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Darwin’s theory of evolution means that dwelling organisms finest adjusted to their setting are probably the most profitable at surviving. Organisms battle in opposition to one another in competitors for sources which are obligatory for existence inside their setting. The identical precept might be utilized to cryptocurrencies. In a unstable, decentralized world characterised by competitors amongst networks, solely the healthiest, most well-structured ecosystems survive. Builders ought to, due to this fact, give attention to growing a ‘wholesome’ underlying community for crypto to make sure they stand the very best probability of surviving the following evolutionary cycle.
What makes a crypto ‘wholesome’?
The character of cryptocurrencies is vastly completely different from that of dwelling organisms, so the sources that make a crypto ecosystem ‘wholesome’ differ from people who make a dwelling organism ‘match.’
Cryptocurrencies are decentralized digital belongings current within the web3 house, in order that they depend on many particular person customers to work together inside this ecosystem to create a wholesome retailer of worth. Like fiat currencies, with out this social community made up of token holders, a cryptocurrency asset has no worth. Every cryptocurrency can signify its personal ‘tradition’ by a transactive coin, the place worth is rooted within the psychology of its holders. That is mirrored by the truth that social occasions, consumer notion, and provide typically impression the worth of the token.
Since all cryptocurrencies derive worth from group and consumer interactions throughout the web3 setting, they compete throughout the identical web3 parameters for consumer consideration and transactions. The parameters used to outline a ‘wholesome’ crypto community relate to token holder exercise and embrace the rules of distribution, number of holders, number of transactions, and token circulate, the place there have to be a sustainable variety of various transactions.
It isn’t nearly having consumer exercise, however the proper. If one particular person lived in a nation-state as its sole citizen with a checking account of $100 million, the GDP per capita of that nation could be the very best on this planet—but its possibilities of survival could be non-existent. Since there is just one holder, there could be no scope for transactions or a wide range of holders, rendering it defunct and with no worth.
While dwelling organisms could also be competing for issues like meals and sources in the actual world, cryptocurrency tokens are competing for transactions and consumer consideration within the web3 world.
Since cryptocurrencies depend on blockchain, an open-source ledger storing all transactions, it’s attainable to map all transactions between wallets inside an ecosystem and measure the parameters that decide a ‘wholesome’ community. In observe, we will see which token ecosystems are growing ‘wholesome’ networks and which of them are slowly turning into extinct. Over time, any patterns that align with community failure, together with manipulation or crime, like some other asset class, can enhance the danger regarding a token. With this information, we will price and rank ecosystems, figuring out which of them are successful the competitors for survival.
Bitcoin & Matic: Successful story
Bitcoin (BTC) has been in a position to assemble a wholesome community. It’s estimated that 106 million individuals across the globe personal Bitcoin, making it probably the most broadly held token. Considerably, Bitcoin now represents 58% of the entire worth of crypto, exhibiting that amongst web3 customers, Bitcoin is overwhelmingly the preferred retailer of wealth. Not solely is it broadly held, however it’s also broadly transacted. All through the primary half of 2024, Bitcoin’s blockchain often had over 400,000 transactions a day. This sustainable and excessive transaction quantity is mirrored in Bitcoin’s pricing. While it has skilled a number of devaluations, it has been sitting above $50,000 for the previous 9 months, and it is without doubt one of the most secure cryptocurrencies out there, having not too long ago surpassed 90,000 USD.
Equally, Polygon (MATIC), has constructed a wholesome community. Round 633,588 wallets hold Matic, making it a broadly held token. It’s also broadly transacted, in various quantities and for a wide range of causes, making it strong. All through 2024, Matic has often had over 4100 transactions a day. This sustainable and excessive transaction quantity is mirrored in Matic’s 24-hour buying and selling quantity, which sits at 7.76m USD.
Dogecoin: A speedy unraveling
Though Dogecoin (DOGE) has rallied laborious lately, it has failed to determine a ‘wholesome’ community. At sure instances, it has skilled a considerable amount of consumer exercise, which has pushed up costs momentarily. This contains early 2021, when Dogecoin’s worth increased dramatically by 23,000%. Nevertheless, the variety of transactions that drove this worth enhance was not sustainable. The consumer exercise right here was pushed by short-term hype, and the transactions going down weren’t various. Nearly all of customers had been interacting with the community purely to ‘pump and dump‘ reasonably than for any long-term, sustainable utility. This was fuelled primarily by Elon Musk merely tweeting concerning the token, creating an anomalous spike in worth. This rally demonstrated the token’s immense volatility and lack of an entrenched notion by customers that Dogecoin has worth rooted in one thing higher than a singular focal point. While it’s nonetheless held by round 4 million individuals, and it nonetheless has comparatively excessive ranges of transactions, in October 2024, round 250,000 every day transactions. Nevertheless, a major 82% of the entire circulating Dogecoin is held by a surprisingly small quantity of wallets, solely 535, demonstrating a scarcity of number of transactions.
Dogecoin is experiencing one other surge due to the current US election outcome and Elon Musk’s appointment to Trump’s Division of Authorities Effectivity. But, whereas it has moments of excessive worth, these haven’t been pushed by sustained and significant progress. The place Dogecoin has been unable to create a sustainable variety of transactions from a various array of wallets, Bitcoin and Matic have been in a position to take action. The proof is in Bitcoin and Matic’s comparatively secure progress and Dogecoin’s volatility. Whereas DOGE continues to be holding on, that is pushed by hype; just like the dinosaurs that got here earlier than us, it’ll probably develop into extinct.
Concentrate on the community, not the value
The success of cryptocurrencies and sustainable worth will increase rests on the well being of the web3 community underpinning the token. Fairly than specializing in driving the value up for the sake of worth, a cryptocurrency developer ought to, due to this fact, give attention to growing a ‘wholesome’ underlying community by harboring sustainable and various transactions. It will lay the groundwork for tokens to draw customers, beat off competing networks, and in the end lead tokens to develop in worth.
