At the outset of the blockchain, there wasn’t a single coin in circulation. This meant that each coin had to be created by transactions that did not include a coin that was already in existence. Therefore, the two parties would make a deal, and after the verification process, they would be able to create a new coin.
The reason for this system was so that only the absolutely necessary number of coins would be created. This was purposely done to avoid the uncontrolled issuance of currency that governments engage in. As a result, only a set number of coins would be used to conduct a specific number of transactions.
Initially, it was thought that the blockchain could produce enough coins to run the entire world economy. However, experience has proven this to not be the case. There is a finite number of coins as the computing power and electricity needed to create them would eventually surpass humankind’s ability. Thus, the only choice here would be to create a fixed number of coins.
The workaround to this situation was to create multiple cryptos in order to share the load, so to speak. Since then, a great deal of coins has been created. Some have quickly gained popularity, while others have remained within a niche market of users. For instance, gaming communities use very specific cryptos for in-app purchases or transactions during gameplay.
Other cryptos have taken the route that is known as an “initial coin offering” or ICO. An ICO is very similar to an IPO with a stock. In an ICO, the creator(s) of the crypto issues an initial number of coins which users can purchase at a specified market price. Like IPOs, underwriters determine the valuation of each coin based on its potential and possible utility. Some ICOs have been widely successful, while others have been a flop. Still, ICOs are generally met with the same expectation as IPOs, that is, the hope that an investor can get in early and clean up when the market begins to push up the price.
