When you first step into the world of cryptocurrency, you might feel the same dizziness as walking into a supermarket. The shelves are filled not just with the well-known Bitcoin, but with thousands of other tokens with various names and fancy logos.

As a beginner, a big question mark will surely pop into your head: Since we already have Bitcoin, why do we need thousands of other cryptocurrencies? Isn't one universal digital currency enough?

This is like asking, if we have gold, why do we still need oil, electricity, stocks, or even supermarket loyalty points? The simple answer is: because they solve completely different problems. In this article, we will peel back the complex technical layers and give you an easy-to-understand perspective on the logic behind this seemingly chaotic market.

Bitcoin is 'Digital Gold', But Why Can't It Dominate Every Scenario?

To explain this clearly, we first need to understand the essence of Bitcoin. Bitcoin's original design was very pure: it is a decentralized peer-to-peer payment system, or more accurately, an extremely secure store of value.

You can think of Bitcoin as gold in the real world. Gold is very precious, easy to preserve for the long term, and has a high degree of global consensus. However, if you want to buy a cup of coffee at the convenience store downstairs, would you cut off a small piece of a gold bar to pay? Obviously not. There are two reasons:

1. Cutting and weighing are too cumbersome (in Bitcoin, this means slow transaction speeds).

2. Transportation costs are high (in Bitcoin, this means the transaction fee could be more expensive than the coffee).

Data doesn't lie: the Bitcoin network can only process about 7 transactions per second (TPS), whereas a global payment network like Visa can handle tens of thousands per second. This technical characteristic of 'sacrificing speed for security' destines Bitcoin to be more like gold locked in a safe, rather than being used for high-frequency daily interactions.

Therefore, the market needs other cryptocurrencies to fill the gaps for 'buying coffee,' 'playing games,' or 'signing contracts.'

More Than Just Money: What Are the Core Functions of Other Cryptocurrencies Besides Payment?

Many beginners fall into the trap of thinking that all cryptocurrencies are meant to be 'money.' In fact, among the tens of thousands of crypto projects today, the vast majority are not intended to be currencies at all.

If Bitcoin is like a simple but incredibly robust calculator, then later platforms like Ethereum are more like a smartphone.

On a smartphone, you can install various applications (Apps). Similarly, on these new-generation blockchain platforms, developers can write code to create various decentralized applications (DApps). At this point, the tokens on these networks are not just 'money'; they are more like:

• Digital Oil: You need to pay tokens as 'gas fees' to run programs on the network.

• Membership Cards or Tickets: Holding a certain token gives you the right to use a specific service or join a particular community.

• Voting Rights: Token holders can vote on the future direction of a project, much like shareholders.

Thus, it is precisely because the application scenarios of blockchain technology have expanded from simple 'bookkeeping' to 'programmable smart contracts' that we need different types of tokens to drive these different functions.

From Ethereum to Dogecoin: Major Categories and Practical Uses in the Crypto Market

To avoid overwhelming you, we can simply divide these thousands of cryptocurrencies into three main categories, each with its own reason for existence:

1. Public Chain Infrastructure (e.g., Ethereum): These are the 'operating systems' of the blockchain world (similar to iOS or Android). The vast majority of other tokens do not have their own blockchain but exist on top of these operating systems. Their value depends on how many thriving applications are built on them.

2. Utility Tokens: This is the largest category by number. They are created to solve specific problems. For example, some tokens are used for decentralized storage (like renting out your hard drive space to others), while others are for cross-border remittances (pursuing ultimate speed and low cost).

3. Culture and Meme Coins (e.g., Dogecoin): This category is the most perplexing for traditional investors. They often originate from an internet joke or meme. You can think of them as 'social badges' or 'collectibles' of the internet age. Their value comes mainly from community consensus and cultural identity, rather than technological innovation. Although they may seem 'useless,' they demonstrate powerful viral potential in the internet's attention economy.

Why Are There 'Thousands' of Them? The Truth Behind Open-Source Tech and Market Speculation

You might ask, 'Even with many use cases, why are there tens of thousands?'

Two key factors have led to this explosion in numbers:

First is open-source technology. Most of the code for blockchain technology is public. This means any programmer with a little technical knowledge can copy the code of Bitcoin or Ethereum, change a few parameters (like changing the name to 'KittyCoin' and increasing the total supply), and issue a new cryptocurrency in minutes. This extremely low barrier to creation has led to a flood of projects in the market.

Second is market speculation. In the early days of cryptocurrency, many people missed out on Bitcoin's rise and were eager to find the 'next Bitcoin.' This mentality created huge opportunities for speculators. A large portion of the thousands of cryptocurrencies were not created to solve real problems but to ride trends, grab attention, and try to get a piece of the pie in the early, chaotic market.

According to some industry data tracking from 2025, although the number of active cryptocurrencies globally is vast, only a very small fraction have genuine daily active users and developer activity.

Not All Are Useful: How to Identify 'Vaporware' and Useless Projects

Faced with a sea of choices, the most dangerous trap for beginners is falling for 'vaporware' projects. These projects usually have nothing more than a catchy name and a fancy website.

To identify them, you can try asking yourself three questions:

1. What real problem does it solve? If a project claims to use blockchain to solve the 'problem' of buying a toothbrush, it's likely a pseudo-problem, as existing payment methods are already good enough.

2. Is blockchain really necessary? Many businesses are more efficient using a centralized database (like an Excel spreadsheet). Using blockchain for the sake of blockchain is usually a way to issue a coin and raise money.

3. Is the development team actually working? This is an open-source world. If a project's code repository (like on GitHub) hasn't been updated in six months, it's basically 'brain-dead,' no matter how loud its marketing is.

A truly valuable project often has a clear use case, an active developer community, and real user data, rather than just a grand vision on a whitepaper.

Conclusion: How Can Beginners Discern Real Value Amidst the Dazzling Array of Cryptocurrencies?

Let's return to our original question: Since we already have Bitcoin, why do we need thousands of other cryptocurrencies?

The answer is: we need Bitcoin as a golden anchor for the digital age, but we also need smart platforms like Ethereum to build applications, stablecoins to connect with traditional finance, and even meme coins to express internet culture. The ecosystem is multi-layered.

However, this does not mean that all 'thousands' of these coins need to exist. It's like the dot-com bubble, where countless .com companies were born, but only a few, like Amazon and Google, survived to change the world.

For beginners, the most important thing at this stage is to maintain a learning mindset rather than rushing to trade. Understand the logic behind the technology and distinguish between 'assets' and 'tools.' If you wish to delve deeper into this field, be sure to learn and experience it through well-known, regulated, and compliant platforms. This is the best way to protect yourself and understand the future.

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