Why are there so many Cryptocurrencies?

Have you ever wondered why we have so many cryptocurrencies ? As of March 2022, there are 18,465 cryptocurrencies in existence. This is a pretty big number. So let’s talk about why we have so many cryptocurrencies.

There are three major reasons for having so many cryptocurrencies –

1. Protocol
2. Technology
3. Application

Let’s talk about each of them one by one.

1. Protocol – What are protocols ? Protocols are rules. Like in internet technology, we have HTTP (Hyper Text Transfer Protocol), TCP (Transmission Control Protocol) etc. In the same way, in the Blockchain world, every cryptocurrency has its own protocol. These protocols decide the following things, like how peers on the blockchain network will communicate with each other, how authentication over the network takes place, how mining will occur and how much reward miners will get etc. Each and every one has its own set of protocols, like in the case of bitcoin transactions, the number of transactions per second is around 5 ( the number may vary a bit) while in the case of Ethereum, it is 30 transactions. All these things are being decided by protocols.
2. Technology – Let us understand this with the help of an example. If we talk about Bitcoin, it uses the public blockchain for cryptocurrency transactions, while if we talk about XRP (Ripple), it uses a centralized server for cryptocurrency transactions. So, bitcoin and XRP are both crypto currencies, but both of them use different types of technology in order to operate.
3. Application – Every cryptocurrency has its own application and uses. If we talk about bitcoin, it is mainly used for transactions. So, if you want to buy or sell something, you can use bitcoin. But if we talk about Ethereum, it is not just used for transactions but it is also used for writing programs on the Blockchain, i.e. smart contracts.

So, that’s why we have so many cryptocurrencies.

Let me know what this blog made you think in the comment section.

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