How many Cryptocurrencies and Crypto Exchanges? and other FAQs
How many different types of cryptocurrencies exists?
As of date, 9th July 2021, there are 10808 Cryptocurrencies and 381 Crypto Exchanges. Core market share is dominated by Bitcoin 45.1% and Ethereum 17.7%
Why so many cryptocurrencies exists?
Not all of the cryptocurrencies are reliable or can be considered fully functional as of now. Many of them are dead, defunct, scams, etc. which you can find on deadcoins.com.
It also depends on the type of problem a crypto can solve. And there are many problems in this world which I believe a crypto can solve.
If you look around on CMC (coinmarketcap) you will notice that there are different kinds of tokens and coins for different kinds of systems, industries, and markets -
- Payments,
- Governance,
- Social media,
- Storage,
- Real Estate,
- Platforms,
- Stablecoins,
- Exchange utility tokens,
- Prediction markets,
- Insurance,
- Trade financing,
- Gaming,
- Decentralized energy,
- Moneylending,
- Banking,
- Supply chain
I mean you name it and we have a coin or token for that.
So we can have a crypto token for many different industries, processes, and markets. However, I would advise you to look at them with a pinch of salt for completeness, readiness, need, and without a doubt please DYOR!!
What is DeFi and why is there so much attention on it these days?
DeFi is an generic term for a wide variety of applications and projects in the public blockchain space geared toward disrupting the traditional finance world. Inspired by blockchain technology, DeFi is referred to as financial applications built on blockchain technologies, typically using smart contracts. Smart contracts are automated enforceable agreements that do not need intermediaries to execute and can be accessed by anyone with an internet connection.
DeFi consists of applications and peer-to-peer (P2P) protocols developed on decentralized blockchain networks that require no access rights for easy lending, borrowing, or trading of financial tools. Most DeFi applications today are built using the Ethereum network, but many alternative public networks are emerging that deliver superior speed, scalability, security, and lower costs.
Benefits include:
- Decentralization (cutting off middlemen from transactions),
- Transparency,
- Permission-less globally and
- Inclusive, interoperability, and earning opportunities.
Though it is promising, DeFi is also full of risks. Yield farming is probably the buzzword behind DeFi's popularity because of the huge rewards, which play on human weaknesses and desires to get rich quickly and effortlessly.
At the same time, people should consider how the pursuit of high yields can be incredibly complex, risky, and not suited for everyone.
But What is Yield Farming?
Yield farming is the practice of staking or lending crypto assets in order to generate high returns or rewards in the form of additional cryptocurrency. This innovative yet risky and volatile application of decentralized finance (DeFi) has skyrocketed in popularity recently thanks to further innovations like liquidity mining. Yield farming is currently the biggest growth driver of the still-nascent DeFi sector, helping it to balloon from a market cap of $500 million to $10 billion in 2020. If you want to compare it to traditional investing, it’s like yield on a bond, or a dividend. Like a traditional dividend paying stock or bond, yield on DeFi tokens fluctuates depending on how these projects and exchanges roll them out.
Ok, I keep seeing ERC-20 Network. What is ERC-20?
ERC-20 tokens are based on the Ethereum blockchain. Just like mainstream cryptocurrencies such as Bitcoin, they can be used to make purchases — or traded for fiat currencies and crypto.
These assets, which usually have a fixed supply, can be stored in a dedicated Ethereum wallet. A wide range of ERC-20 tokens were created in 2017 and 2018 during the boom of initial coin offerings. They usually form the backbone of decentralized apps, otherwise known as DApps for short.
Then, What is Fiat Currency?
Fiat currency is “legal tender” backed by a central government, such as the Federal Reserve, and with its own banking system, such as fractional reserve banking. It can take the form of physical cash, or it can be represented electronically, such as with bank credit. The dictionary definition of “fiat” is simply an authoritative or arbitrary order. So, the government issues an order dictating that USD, GBP, INR, EUR, or other world currency is lawful and accepted to pay both public and private debts.
And, What are Stablecoins?
Stablecoins are a viable solution to volatility issues surrounding cryptocurrencies and are helping DeFi gain prominence. The name says it all — stablecoins' value is tied to a relatively stable asset, like gold or the US dollar, to keep its price consistent. Stablecoins became useful during risk-off moments in the crypto space, providing a safe haven to investors and traders. Stability makes them a reliable collateral asset. Stablecoins also play an important role in liquidity pools — an integral part of the DeFi ecosystem and DExs.
What Are Gas Fees?
Do you think India is ready to adopt and innovate in cryptocurrency?
India is already at the forefront of crypto innovation with companies like WazirX (now acquired by Binance), CoinDCX, BitBNS, Marlin, Matic, Persistence, EasyFi, OroPocket, Persistence, raising multi-million dollars in investments. Currently, the daily volumes in exchanges are a little less than ten million dollars, which is minuscule compared to the daily global volumes, but the interest is increasing day by day.
India already has the world's largest software services capability which gets extended into blockchain development too. There is no doubt about India's readiness to take this industry to the stratosphere.
But the key question is the need for a government direction and regulatory acceptance, which will accelerate it and make India the most favored destination for crypto-related activities too.
DISCLAIMER
The contents of this article are for information purposes only and do not constitute an advice or a legal opinion and are personal views of the author. It is based upon relevant law and/or facts available at that point of time and prepared with due accuracy & reliability. Readers are requested to check and refer relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc before acting on the basis of the above write up. The possibility of other views on the subject matter cannot be ruled out. By the use of the said information, you agree that we are not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof. CA Mitesh and Associates is Mumbai's leading Cryptocurrency Taxation Firm which is committed to helping people navigate complex tax laws and banking regulations. Our main aim is to assist the individuals with applicable laws & regulations compliance and providing support at each & every level to make sure that they stay compliant and grow continuously. For any query, help or feedback you may get in touch here - Appointment with CA. Please note the all consultations with the CA are Paid consultations.
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