4. The Multiverse of Cryptos
Updated: Jul 5, 2021
In reality, there are as many cryptocurrencies as stars in the night sky. They are simple to create from a coding standpoint because you can almost copy/paste the code from bitcoin or any other crypto. Some of them were made as a joke like Dogecoin, while others were made as an improvement to their predecessors like Ethereum. Understanding why so many exist is similar to why so many search engines exist. Competition.
In every market, somebody will look at a new invention and think that they can do it better. In 2015, Vitalik Buterin created the Ethereum Blockchain and the Ether Cryptocurrency as an improvement to Bitcoin. This new blockchain has a third layer to it called smart contracts. Smart contracts allow an individual to not only record financial transactions on the blockchain, but also lines of code. Instead of needing a large server of computers to run a line of code, Ethereum introduced the ability to run a software on all the computers that mine Ether (for a very small fee of course). With this, tokens were born as cryptocurrencies that operate on the blockchain of another cryptocurrency.
While there are numerous blockchains similar to ethereum that have their own way of verifying transactions, like Vancouver's Dapper Labs which developed OnFlow (truly incredible innovation btw), there are none as large as Ethereum. On the Ethereum blockchain, there are thousands of tokens that do things such as query data systems similar to google, create asset based borrowing similar to a mortgage, and provide a storage and conversion platform for money similar to foreign exchange and banks but with both crypto and foreign currencies. These are just a few of my favourite innovative companies, each with their own associated token that you can purchase.
To learn about the difference between a cryptocurrency and a token, stay tuned for my next blog post Cryptos vs. Tokens.