What Differentiates a Successful Cryptocurrency From a Failed Project? (and What It Means for You)
From 2009 to the present day, we have witnessed the creation and development of thousands of cryptocurrencies and have only seen the success of a handful. Given that there are so many projects out there, we can not expect all of them to achieve success, but the fact that there are so few successful projects often spurs the same question from enthusiasts and investors alike, what makes a cryptocurrency successful? Why do some cryptocurrencies fail and what factors contribute to both success and failure? In order to gain a better understanding of why this happens and how you can learn to identify some of the more promising projects, take a look at the main factors contributing to the success of a cryptocurrency listed below.
Community, Popularity, and Adoption
Think of the cryptocurrency industry as if it were an election. There are a handful of candidates that you can choose from and some may have something valuable to offer while others may be a generic reproduction of others. For the most part, the more valuable candidates will receive all of the attention they deserve but, in order to garner the support they need, they first need to attract more attention to themselves. Without the popularity and the hype, they are never going to have enough people to emerge a victor.
This is something that holds true in the cryptocurrency industry. The characteristics and use of a cryptocurrency are very important but without a large audience, a cryptocurrency will never be able to flourish. Bitcoin, Ethereum, and others have managed to reach their target audience and have proven their worth in the industry, which is why they are so popular. Of course, this example can be applied to less appealing coins such as Dogecoin, which may not have the best price, use, or market capitalization, but have access to a strong community that continues to back the coin, making it successful in its own way.
Usage and Demand
Regardless of how popular a product may be, however, it will not hold up in the market if it does not fill a certain need. This issue is why many Bitcoin clones and ICOs failed as they were essentially repeating products of a successful product that we already had with different branding. In order for a cryptocurrency to become successful, it needs to have a practical application in the real world that differentiates itself from any other crypto projects that have already been released. Once they have managed to prove that they are a useful product, they can then increase demand and popularity as the project moves forward.
Ease of Use
Not to be confused with usability, ease of use refers to how simple the process of using a crypto product is. If you take a look at some of the top cryptocurrencies to date, visit their website, and attempt to use them, you are almost guaranteed to find that the developers have not made it difficult for you to obtain and use their cryptocurrency. Most developers know that users do not want to jump through hoops in order to put their products to use. However, some projects are quite complex and, unless they have a dedicated and interested audience and have no competition, no one is going to want to go through the hassle of attempting to use said cryptocurrency. Overall, the easier to use a project is, the more likely it is to become widely adopted.
Affordability and Transaction Speeds
This is a common problem that has been known to plague the cryptocurrency industry as some assets have either required their users to pay hefty fees and wait for a significant amount of time in order to transfer their assets either in the past. Given that cryptocurrencies were developed to help alleviate these issues, these problems have contributed to the fall of many a project and have created severe problems for others. As long a cryptocurrency provides more affordable transactions and high transaction speeds, it definitely has an advantage over some other projects.
Given the recent Binance hack, the crypto community has been reminded that security is very important when it comes to holding digital assets. No one wants to have a cryptocurrency that is simple to hack and there have been some products in the past that proved to be quite vulnerable. Cryptocurrency products that have seen their way to the top will often boast improved security mechanisms that work to guard users’ funds against digital theft.
Regardless of whether you are an investor, an enthusiast, or a developer, it can be helpful to know the features that help certain cryptocurrencies thrive and best other products. To better understand the success of various projects and how each component of success plays into the others, use the guide above as a way to evaluate well-known cryptocurrencies and their achievement in the industry.