For most of the history of blockchain-based currencies and assets, the story has been all about Bitcoin. At a market capitalization of around $40 billion, it remains the most valuable cryptocurrency.
But with the rise of a new ‘chain on the — ahem — block, namely Ethereum, and new ways to fund the development of new crypto-platforms with ICOs, the narrative is shifting somewhat to the entire cryptographic asset class.
Today, let’s take a more in-depth look at some of the historical trends in the digital currency space, paying close attention to Ethereum and its role as the platform of choice for new cryptographic assets.
The number of new digital assets is on the rise
In roughly the past 12 months, the number of cryptocurrencies listed on CoinMarketCap.com, a main reference site for digital asset developers and speculators alike, has increased significantly.
Below is a chart compiled from the count of cryptocurrencies listed on historic snapshots of the site’s main table starting with the first snapshot on April 28, 2013 (featuring a whopping seven cryptocurrencies) and the most recent snapshot from June 4, 2017.
As of the June 4 snapshot, there were 809 cryptocurrencies and other digital assets listed on the main CoinMarketCap page. As of Monday, June 5, 2017, at around 6:00 PM Central time, there were 857 cryptocurrencies and assets listed on the site.
Between January 3, 2016 — the first snapshot of 2016 — and June 5, 2017, the number of cryptographic assets listed on CoinMarketCap grew from 551 to 857, an increase of about 56 percent in almost exactly 18 months.
As the chart shows, the pace of growth in the number of crypto-backed assets is itself growing. Based only on the listings on CoinMarketCap, 80 percent of the growth in the number of cryptographic assets over the past 18 months took place since January 1, 2017.
The open-source nature of most cryptocurrency systems means that it’s trivially easy to make copies of the software (or “fork” its code, in developer parlance), make some modifications to the protocol and release it as a new, wholly separate system.
As Bitcoin’s price began to increase rapidly in the latter half of 2013, the aspiring Satoshi Nakamotos of the world began forking various cryptocurrency protocols to establish their own coins. By 2013, most of the forks were off of Litecoin, which is based on Scrypt.
With Bitcoin’s price spike at the end of 2013, it had become inefficient to mine Bitcoin on commodity hardware (like graphics cards) because the arms race in the Bitcoin ecosystem produced a new breed of specialized hardware.
Scrypt, at the time, was still economical to hash on graphics cards, and as Litecoin and a few other Scrypt-based currencies began to appreciate in value, wholly separate cryptocurrencies were forked off of the original protocols to rise anew. Remember the goofy, meme-based Dogecoin? That was a fork of Litecoin. And in case you’re interested in looking at the “family tree” of cryptocurrencies, MapOfCoins.com produced some really interesting data visualizations.
The goal was to create cryptocurrencies as valuable, or at least as lucrative, in the short-run, as Bitcoin. This somewhat haphazard approach of throwing cryptocurrencies against the proverbial wall and hoping that something sticks was certainly effective at expanding the scope of blockchain-based currency systems; however, that alone doesn’t explain the appreciating value of the asset class as a whole.
ICOs: The newest new thing
If the forkable, derivative-by-design nature of cryptocurrencies explains the breadth of the ecosystem, what explains the growth in value?
Part of it is surely market speculation, and another part of it is that cryptocurrencies and other blockchain-based assets do have real-world applications today.
But another part comes from cryptocurrency entrepreneurs wising up to the fact that their little upstart protocols, in order to be valuable, needed to have an ecosystem built around them. That, of course, takes time…