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The proliferation of cryptocurrencies is out of control. Is this the last hurrah for crypto before the purge and the triumph of bitcoin?
11 million cryptos
According to the Coin Market Cap website, there are currently 11.52 million cryptocurrencies. At this rate, there will soon be more cryptocurrencies than bitcoins…
The CEO of the exchange platform Coinbase estimates that about 1 million are created every week. For Brian Armstrong, it “is no longer possible to value them one by one.”
“Regulators must understand that the demand for approval for each of them has become completely unfeasible”, he said on X.
In other words, the Coinbase casino wants to be able to offer anything to its customers. To understand how we got here, we need to return to the bitcoin pioneer and its four essential characteristics:
- Trustless: Peer-to-peer transactions, meaning without a trusted third party;
- Permissionless: Anyone can use bitcoin;
- Censorship resistant: Impossible to prevent transactions;
- Perfect scarcity: Impossible to create more than 21 million BTC.
Bitcoin is a masterpiece of cryptographic engineering born from the combination of pre-existing technologies. Public key cryptography, hashing algorithms (SHA-256), and the concept of Proof-of-Work. The result? An unseizable currency existing in an absolutely finite quantity.
The Pandora’s box was opened, and what was meant to happen did: a Cambrian explosion of cryptocurrencies, for better or for worse.
It is extremely positive that new generations are getting familiar with the obscure world of cryptography, especially in these times of mass surveillance. The flurry of cryptographic protocols that enhance privacy is the beautiful legacy of the “crypto” explosion.
This legacy, however, comes with its share of false good ideas, more or less harmful.
Selling dreams
The vision of “Web3” (a decentralized internet powered by blockchains) is a mirage. The ideals are noble, but the reality of decentralization is a pipe dream that doesn’t scale.
Centralized systems are faster and cheaper. This is, by the way, the main promise of cryptocurrency creators: to offer cheaper and faster transactions. The problem is that this comes at the expense of decentralization. This is the famous blockchain trilemma.
However, thousands of tokens are created every day. The crypto world remains obsessed with “the next big thing.” Even bitcoin is not spared. We have seen this demonstrated in the last two years with Ordinals, BRC-20s, rare sats, and Runes.
But as always, the hype eventually dies down. The innovations that were supposed to bring us closer to this mythical web 3 often turn out to be nothing more than vulgar pump & dumps.
Each cycle comes with its more or less reheated narrative. The buzz is currently maintained by a mix of DeFi (again), stablecoins (again), memecoins, AI, and old cryptocurrencies like XRP.
And after the celebrities of the previous cycle, it’s now the heads of state who are “roaring” (Trump coin, Melania coin, Libra coin…).
During the last cycle, we had yield farming, Play-to-Earn (P2E), Move-to-Earn (M2E), unstable stablecoins (Terra/LUNA), dog memecoins, Bridges, NFTs, etc.
Many are left with losses… Necessary evil? Creative destruction? Scam? It’s a bit of everything at once.
And in the end, it’s bitcoin that wins
The fact that memecoins are now the most popular trend is good news. This means that no one is pretending to want to challenge bitcoin anymore. The casino finally admits its true nature.
Monetary hegemony is a fight to the death, and there is no doubt that bitcoin has triumphed. There are still a few pockets of futile resistance, but the game is up. The United States will not create a strategic reserve of XRP or Ethereum.
The most successful applications are of a financial nature:
- Store of value;
- Currency (L2 Lightning Network);
- Stablecoins.
Why? Because the four main characteristics of blockchains are primarily useful for monetary and financial applications. On the contrary, they introduce friction and unnecessary costs for most other applications.
Is it finally understood? Maybe. This is suggested by the growing dominance of bitcoin (62%) even as the number of tokens and other cryptocurrencies continues to soar.
The next cycle will be more serious with the integration of bitcoin into the traditional banking system. It will soon be possible to obtain loans in exchange for bitcoin collateral.
Bitcoin as a store of value and a means of payment backup for all. International reserve currency for states. This is what should remain once the smoke screen of “crypto” has fully dissipated.
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Bitcoin, geopolitical, economic and energy journalist.
DISCLAIMER
The views, thoughts, and opinions expressed in this article belong solely to the author, and should not be taken as investment advice. Do your own research before taking any investment decisions.
