Survival of the healthiest: Creating a successful crypto

Disclosure: The views and opinions expressed right here belong solely to the writer and don’t characterize the views and opinions of crypto.information’ editorial.
Darwin’s theory of evolution means that residing organisms finest adjusted to their atmosphere are probably the most profitable at surviving. Organisms battle in opposition to one another in competitors for assets which might be needed for existence inside their atmosphere. The identical precept will 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, deal with creating a ‘wholesome’ underlying community for crypto to make sure they stand the most effective probability of surviving the subsequent evolutionary cycle.
What makes a crypto ‘wholesome’?
The character of cryptocurrencies is vastly completely different from that of residing organisms, so the assets that make a crypto ecosystem ‘wholesome’ differ from people who make a residing organism ‘match.’
Cryptocurrencies are decentralized digital property current within the web3 area, 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 characterize its personal ‘tradition’ via a transactive coin, the place worth is rooted within the psychology of its holders. That is mirrored by the truth that social occasions, person notion, and provide usually influence the worth of the token.
Since all cryptocurrencies derive worth from group and person interactions inside the web3 atmosphere, they compete inside the identical web3 parameters for person consideration and transactions. The parameters used to outline a ‘wholesome’ crypto community relate to token holder exercise and embody the rules of distribution, number of holders, number of transactions, and token circulation, the place there should be a sustainable variety of various transactions.
It isn’t nearly having person 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 most effective 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 residing organisms could also be competing for issues like meals and assets in the actual world, cryptocurrency tokens are competing for transactions and person consideration within the web3 world.
Since cryptocurrencies depend on blockchain, an open-source ledger storing all transactions, it’s doable to map all transactions between wallets inside an ecosystem and measure the parameters that decide a ‘wholesome’ community. In observe, we are able to see which token ecosystems are creating ‘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 every other asset class, can enhance the chance referring to a token. With this knowledge, we are able to fee and rank ecosystems, figuring out which of them are profitable the competitors for survival.
Bitcoin & Matic: Successful story
Bitcoin (BTC) has been capable of 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 full worth of crypto, displaying that amongst web3 customers, Bitcoin is overwhelmingly the most well-liked retailer of wealth. Not solely is it broadly held, however it is usually broadly transacted. All through the primary half of 2024, Bitcoin’s blockchain repeatedly 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 steady cryptocurrencies available in the market, having lately 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 sturdy. All through 2024, Matic has repeatedly 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 exhausting lately, it has failed to determine a ‘wholesome’ community. At sure occasions, it has skilled a considerable amount of person exercise, which has pushed up costs momentarily. This consists of early 2021, when Dogecoin’s worth increased dramatically by 23,000%. Nonetheless, the variety of transactions that drove this worth enhance was not sustainable. The person exercise right here was pushed by short-term hype, and the transactions going down weren’t various. The vast majority of customers have been interacting with the community purely to ‘pump and dump‘ slightly than for any long-term, sustainable utility. This was fuelled primarily by Elon Musk merely tweeting in regards to 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 larger 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 each day transactions. Nonetheless, a big 82% of the full circulating Dogecoin is held by an incredibly small quantity of wallets, solely 535, demonstrating a scarcity of number of transactions.
Dogecoin is experiencing one other surge because of 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 development. 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 steady development 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 is going to doubtless turn out to be extinct.
Deal with 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. Slightly than specializing in driving the value up for the sake of worth, a cryptocurrency developer ought to, due to this fact, deal with creating a ‘wholesome’ underlying community by harboring sustainable and various transactions. This may lay the groundwork for tokens to draw customers, beat off competing networks, and in the end lead tokens to develop in worth.