The fact that cryptocurrencies have become wildly popular all around the world over the past decade is not a secret to anyone. From an unassuming and inconspicuous crypto project back in 2009, the market has expanded tremendously, currently comprising over 10,000 coins.
The number of users has also grown exponentially, despite the initial reluctance, with over 300 million people being lured by the sparkle and shine of the crypto sphere.
Although cryptocurrencies are not currencies in the traditional sense of the word, they have made their way into the global monetary system and are now going for mainstream adoption. They have been praised for their safety, transparency, immutability, decentralized nature, and, most of all, for their ability to yield high profits when used as an investment vehicle.
Many envision a future where cryptocurrencies will replace fiat money entirely and become the foundation of world finance.
Despite the many benefits that certain digital currencies provide and their undeniable potential, it’s important to acknowledge that cryptos don’t have any intrinsic value on their own. The price swings are dictated by the demand and supply dynamics and a series of other factors that influence the market. It’s utility that gives crypto real value, so this is the one element that can make or break a crypto project.
Utility as a driver of value
Ever since Bitcoin’s emergence, numerous other projects have made their debut on the market, promising to become the next big thing in the crypto sphere. Some have managed to attract a solid following, while others have vanished into thin air. Many of the crypto initiatives that have failed were lacking a vital ingredient: utility.
A cryptocurrency might check all the other boxes – a promising concept, proper funding, an experienced and dedicated team of developers, and good marketing – but without crypto utility, it can only last for so long in the increasingly crowded and competitive crypto environment. No matter how bright and shiny a coin may appear, it’s worth nothing if it can’t be used in real-life scenarios. So, it all boils down to real-world applications.
If there’s no crypto utility, there’s no demand and, therefore, no trading volume, so the project will die eventually. A crypto may thrive on the initial hype created around it and the speculation that derives. This might give traders the possibility to make a quick buck as prices increase, but these coins are not a suitable option for long-term investments as prices will ultimately deflate when the hype subsides.
Meme coins offer a prime example in this respect. They were created as a joke, mocking Bitcoin and other cryptocurrencies that were growing in popularity at the time. After they caught the eye of Elon Musk and Mark Cuban, their prices suddenly skyrocketed, turning them into some of the hottest assets in the crypto market.
But their moment in the spotlight didn’t last long. Since meme coins didn’t possess any use other than trading, people soon lost interest in them, and not even viral tweets could resuscitate them.
For a digital currency to prosper in the long run, it has to address a real-world problem and offer a viable solution to it. If people become aware of their efficiency, they’ll start using them, and this will create value. That’s why when evaluating different crypto projects and looking for profitable investment opportunities, one has to focus first and foremost on utility.
The crypto market is inherently volatile and unpredictable, making it nearly impossible to foresee how things are going to evolve. But amidst all the confusion and chaos, utility can be your guiding light and help you assess a project’s chances of success.
Choosing crypto by utility
Unfortunately, only a handful of coins out of the thousands of projects available on the market provide real-world utility. Bitcoin and Ethereum are among the rare exceptions.
Bitcoin is mostly known as an alternative means of payment and store of value, but what sets this crypto aside from other projects is the ability to improve the financial life of people in disadvantaged communities by banking the unbanked.
Bitcoin can be extremely useful for populations in areas riddled with financial instability and inflation or for those who don’t have access to traditional banking services by ensuring fast and easy transactions over the internet.
The best way to buy Bitcoin is to open an account on a reputable exchange platform, set up a wallet, and place an order for the amount you want to purchase. People from all parts of the world can easily buy Bitcoin online without having to travel to a central bank or deal with a third party in the process. Therefore, Bitcoin can lead to greater financial inclusion and address a real-world problem that central institutions haven’t been able to solve so far.
Although Bitcoin was the first project to introduce the concept of digital currencies, Ethereum was the one that expanded on it and pushed the industry further. By doing so, Ethereum proved its utility and became the second-largest crypto in the market.
Unlike Bitcoin, Ethereum’s use cases are not limited to payments and storing value. Ethereum is, in fact, a decentralized blockchain platform that offers smart contract functionalities and provides the infrastructure for the deployment of decentralized applications (dApps) and decentralized autonomous organizations (DAOs).
ETH is the native cryptocurrency of the platform that fuels the entire Ethereum ecosystem. As such, Ethereum’s uses are truly limitless, as it can benefit businesses in all industries and become a very powerful tool for its users.
With so many things going on in the crypto space at the moment, it’s not easy to tell which coins are going to succeed in the long run, but functionality is indeed a determining aspect of the equation. On the other hand, just because a project has utility doesn’t mean it will automatically become successful.
There are many other factors at play here, so this doesn’t exempt you from doing thorough research on a project before deciding if it might serve as a viable investment option or not.