The Importance of a Clear and Unique Use Case for Cryptocurrencies
What problem are we solving and does it already have a working solution in place?
If you’re a loyal Luno blog reader, you’re familiar with our stance on adding new cryptocurrencies to our platform. If you’re joining us now — buckle up and welcome aboard our rocket ship.
Behind our thinking
We know it can be frustrating if we don’t support your favourite altcoin, but we have good reasons as to why we don’t. Before adding any cryptocurrencies, we like to ask ourselves a few important questions, like:
- Does it solve a clear and unique use case? Does a working solution already exist?
- Does it have a large community of people who will be willing to adopt this solution?
- Is it decentralised? Is it controlled by a single organisation or person?
- What does the team look like? Do they have experience?
What problem are we solving?
We want to ensure we’re providing the elements on our platform that perform a specific and obvious function for our customers. According to CoinMarketCap, there are over 2,000 altcoins available on the internet. In addition to this, creating a cryptocurrency has never been easier.
Another aspect we consider important when determining which cryptocurrencies we list is mass adoption.
Like other new technologies, unless it can help save a lot of time and money, or has some other tangible form of utility, people are unlikely to go to the effort of adopting it.
Having a unique use case and reaching mass adoption go hand in hand. For a new cryptocurrency to gain widespread adoption and market traction, it needs to have a clear and unique use case which solves a problem for a large number of people.
A practical example: telephones. Landlines reached mass adoption because everyone needs to communicate with each other, and they were far more efficient than older methods like sending physical mail. Imagine your pipe burst at home and you’ve got to get a plumber in before your whole house is completely waterlogged. You could send your plumber a letter but it’s likely you’ll already be sharing your home with the fishes before the postman’s even sent your letter off.
Bitcoin: Paving way for a better financial system
The invention of cryptography and blockchain technology has given us the platform to look at ways to renew and enhance the financial system. When it comes to Bitcoin, it’s pretty obvious as to why it’s the most popular alternative to traditional banking, especially considering its tenure within the cryptocurrency space. There’s a lot of potential, but we believe cryptocurrencies make the best use of blockchain technology at this stage. Plus, of all of the cryptocurrencies out there, we believe Bitcoin has the network effect and many snowballing benefits that continue to encourage people to adopt it into their daily lives.
Bitcoin offers a better solution to the rigid banking systems that were created decades ago at a time when people’s needs and desires were totally different from today’s.
Simply put: Ordering a pizza with extra pepperoni at 2am wasn’t a top priority for feudal serfs having to pay their landlords, but in 2019 we’d really like a different system that meats (pun very much intended) that need.
Ethereum: Making contracts smarter
When we look at the case of Ethereum, it’s a great example of a cryptocurrency with multiple valuable and unique use cases. When we consider the way we interact within the contractual space (think: renting property, signing up with a mobile service provider, or even admitting yourself into a hospital), the paperwork generally exists in some type of database.
Who controls the database? How safely are these important documents kept?
Most of the time, you don’t know the answers to these questions, but the truth is, it’s your personal information that only authorised personnel should be able to access for a specific reason. With the awareness and news surrounding data leaks becoming more and more prevalent (and rampant), people are becoming more concerned with protecting their data, which is where one of Ethereum’s great unique use cases comes in.
Ethereum’s founder, Vitalik Buterin, set out to create a cryptocurrency which expanded on the Blockchain project, with added security and the ability to perform a smart contract role. Coinstaker describes smart contracts as “[…] bring[ing] to the table transparency, trust, mathematical logic and a bond between two parties that can’t be broken.” At the moment, a solution to protecting people’s data and private information doesn’t exist, so smart contracts could offer a solution to this big issue.
Putting it together: Painless insurance?
It might make you recoil — contract, as it were — but let’s look at how this might play out in real life. Think about the insurance industry. At some stage or another, we’re sure you’ve needed to make a claim to your insurance company. Most of us would rather watch paint dry than deal with an insurance company, as it can take weeks or even months for your insurer to process and pay out your claim. Between the manual labour that goes into this process, administrative costs and the increase you’ll incur in your premiums (and the extra grey hairs) making a claim is far from fun.
What’s the answer? Smart contracts.
Insurance companies have the potential to automate insurance policies. According to Draglet, “When the input conditions of the smart contract change in an insured event, for example in the event of a catastrophic natural disaster, then the claims process is triggered immediately.” Due to the distributed nature of smart contracts on the blockchain, transparency and trust in the process is visible to all stakeholders and regulatory bodies.
If it ain’t broke, why fix it?
The amount of innovation happening in the world at the moment is inspiring, to say the least, but the viability of all of these innovative ideas and prototypes is tested when considering whether or not they’ll solve a problem for the larger public.
More often than not, to innovate costs money, and if the innovative product isn’t going to sell (and, in turn, make a lot of money), there’s little chance it’ll survive out there in the big, bad world.
Think about almost every episode of Dragons’ Den you’ve ever watched and you should get the idea of where we’re going with this.
The financial system is most certainly not broken, but we believe it is due time for an upgrade. We believe the two cryptocurrencies we offer have the potential to (and do) save people time, money, and a whole lot of hassle. Even though there are a multitude of cryptocurrencies out there with great unique use cases, we also need to ask ourselves if the world is ready for them yet. An example of a great solution that came about before people knew they had a problem is pocket PDA’s. They solved the issue of being able to organise your diary on the go, but by the time it gained traction, mobile phones with this technology already integrated within them were becoming popular and offered a much more practical solution as opposed to PDA’s with a sole function.
Share a great use case
We understand the passion behind a popular altcoin, however, our vision of upgrading the world to a better financial system needs to be at the forefront of each and every cryptocurrency we consider.
We always encourage you to do your own research before you consider buying any altcoin, and ensure you’re aware of scams and fraudulent ICOs. Let us know on Facebook and Twitter which cryptocurrencies you believe have the best unique use cases.