Digital Reading Encrypted Assets, Smart Contract Platforms, Stable Coins, DeFi, Exchange Platform Coins, and Top Market Projects and Current Status of Privacy Coins
Original title: “In-depth 丨 One article to understand the six popular sections of the crypto market”
Written by: Lukas Wiesflecker
Translation: Sherrie
We should not throw all cryptocurrencies into one basket, but should divide all bitcoins into markets. Therefore, a fascinating, multi-layered “crypto market” picture was created, which tells many stories about network effects.
The leading indicators currently commonly used in the cryptocurrency market are “broken.” Because we throw all the cryptocurrencies together, and then calculate which market share has which cryptocurrency. It’s like comparing apples not only to pears, but also oranges.
If analysts divide the market into different market segments- crypto assets (such as Bitcoin) and crypto applications (such as the Ethereum cryptocurrency chain), and then calculate specific dominant indicators and determine their respective market leaders, then the crypto industry Everyone in will be a winner .
This is what we did today so that you can make decisions more easily when trading. The classification looks a lot like this:
Cryptocurrency wants to be a currency like Bitcoin. Stable coins copy a fiat currency, such as Tether and DAI, copy U.S. dollars; smart contract platforms, like Ethereum, mainly execute smart contracts, that is, they are more like a “decentralized computer” than currencies; privacy coins, through Realize the mixing of cryptocurrency and transactions at the protocol level to provide additional privacy; DeFi Tokens, which means a new, autonomous, more or less decentralized financial world Token, most of the time as Ethereum The smart contract is running; the transaction Token reflects the market power of the old centralized financial world in the cryptocurrency, including DeFi projects.
Of course, one can question this classification . Why are Ripple (XRP), Stellar (XLM) and Cosmos (ATOM) in the list of “cryptocurrencies”, but Ethereum (ETH) is not among them? How about security and ICO Token? Why are smart contract platforms and currencies mutually exclusive, but not privacy coins and currencies? Why can Chainlink (LINK) be both a DeFi Token and a smart contract platform? Since there are enough mechanisms to make Bitcoin anonymous and Bitcoin is also used in cybercrime, does it make sense to classify Bitcoin as a privacy currency?
Although these issues may be discussed for several hours, the result is important: it helps to more clearly determine which projects dominate the market in their field. In general, the situation of the cryptocurrency market shown in the chart is much more complicated than the large number of cryptocurrencies and tokens displayed on pages such as Coinmarketcap.
Market leaders and their competitors
The first chart shows cryptocurrencies. With a market value of 250 billion US dollars, this is also the largest part of “cryptocurrency”. Bitcoin dominates this market with a share of over 90% , followed by Ripple (XRP)-it should not be in this series because XRP is not a currency. In this category, Bitcoin Cash (BCH) will be ranked second, followed by Litecoin and Monero (XMR), a privacy coin. Bitcoin SV (BSV) is not included in this list. But this will not change the overall situation:
Bitcoin has no competition in the cryptocurrency category, and its dominance has been increasing since 2017. The demand for a second cryptocurrency other than Bitcoin seems to be negligible .
The smart contract platform has nearly 70 billion U.S. dollars and is the second most powerful part . Ethereum (ETH) dominates this area, although only 66% . Ethereum is followed closely by Chainlink, but some people may ask whether Chainlink belongs to this category as a data provider for smart contracts. Then there is Cardano (ADA), as far as I know, this project is not yet decentralized. EOS and Tron seem to be true smart contract platforms. In this part, I am not entirely clear about what Stellar or IOTA is missing. It is worth mentioning that none of them have smart contract virtual machines.
The actual advantage of Ethereum may be even higher-especially if the platform for the “dominance” of smart contracts is not a market value measurement, but values are handled by smart contracts in principle… However, even without this, the trend of market leaders is to expand it leading position.
The stablecoin is worth about 22 billion U.S. dollars and may be the third most important market in the cryptocurrency field . Compared with the currently proposed market segments, there is an obvious trend of decentralization, that is, the reduction of market leaders . Tether’s dominance now only accounts for 75%. Considering the uncertainty of Tether, this should be a good sign. Especially USDC, as well as DAI, can strengthen their position.
It is worth noting that since the spring of 2020, the market value of stablecoins has been rising rapidly. Unless there is a dramatic turn in the curve, this situation will continue, and 2020 seems to be the year of stablecoins.
The most recent part may be DeFi Token, which will reach US$11 billion . They are the most decentralized part, with 41 cryptocurrencies or tokens, and contain more projects than any other part.
Chainlink’s LINK Token achieved a 43% dominant position, but due to the short time span and low capitalization, the trend can only be roughly discerned. After LINK are projects such as UniSwap, Maker, Synthetix and Compound. I am not sure if Chainlink is suitable here; if it is eliminated, its market value will be relatively low, but this part of the business will be more dispersed.
In any case, the chart shows a fast-growing and vibrant ecosystem. So far, the only ecosystem that has formed a major bubble in August this year, and a token that has only existed for a few months has fallen in second place.
It is followed by the fourth market segment with a market value of slightly less than $10 billion: Exchange Token, which is a centralized and decentralized exchange . Binance’s BNB token dominates here, accounting for almost 50%.
Next is Synthetix, followed by Loopring and Balancer-they are both decentralized exchanges.
However, the chart only shows a small part of the market capitalization of crypto exchanges. Binance and OKEx may be relatively large players, but they are only a small part of all exchanges.
Privacy coins have the smallest market share, less than $5 billion . Among them, Monero topped the list with a market share of more than 55%, followed by Dash and Zcash, with roughly the same market share. Other privacy coins are mostly unknown, with a market value of less than 50%.
Since mid-2017, Monero’s dominance has been rising, and a clear and strong trend has formed: developers, users, and investors all believe that Monero is the most critical privacy currency.
Of course, one might ask whether Bitcoin should also fall into this category. After all, methods such as wasabi and the Lightning Network can make Bitcoin relatively anonymous. However, the same situation applies to Bitcoin Cash implemented through Cash Shuffle and Ethereum implemented through Tornado.Cash. Therefore, the question is more inclined to realize whether the particularity of privacy at the protocol level justifies the establishment of a separate project in the encryption market. The fact that the total capital of stablecoins has stagnated compared to cryptocurrencies confirms this.
All in all, the chart provides such a wealth of information that in the end, we have to record what we have learned and wonder whether investors can profit from it.
Network effects do not work in all areas
The most important findings revolve around network effects:
First, in certain areas of the crypto market, network effects are obviously crucial : cryptocurrencies, privacy coins, and smart contract platforms.
Once a leader appears in these fields, it is almost impossible for him to be ousted. He almost always increases his market share at the expense of competitors . It is almost impossible to surpass such a leader on his own-for example, through better technology. Even the weakening of market leaders—for example, due to the poor scalability of Bitcoin and Ethereum—has not helped competitors—such as Bitcoin Cash or EOS—make progress. In these markets, “usurpation” is impossible.
From a technical point of view, it is worth paying attention to a currency that has the same functions as Bitcoin, Ethereum or Monero, but is better and more complex. However, for investors, investing in such a coin may not make much sense. On the contrary, what is of interest is cryptocurrencies, which ensure their leading position in a certain market segment.
Second, the network effects of three types of cryptocurrencies are not obvious: stablecoins, exchange tokens, and DeFi Tokens . In the case of stablecoins, this is obvious; they are a bit like oil or peanuts: the product is always the same, but diversifying a limited number of suppliers will make the market more resistant to fragility, which is a common sign of market maturity. This is what we are currently seeing as Tether. It continues to lose market share, despite its strong innovative advantages, perhaps because Tether’s trust model is not popular everywhere, and the USDC score is mainly because it is reliable.
On the other hand, DeFi and market tokens behave more like markets-they are tokens, in some way, and sometimes only superficially, associated with the success of traditional centralized or decentralized economic enterprises. These tokens also have network effects—for example, when it comes to exchanges—but they do not dominate the market as mentioned above. In both cases, the market share of “others” is at least equal to that of the market leader, and the latter’s dominance index is declining rather than rising, which also reflects this.
In other words, although it is clearly the market leader that is worth relying on cryptocurrency first, smart contract platform, and privacy cryptocurrency, it may be profitable for DeFi and Borsentoken to pay close attention to the offer and track the potential Token in the future. of.
