Applying Darwin’s Theory of Evolution to Cryptocurrencies
In the world of cryptocurrencies, only the strongest and most well-structured networks thrive. This statement borrows from Darwin’s theory of evolution. Organisms in their natural habitat compete for resources necessary for their existence. Similarly, developers of cryptocurrencies should strive to build robust underlying networks for their crypto to increase their chances of survival in the next evolutionary cycle.
Defining a Healthy Cryptocurrency
However, cryptocurrencies differ vastly from living organisms. The resources responsible for a crypto ecosystem’s health differ from those that benefit a living organism. The environment cryptocurrencies exist is digital and decentralized, known as web3 space. They depend on user interaction in this space to build a healthy store of value. Without this user network, a cryptocurrency loses its value, just like a fiat currency.
Each cryptocurrency references its specific culture using a transactive coin. The value of this coin is rooted in the perception of the holders. This value can alter based on various factors such as social events, perception of the user, and the supply of the coin.
All cryptocurrencies derive their value from community and user interactions within the web3 environment. Hence, these cryptocurrencies compete within the same web3 parameters. The parameters that set to define a healthy crypto network could include aspects such as token holder activity, token distribution, type of holders, variety of transactions, and token flow.
Bitcoin, for instance, owes its successful network to an estimated 106 million users worldwide. It now holds more than half of the total value of cryptocurrency, making it one of the most popular wealth storage options in the web3 community.
The Bitcoin and Polygon Success Story
Over time, Bitcoin has proven to be a resilient and stable cryptocurrency despite its volatility. Bitcoin’s stable and high transaction volume is proof of its successful establishment. Back in the first half of 2024, Bitcoin’s blockchain regularly recorded over 400,000 transactions a day.
Similar to Bitcoin, Polygon, also referred to as MATIC, has successfully built a robust network. Approximately 633,588 wallets hold Matic, making it a widely held token being widely transacted. Throughout 2024, Matic consistently recorded over 4100 transactions a day, reflecting the asset’s robustness.
A Case of Rapid Unraveling: Dogecoin
Despite its impressive rallies in recent years, Dogecoin has struggled to establish a healthy network. At particular times, Dogecoin experienced a surge in user activity, temporarily increasing the price. However, the number of transactions driving this price increase proved unsustainable.
In 2021, Dogecoin’s price spiked by an impressive 23,000%, driven largely by short-term hype, not by diverse transactions. Most users interacted with the network for a pump-and-dump scheme, not for any long-term, sustainable utility. As an effect, a small number of wallets hold a significant percentage of the total circulating Dogecoin, indicating a lack of transaction variety and unreliable growth.
While Dogecoin, thanks to hype, is still holding on, its chance of survival in the long run is becoming increasingly unlikely in comparison to Bitcoin and Matic.
Concentration on Network Development Instead of Price Driven Growth
The ultimate success of any cryptocurrency and its price increase depends on the health of the underlying web3 network. Instead of aiming to inflate the price value, cryptocurrency developers should concentrate on creating a healthy underlying network. They should focus on nurturing sustainable and diverse transactions. The development of such a healthy network would attract more users, fight off competition, and gradually increase the token price.
