Why Thinking of Blockchains as Competitors is Missing the Point

It is hard to tell how many blockchains exist today. What is easier to illustrate, though, is that seeing them as competitors is missing the point.

Why Thinking of Blockchains as Competitors is Missing the Point

According to some, the number of blockchains in existence is somewhere around a thousand. Others think it is a couple of thousands more. Interestingly, almost every article you read about this topic cites the same source: CoinMarketCap.

The website, founded in 2013, has built itself a reputation among crypto enthusiasts as a source of reliable and detailed crypto market data. However, there are a few reasons why it should not be considered reliable when it comes to the number of blockchains in existence.

It is probably a good starting point, but what it gives you could probably be off by a lot.

The Reasons Why It is Not

The first reason why CoinMarketCap is not reliable is that it does not list actual blockchains but only assets on blockchains. For example, bitcoin on Bitcoin and ether on Ethereum. That is because it is primarily designed to serve traders and investors, whose primary focus is the asset price movements in the market.

Many, including journalists from leading news outlets, make the mistake of assuming that each blockchain has one native asset listed on CoinMarketCap. In reality, that is far from being the case. While many blockchains have a single asset, several do support multiple assets.

Bitcoin, Litecoin, and Ripple are all blockchains that support only one digital asset each. Meanwhile, Ethereum, Ethereum Classic, and Cardano are blockchains that can support numerous digital assets. In fact, up to thousands.

Of all those in the second category, Ethereum is the most established. Besides its native coin, Ether, the blockchain supports numerous other digital assets and applications.

And that is because Ethereum is a platform that, through its smart contract capabilities, allows third parties to create their own digital assets. These assets can be utility tokens, currencies, or other forms of applications. Indeed, through a provided user interface, you can easily create your own tokens within minutes.

Most of the tokens issued during the initial coin offering (ICO) craze of 2016 and 2017 were created and sold on Ethereum as ERC-20 (standard) tokens.

Today there are many digital assets on the CoinMarketCap list that are domiciled on the Ethereum blockchain. Some of these include BAT, DAI, ChainLink, Aragon, Binance coin, and Wrapped Bitcoin.

Indeed, a few of them are in the top ten of the largest cryptocurrencies in terms of market capitalization. For example, Binance Coin is in position nine and Chainlink position ten. These two can easily be counted as assets that are representing independent blockchains.

The second reason why the number on CoinMarketCap is inaccurate is that the platform does not include all blockchains. In particular, the website’s admins have little interest in blockchains that are not built with a currency or a tradable asset. And it is for a good reason. The majority of the site users are only interested in tradeable digital assets.

In particular, most of the so-called enterprise (or private) blockchains don’t have native tokens or digital currencies listed on CoinMarketCap. Those in this group include Hyperleger Fabric (by Linux Foundations and others), Corda (by the R3 consortium), and Quorum (by ConsenSys).

Now, Will We Ever Have More Than Enough Blockchains?

This is a question that many may consider, especially as the number of blockchains keeps growing over time. We can only assume a limit exists to the number of blockchains that the world needs when we think of them as competitors.

There are two reasons we are not even close to reaching the limit on the number of blockchains the world needs.

First, it is turning out that each blockchain is being designed to perform a unique function. Indeed, if you look closely at what we have, there are no two blockchains that do exactly the same thing.

For example, the Bitcoin blockchain is turning out to offer the world the first digital gold. Indeed, Bitcoin could easily turn out to be a great store of value in the coming years. Already major investment firms are holding it a reserve asset. According to Bitcointreasuries.com, about 30 entities hold close to 6% of all bitcoins as a reserve.

Meanwhile, the Ethereum blockchain is a virtual machine that allows anyone to build and run their own application, a token, website, or even a video game (like Cryptokitties). In particular, the blockchain differentiates itself through its smart contract capabilities.

On the other hand, Ripple (XRP) has cut itself a place in the financial ecosystem as a better alternative to SWIFT. With applications like RippleNet, it promises faster inter-bank payment settlements.

There are blockchains designed to do things like handling micropayments (Randpay), cloud storage (Storj), cloud computing (Golem.Network), and so forth. In a nutshell, blockchain developers will continue niching down, which creates the possibility for tens of thousands of blockchains, each customized for industry, region, and use case.

The other reason is that blockchains are like local area networks, which will ultimately link up with others to create large area networks and also the internet of blockchains. Already interoperability is a huge interest within the blockchain community, and the building of protocols that will allow blockchains to talk and transact with one another is underway.

Some of those showing significant promise include two-way peg protocols such as Sidechain and Plasma.

So we are most likely at the very beginning of what could turn out to be the next internet. The number of blockchains that would form this network is irrelevant, just like the number of local area networks that form the internet.

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