Altcoins Have A Total of 5,563 Coins,
that’s the number of cryptocurrencies in existence as of June 2020. This includes privately-issued tokens and government-issued ones, mammoths like Bitcoin and unknown offerings that are largely unlisted, decade-old veterans of the industry, and those launched last week.
Less than two years ago the number was 1600. This means that the number of cryptocurrencies has more than tripled in a two-year period. If this growth rate keeps up, we can expect almost 10,000 tokens to exist by 2022 and beyond.
But what about 2030 or 2050? How many tokens will exist then? Cryptocurrency overall is becoming a more real part of our daily lives but not all cryptocurrencies receive this newfound attention. In fact, most people can only name a few, like Bitcoin or Litecoin.
It is unlikely that this will change in the next decade. Instead, it can be expected that a small handful of tokens will dominate the industry and many others will die off with time. But how many tokens will be included in this handful and how many will be left on the wayside. The simple answer is that we cannot know definitively but we can make some predictions based on a number of factors.
A Slowdown in Token Creation
As previously stated, more tokens are being created than ever before and there is a reason for this. Cryptocurrency has gone from a novel internet concept to being a hot topic in the global financial sector. More active cryptocurrency wallets exist than ever before and countries such as France and China are piloting their own digital currencies.
When a concept attains this level of prominence, especially in the financial world, it is inevitable that many people will want to get in on the action. This can be linked to the rise in interest in cryptocurrency trading, blockchain innovations, and, of course, token creation.
Many of the newly-created tokens are private affairs trying to recreate the success of Bitcoin and others. As the industry matures, however, it is likely that the dominant players will be set in stone. Also, the market will eventually become saturated enough that it will not be as profitable to create new tokens.
Think of the early internet before the dot com bubble burst. Everyone was creating and investing in ‘dot com’ companies at an excessive rate as it was the gold rush of the late 20th century. The market has since cooled and it can be expected that cryptocurrency will go through the same evolution.
Token usage and adoption
Besides market oversaturation, another factor that will slow down the creation of new tokens and determine which tokens will continue to exist is usage and adoption.
For every token like zCash or Litecoin that has a healthy community of users, there are hundreds of tokens that are barely used by anyone other than its creators. And if new tokens are hardly being used, there will be little point to creating new ones. Then, as the number of new tokens declines, existing ones with no users will fall out of circulation altogether.
Then there is the matter of adoption. It is much easier for a token to foster a healthy userbase if it is widely adopted. Take Bitcoin, for example, which is now being accepted for everything from tax returns in certain jurisdictions to retail payments from businesses such as AT&T and KFC. With this number of avenues available for spending Bitcoin, it is easier for cryptocurrency users to gravitate towards it.
Smaller cryptocurrencies, however, might not be able to drum up this much support and over time, might simply fizzle out of existence. Even as cryptocurrency adoption takes root, mainstream establishments are more likely to accept already-prominent cryptocurrencies as opposed to less-known ones.
While there are a number of cryptocurrencies that are at the top of the industry, there is no guarantee that they will always retain their position. One of the factors that could change this is the technical merits, especially of the blockchains behind the tokens.
Certain blockchains, such as the Bitcoin blockchain, struggle with scalability and there is concern that the blockchain cannot support a significant increase in users, lest transactions are slowed down.
There is also the problem of token supply. Most prominent commercial cryptocurrencies have limited supply and should cryptocurrency reach the heights of adoption that it is targeting, there might not be enough to go around. For example, the recent announcement that PayPal would be supporting cryptocurrency transactions brought this to light.
Theoretically, if every one of PayPal’s 325 million users was to receive an equal amount from all the Bitcoin in existence, there would be less than one Bitcoin for each person. If this technical issue is not resolved for major cryptos, it is likely that other tokens will take their place in the event of mass adoption.
While considering the future of cryptocurrency and which ones will survive, it is important to note that not all cryptocurrencies are created to survive. Out of the thousands of tokens in existence, some are created as outright scams. There is money to be made in the cryptocurrency industry and some have chosen to create cryptocurrencies for this purpose.
This usually involves pump-and-dump schemes in which tokens are created and their value is artificially inflated, after which they are sold to unsuspecting victims. These were never intended to last for long and once their purpose is served, they are rendered worthless and are taken out of circulation.
The cryptocurrency industry is largely unregulated but this is changing. Around the world, laws are being put in place to govern the cryptocurrency industry and this could go on to affect how many cryptocurrencies are allowed to survive.
Cryptocurrencies, by their very nature, do not require government approval to exist, but the environment that is created by government legislature could stifle the use of cryptocurrency and affect how accepted they are in mainstream society. If certain cryptocurrencies see pushback from the government, it could determine their possible survival.
There is no way to know for certain how many cryptocurrencies stand a chance of survival into the future. What we do know is that the ones that have a high enough innovation, a string enough userbase, and favorable government regulation have the best chance of survival in the decades to come.
Image via Shutterstock, Writer Tokoni Uti