Why Are There So Many Different Cryptocurrencies?

During my professional career we publishing software for graphic designers who wished to put barcodes in their graphics such as the barcode on the back of a paperback book or grocery box. In the process, we became experts at printing all of the various barcode types. Barcodes come in many different forms. Think of different barcode types the way you would think about different languages. If you print Code 39 and someone’s scanner reads Code 39 they understand each another. If you are shipping groceries in cartons you’ll need Interleaved 2 of 5. If you want to distribute coupons, you’ll need a GTIN number. The list goes on and on. There are hundreds of barcode types and they have all been optimized to do something well whether it be easily readable, large data content or small image. Each has been optimized to do something well. The same can be said for cryptocurrencies.

Each cryptocurrency has been optimized to do something well whether it be fast transactions, handling large values, being ultra-secure and so forth. As I read through the various schemes that have been designed in the cryptocurrency raison d’être some strategies are more compelling than others. At this early stage of development, it is difficult to see which problem being solved is the problem that makes the cryptocurrency that solves that problem famous. It’s worth taking a look at a few different strategies to see which resonate. For example, a couple of years ago a new crypto appeared called Electroneum.

Electroneum drew attention to the fact that cryptocurrency was a huge drain of energy. I read one statistic that said that all Bitcoin miners are now using the equivalent energy of the country of Denmark. In this day and age that’s not good. Electroneum was designed so that it could reside on a person’s smartphone, and, if there were enough smartphones with Electroneum, the app would use the smartphone in the background to mine Electroneum. By sharing the load with millions of smartphones the mining function could be done without an additional drain on precious resources. That sounded like a sensible approach to solving a real problem. Unfortunately, Electroneum, two years later, is still struggling to find a footing in the crypto space. Only one exchange that I know of actually trades Electroneum.

171106 Frontier Days

Screen Shot 2017-10-18 at 8.45.27 PMWhat’s happening in the world of cryptocurrencies reminds me of the time when the Internet was just becoming known and getting popular.  People were scrambling to understand the Internet, to learn what a browser was, why you would call a web address a URL and other such new phenomena.  You could register a domain name for $9.95 and they were ALL available. “They would be worth good money some day,” someone told me.  Anyone could have registered macdonalds.com, coupon.com, or ford.com if they’d had a mind to but no one could think of what one would do with them, and it wasn’t clear that they would be worth money then.

When the use of blockchain technology and cryptocurrencies spread through our society, there will be tokens or cryptocurrencies for everything.  There’s a good chance that half of all the cryptocurrencies out there already will be valuable at some time in the near future.  We’re at the beginning of virtual money, and as currencies come into being, with a little imagination, all you have to do is put out your hand and grab some.

I founded and managed a small software company for many years that specialized in barcode.  I learned a great deal about barcode during those years.  Barcodes are like languages in that if you print a certain barcode type and your scanner is capable of reading that barcode type you will be understood.  The reasons for different types of barcodes are many.  One barcode type might be capable of being printed smaller than another.  There is a barcode for really bad printers.  There is a barcode just for pharmaceuticals.  There is a barcode that can hold two thousand characters.  There is a barcode just for military purposes.  So, too, are there now cryptocurrencies with special features and applications.  The list is already enormous and keeps growing.  We already need a dictionary of cryptocurrencies to understand the universe of virtual money.

There is no doubt some will be enormously popular and some will disappear.  The world is evolving quickly.  No doubt fortunes will be made and lost during this process.