Cryptocurrencies are a new technology. We all know that new technology can come and go fast. Especially with crypto, which has a lot of issues to solve before they can become mainstream. Can we overcome those issues and will cryptocurrencies survive if they don’t solve them?
Yes, cryptocurrencies will survive. At least the concept of cryptocurrencies, digital money, will survive. The trend is for years to digitalize everything we can. Digital currencies are perfect for that environment.
Like every market, cryptocurrencies compete against each other. Also, most crypto projects are open source to get the trust of the users. They are transparent. Developers can take concepts and implement them in their projects.
Competition lets the crypto market grow at an extraordinary speed. Every project wants to be better and different from each other. They implement new and exciting features.
There are 3 major factors if a cryptocurrency project wants to survive in the future.
The community is the most important part when it comes to cryptocurrencies. Think of it as customers. The more customers a project has, the more trusted it is. More people already tried this project and think it’s great. If a crash happens, projects with the biggest communities are more likely to survive.
Community growth should also not be disregarded. The community growth tells you if there is a trend or if the project is good at its core. If there is consistent community growth, it means that people recommend that product. The project has decent fundamentals.
If there is no further development in a project, it will soon die out. The reason for this is competition. Competitors will most likely develop similar features. Also, they will have more features that make the project even better. Users will realize it in the long run and change to that platform.
If a crypto project has a critical bug, it can be problematic. Let me give you an example. Let’s say you own a privacy coin called PrivCoin (I made this name up). Some day, testers found out that the privacy feature has a bug. It is possible to trace transaction information.
To develop a new privacy protocol, it could take developers months or years. It would defeat the purpose of the coin until it got the new privacy feature.
Does crypto have a future?
We can tell that the crypto market is growing fast and will not die out soon. We don’t know if there will be one cryptocurrency in the future that everybody uses to settle payments.
Most crypto projects have a different purpose and you have to ask yourself this question. Does this crypto project solve this specific problem the best? If yes, think of how big the problem is.
Let’s say the problem was that developers can build their apps on a blockchain. In this case, Ethereum is the best cryptocurrency that solves this problem.
Every crypto project has its purpose and solves different problems. Cryptocurrencies will have a future, but the question is, which ones solve a big problem the best.
Which cryptocurrencies will survive a crash?
Here is a list of coins that should survive a market crash.
|Bitcoin||It is the first and the biggest cryptocurrency. It counts as one of the best stores of value.|
|Ethereum||ETH now is a popular dApp platform. With ETH 2.0 coming out in the next years, ETH should be more scalable.|
|Monero||Monero is loved by privacy users. No tester/developer/hacker managed to crack the privacy feature for years.|
|Binance Coin||Binance is the biggest exchange in the world. It has the resources to survive a crash and develop new platforms for users and maintain old ones.|
What sectors of cryptocurrencies will survive in the future?
From a technical viewpoint, cryptocurrencies are not suitable for payments. The reason for this is the blockchain itself. New blocks have to be added to the blockchain to confirm transactions. This process takes time and resources.
Even if one block is added to a blockchain every 10 seconds. It means it takes at least 10 seconds to confirm a transaction. There are a few projects that reduced the block time to 500 ms through a concept called sharding.
This splits the blockchain into many pieces and nodes only have to store these pieces. This makes it more affordable to become a node and as a result more decentralized.
Yet, the blockchain itself still has scaling issues. Let’s imagine blocks could scale and the block time would be 500 ms. First, you would think that this is great for payments, right? If more people start using this project, the network becomes more centralized.
Because more users use the network, blocks are bigger. The blockchain is growing faster. As a result, fewer nodes can store the blockchain anymore.
We need better scaling solutions to make cryptocurrencies faster and suitable as a payment system in the future for everybody around the globe.
Where cryptocurrencies also have a huge advantage is to make private payments. Mathematical functions make it possible to hide sensitive information. This includes how much coins you sent or which address received how many coins.
Payments itself should be private. By digitalizing everything, banks got a transaction history from us. They know how much we spend. More and more people realize it and start using privacy coins. That’s why privacy coins will survive in the long run.
Privacy is equal to freedom. Who knows what institutions do with your information? Only them and you don’t have full control over your data anymore if they tracked it.
Borrowing & Lending
Where it becomes interesting is to use crypto for lending, or borrowing. Because of the nature of crypto, everybody in the world can borrow or lend crypto. Also, without getting censor shipped. If you want a loan, you can get it if you can get the requirements of the lending platform fulfilled.
Cryptocurrencies itself are meant to be a financial instrument. That’s what Bitcoin originally wanted to be, a payment tool.
Borrowing and lending will survive in the future, because there is always an incentive to borrow and lend some money to generate more or pay for something.
Tokenization is also a great thing for cryptocurrencies. Imagine tokenizing the ownership of a house into 1000 pieces. If this property gets rented out, you can buy only 1 or 2 tokens. You can buy them for an affordable price instead of having to buy the whole house.
Another thing is personal tokens. Personal tokens can be coupled to specific events, for instance as an entrance ticket. If you own a token, you have access to a party hosted by this person.
The question in the future will be if personal tokens are that useful as imagined. Also, tokenization of houses could bring up other problems like who has to pay if something breaks in the house.
Because crypto is too volatile to settle payments, there are stablecoins. As the name says it, stablecoins are packed to something. For instance, some stablecoins are pecked to 1 USD. So, 1 USD equals to 1 stablecoin. The institution behind that stablecoin only generates as many tokens as USD they hold.
For payments, stablecoins are great because the price of the asset doesn’t change a lot over a day. If it would, there would be something wrong with the project or institution itself.
On the other side, stablecoins are also limited to blockchain scalability. As for now, most stablecoins are tokens on the Ethereum blockchain. This means that they are bound to Ethereum. They have the same scalability issues as every other token on the Ethereum platform.
States also have a huge incentive to regulate stablecoins more. If states would enter the market, they will do that by publishing a stablecoin. Let’s take Europe for example. They would publish a stablecoin that is pecked against the Euro. They want to be a monopoly and don’t want users that they use a different stablecoin.
If states enter the market, they will hold other stablecoins down. They do this to dominate the market.
Other purposes – Governance tokens, etc
There are many other use cases for cryptocurrencies, for instance, governance tokens. Governance tokens represent a vote to change something on a platform.
Let’s say you own a governance token of a decentralized trading platform. You think the trading fees are too high, let’s say at 0.5%. You could vote with that governance token to reduce the trading fee from 0.5% to 0.25%. Depending on what the majority thinks, your change gets accepted or rejected. They vote with their governance tokens for your proposal. If you hold more governance tokens, you have more power.
Governance tokens will most likely survive in the future because it makes a project truly decentralized. The most significant question will be for how many things you can vote to change the specific characteristics of the project. For instance, a governance token would not be useful if the protocol itself would not allow it to change the trading fees, even if you wanted to.