for a variety of other applications. Charlie Lee invented Litecoin, which is widely regarded as one of the earliest alternative currencies. Many others would follow, some of which are inventive with new concepts based on blockchain technology, while others are simply constructed on top of existing blockchains, and this would continue till today.

To be used as prizes within metaverse worlds, to purchase crypto real estate and utility NFTs within virtual worlds, and for in-world transactions, new coins have been created and are now available for usage. Many software developers are enthusiastic about cryptocurrency creation.

Forking current blockchains results in the creation of new cryptocurrencies that can be utilized on the new blockchain. If different users have differing perspectives on the transaction history, forks occur in the transaction history and cause a split in the transaction history. After causing a divergence in the existing transaction history, these forks result in the creation of new versions of an existing cryptocurrency.