There is a lot of speculation out there about cryptocurrencies: which will survive the cull, which will grow and prosper, and which will fade into nothing? As with any market, the answers to these questions are unknownable, only time will tell. But that doesn’t mean that users can’t look at the data and make educated guesses. In cryptocurrencies, there is a strong consensus that the worth of a token alone isn’t enough to value its potential. Instead, we have to implement additional methods for calculating possible growth and market sustainability. When looking through the lens of user growth, the idea of token worth takes on a whole new meaning: is a token worth $1,000,000 that is owned by one person better than a $1 token owned by a million people?
The current market: a top-10 analysis
To get an idea of what drives a particular cryptocurrency to become popular — and stay that way — let’s look at the current top 10 market leaders and briefly investigate how they got to where they are today. We’ll rank them in order of largest to smallest, which is derived by multiplying the total coins in circulation by the current price.
Market data pulled from Coinmarketcap.
- Bitcoin
The first and largest of all cryptocurrencies in regard to market cap, Bitcoin has been around for more than 10 years. Because of how Bitcoin was designed, all coins come from the same place – mining. The price of which is guided by the users’ willingness to pay a premium for the coin, weighed against the miners’ willingness to sell the coin to cover their operational costs.
- Distribution method: Mining rewards (PoW consensus) → Purchase from miners
- Circulation supply – 18,334,325 BTC
- Market cap – $132,141,097,303
- Ethereum
Similar to Bitcoin, Ethereum was created a handful of years after and uses the Proof of Work consensus algorithm to verify the work of miners. Unlike Bitcoin, however, Ethereum allows for dApps, which helps increase the cryptocurrency’s popularity.
- Distribution method – Mining rewards (PoW consensus) → Purchase from miners
- Circulation supply – 110,587,607 ETH
- Market cap – $20,233,484,192
- XRP
Ripple is unlike the top two cryptocurrencies in that it cannot be mined. Ripple, which was first released in 2012, is instead distributed in pre-scheduled batches — approximately one billion a month for 55 months. However, not all of this currency is released monthly, as about 900 million is put back in escrow for future release.
- Distribution method – Release from escrow on a monthly schedule
- Circulation supply – 44,089,620,959 XRP
- Market cap – $8,473,868,796
- Tether
Being the first stable coin on our list, Tether is entirely backed by fiat currency. First released in 2014, Tether’s price is based on USD and encourages users to buy or sell when it wanders a few cents above or below the price of $1. Tether isn’t mined, it is instead bought and minted when users want to obtain Tether. When it is sold, Tether is burned to ensure network stability.
- Distribution method – Minted on purchase, burned on sale
- Circulation supply – 6,361,032,509 USDT
- Market cap – $6,408,505,361
- Bitcoin Cash
An offshoot of Bitcoin, Bitcoin Cash is mined the same way as the original and has a very similar amount in its total circulating supply. Because Bitcoin Cash is a hard fork of Bitcoin, it borrowed from Bitcoin’s user base during its inception in order to boost its network strength right off the bat. In addition, Bitcoin Cash is theoretically more scalable than Bitcoin.
- Distribution method – Mining rewards (PoW consensus) → Purchase from miners
- Circulation supply – 18,384,713 BCH
- Market cap – $4,339,853,820
- Bitcoin SV
Just as Bitcoin Cash split from Bitcoin, Bitcoin SV (Satoshi Vision) split from Bitcoin Cash. Bitcoin SV adds even more space to the block size limits, and further increases the transactions per second of the network.
- Distribution method – (PoW consensus) → Purchase from miners
- Circulation supply – 18,383,371 BSV
- Market cap – $3,659,658,110
- Litecoin
Founded in 2011, Litecoin is a Bitcoin clone known for being quicker to experiment than its “older brother.” Litecoin runs on the same consensus protocols and often leads the charge on implementing new tech before Bitcoin gets around to it. One of the appeals of Litecoin for users is that it is designed to be spent more frequently than Bitcoin.
- Distribution method – Mining rewards (PoW consensus) → Purchase from miners
- Circulation supply – 64,547,531 LTC
- Market cap – $2,781,430,420
- Binance Coin
Unlike minable currencies, Binance Coin is bought directly from Binance or traded for using other cryptocurrencies. This coin exists to make transactions cheaper and smoother on the Binance exchange, and its market popularity reflects that of the Binance exchange itself.
- Distribution method – Purchasable
- Circulation supply – 155,536,713 BNB
- Market cap – $2,529,731,142
- EOS
EOS is purchased in exchange for virtual computing power, and the more EOS that a user holds the more network power they are guaranteed at any given time.
- Distribution method – Purchasable
- Circulation supply – 921,931,058 EOS
- Market cap – $2,438,488,289
- Tezos
Tezos relies on a proof-of-stake consensus protocol to secure its network, and users cannot mine the currency to acquire more.
- Distribution method – Purchasable or earnable through creating network updates
- Circulation supply – 707,574,068 XTZ
- Market cap – $1,609,589,323
What is the secret to a crypto’s success?
Looking at the top 10 list, you’ll see some clear distinctions: half of them are ancient cryptocurrencies or forks of ancient cryptos, and the other half aren’t mineable — does this tell us our answer? All of the unmineable cryptos have far, far larger circulating supplies than their minable counterparts, hinting that a large circulating supply is the path to success when you don’t have the first-to-market advantage.
With that in mind, is it possible that a greater chance of success can be achieved when coins focus less on the individual price of each token and instead prioritize total user adoption? Circulating supply is a quasi-measurement of total user adoption, but what if we took it one step further and limited users to only being able to acquire a cryptocurrency by introducing other new users to the network?
Let’s look at a real-world example of such a cryptocurrency to see how it could work and why it may be successful in gaining the attention of new users. For this example, we’ll be digging into ONFO, a stable coin with all of its tokens pre-mined and available for deployment. The ONFO coin operates off of a few simple ideas:
- The average person considers crypto a bit too confusing to mine, purchase, or use
- The average person doesn’t have the time or resources to invest in purchasing crypto
- The average person knows a few people who they can talk to about something they are excited about
ONFO uses what it calls network mining to distribute its coin instead of forcing users to either mine it themselves or purchase it from someone who has mined it. Network mining works by creating an account on ONFO and then referring your friends, colleagues, loved ones, and internet strangers to do the same using your unique invite code. Think of this as any other referral system where the user receives kickbacks; the difference is that the original referrer can earn kickbacks for three generations on their one referral code.
If Bob invites Alice, Bob earns a reward. When Alice invites Stacie, both Bob and Alice are rewarded. When Stacie goes on to invite Fred, Bob is rewarded in addition to Stacie and Alice. This three-generational bridging of rewards ensures that Bob is rewarded for being an early adopter, especially for being the first within his social circles to jump on board with ONFO. Network mining is different from traditional mining in that it doesn’t require any special computing power or financial investment and that it can potentially be far faster than traditional crypto mining.
Source: xkcd.com
There should be little doubt that the cryptocurrency market is dominated by first-to-market coins and coins that can’t be mined, heavily alienating most of the world’s population through both financial and technical understanding gateways. By removing the need for users to have a technical understanding of the coin and removing their need to fiscally invest, users may be more likely to show interest in a project they can immediately be onboard with. As is the case with any social-growth-based company, a project like ONFO’s success will depend on how quickly it can incentivize key users with strong social circles. The power of exponentials could quickly expedite network mining, even if everyone was just sharing it with a few friends.
