Everyone knows about the rise of Bitcoin and the impact it had on the world and on cryptocurrencies. With millionaires being made overnight, word of cryptocurrency went mainstream, and since, there have been plenty of cryptocurrencies using blockchain technology to try and take the same route to success.
However, not every cryptocurrency is designed to make it. According to Yahoo Finance, as of 28th November 2019, there are around 1,085 dead cryptocurrency coins, and they’ll be plenty more since then. When you consider that, at the time of writing, there were around 3,000 coins in existence, this is a huge number of failed attempts.
Regardless of these attempts, two questions remain; why are these cryptocurrencies are failing, and what should existing cryptocurrencies do to succeed. In today’s guide, we’re going to explore both these questions and what industry operators should be focusing on.
A New Age of Finance is Here
With the rise of altcoins and cryptocurrencies, the term ‘big finance’ was coined, and has basically referred to every kind of currency that has set out to change the finance industry forever; cryptocurrencies included. Due to the decentralized nature of cryptocurrency, entities set out to use this technology to bring traditional banking institutions to their knees.
However, as the years have gone passed, it turns out that this hasn’t been the case. Instead, large financial institutions have started to use the blockchain technology instead. Traditional places like Wall Street are in control of many cryptocurrency services, including trading and future concepts.
This means that blockchain currencies and altcoins that aimed to rival traditional finance have less of a market to operate in and have much larger competition, which, most of the time, results in them failing.
The Basics Aren’t There
When it comes to succeeding cryptocurrencies, there are two basic factors that need to be fulfilled; people need to want to use the cryptocurrency, and people need to trust using it. With currencies like Bitcoin, usage of it was known throughout the mainstream throughout the world, which meant it had a reputation that ‘everyone was using it,’ and it could be trusted.
However, smaller, less known cryptocurrencies don’t have that reputation, and therefore need to prove themselves as being a legitimate currency. If they can’t, people aren’t going to use it and, thus, the cryptocurrency will fail.
On the same hand, if there’s no desire to use the cryptocurrency, nobody will use it. Most cryptocurrencies have to offer a service that people won’t be able to find elsewhere or at least a feature that’s improved or unique compared with any other kind of altcoin. If a cryptocurrency is cloning other altcoins or doesn’t bring anything new to the table, it’s destined to fail.
Scams are Common Knowledge
Scams within the cryptocurrency community and industries are very common in the sense that they make big news and are well known. This makes everyday people who would use cryptocurrency in their lives, either as currency or as an investment, dubious about using new and relatively unknown currencies or services.
For example, OneCoin was a well-known Ponzi scam that ‘guaranteed up to 300% return on investments’ but ended up scamming around $19.4 billion in the U.S.U.S. alone back in 2008. BitConnect was another scam that was well advertised and later became a meme. Guaranteeing returns of up to 120% per year.
However, after the authorities in the U.S. stepped in and the value of the company dropped by around 96%, although the company is still operating to this day. These are not the only scams to have taken place, and anyone with interest in blockchain currencies will be careful before trying anything new.
Summary
All in all, referring back to the two factors a future successful cryptocurrency needs to fulfill, you need to have trust and a desire to be used. If you don’t have these or even just one of them, a cryptocurrency is doomed to fail, so make sure you’re keeping your eyes open for them.
Regina Wheeler is an eLearning consultant at Write my research proposal. She has been involved in many consulting projects.
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