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<h2 id="header-0">Quick Takes</h2><ul><li>Cryptocurrencies are both homogeneous and heterogeneous.</li><li>The homogeneity of cryptocurrencies is manifested by their same susceptibility to and their strong correlation with mainstream currencies’ market performance, whereas heterogeneity by the disparity of their popularity and recognition in the market.</li><li>The ever-evolving blockchain infrastructures of today may lead cryptocurrencies and the overall crypto market to a more heterogeneous future.</li></ul><p><img src="https://academy-public.coinmarketcap.com/optimized-uploads/d664b4170a0a48f4ba9264c8eca296c5.jpeg" /></p><p>Ever since the advent of Bitcoin in 2008, a surging number of cryptocurrencies began to make their way into the market. According to<a href="https://www.statista.com/statistics/863917/number-crypto-coins-tokens/" rel="noopener noreferrer nofollow"> Statista</a>, there are nearly over 10,000 cryptocurrencies as of May 2022. While discussions about whether cryptocurrencies are homogeneous are often heard during the early times of blockchain development, in recent years, more and more have turned to heterogeneity, providing diverse perspectives in analyzing the ever-growing cryptocurrencies and the crypto market.</p><p>It could be quite intimidating when looking at the two abstract words: homogeneity and heterogeneity. But in the context of cryptocurrencies, they are not as complicated as they appear. Simply put, homogeneity refers to how the volatility of cryptocurrencies is affected by mainstream currencies’ market performance in a similar pattern, even though unrelated. And heterogeneity refers to the fact that, while cryptocurrencies are equally susceptible to market performance, they do not share the same popularity and recognition and differ in transaction volume, market value, currency prices, etc.</p><h2 id="header-1">The Homogeneity of Cryptocurrencies</h2><p>Cryptocurrencies, like any other currency, are mainly defined by their values. Therefore, to explore whether currencies proclaim homogeneity, their value sources, and how and by what factor these values are affected need to be identified.</p><p>Namely, there are three primary sources of value that forge three different types of cryptocurrencies. One is the payment cryptocurrency represented by Bitcoin, a commodity currency that can be used for payment. Another is the fiat-currency-anchored cryptocurrency like Tether, whose value is anchored to and determined by a specific legal currency. The third is the asset-mapping token as Binance Coin, representing the equity assets the holder possesses of a project. Except for fiat-currency-anchored currencies, the value of the other two in the secondary market is challenging to measure. However, by defining these currencies, correlation analysis can be done to reveal whether the price fluctuations of these cryptocurrencies are affected by the same economic factors and give clues for further analysis of homogeneity.</p><p>A <a href="https://arxiv.org/abs/1910.01330" rel="noopener noreferrer nofollow">research</a> conducted in 2019 with Bitcoin as the parameter discovered a linear correlation between Bitcoin and some other 3600 payment and asset-mapping cryptocurrencies, concluding that all the cryptocurrencies are affected by similar market factors, though the particular factors remain unclear. Furthermore, after removing the trend of Bitcoin, the distribution of cryptocurrency returns immediately dropped to nearly 0, and the distribution became relatively concentrated.</p><p>In other words, the results show not only that most of the cryptocurrencies are similarly affected by the market but also that they are anchored to the earning trend of mainstream currencies such as Bitcoin and Ethereum. The market&#39;s value measurement of cryptocurrency is hence extremely homogeneous, and all factors that can cause Bitcoin price fluctuations will have the same manifestation on all electronic currencies at the same time.</p><h2 id="header-2">The Heterogeneity of Cryptocurrencies</h2><p>Although the volatility of the cryptocurrency is homogeneous, there are still apparent disparities among different currencies in terms of popularity and recognition, demonstrated by their contrasting indicators such as market value, currency price, and trading volume.</p><p>Another result of the research mentioned above has shed light on the possible causes of such heterogeneity. The research pointed out that the number of transactions on the chain of certain cryptocurrencies appears to have a strong correlation with the number of Reddit subscriptions, Facebook likes, and Twitter followers of the currencies. In this sense, one way to analyze the heterogeneity could be to explore how people have played a significant role in the overall cryptocurrency scenario.</p><p>It is generally believed that there are three distinct camps in the user ecology of cryptocurrency. The first is the technology-led developer camp, which pays attention to the development of blockchain technology and carries out technical discussions around various projects. The second camp is speculators who care about currency price fluctuations in the short term and use multiple means to arbitrage. And the third refers to those real users of cryptocurrencies, who may be groups of miners or participants of any transaction that uses cryptocurrencies.</p><p>When taking a closer look, it’s not surprising that each camp seems to be impacting and forging heterogeneity in different ways, with developers playing a leading role and the speculators mattering the least. Hence, the conclusion is quite straightforward: the heterogeneity of the market value of cryptocurrencies is most likely caused by their technological enthusiasm (maturity). The better a blockchain infrastructure, the more valuable the relevant currency and the higher the transaction volume.</p><p>In<a href="https://medium.com/&#64;arikan/a-comparison-of-heterogeneous-blockchain-networks-4bf7ff2fe279" rel="noopener noreferrer nofollow"> Burak Arikan</a>’s opinion, the blockchain network is one of the key aspects that has been centered in recent technological discussions. As the new generation of projects such as Cosmos, Polkadot, and Avalanche releases extraordinary infrastructures as improvements over Bitcoin and Ethereum, these new blockchain infrastructures and architectures begin to challenge the heterogeneity and lead to a more heterogeneous future for not only the cryptocurrencies but also the crypto market as a whole. Many believe that such heterogeneity is healthy for cryptocurrencies and a truly decentralized internet, for it is these infrastructures that make their own design choices and tradeoffs in their own right.</p><p>To sum up, once believed to be highly homogenous, cryptocurrencies are now becoming increasingly heterogeneous due to the emergence of various impressive blockchain infrastructures. As a Web3 engine that endeavors to provide reliable infrastructures to power up the Web3 space, Rangers Protocol, would also do its best for a heterogeneous future and embrace more diversity and inclusivity in the crypto world.</p><h2 id="header-3">About Rangers Protocol</h2><p>Rangers Protocol is the backbone of a Web3 engine for creating immersive Web3 applications. It minimizes the development difficulty for Web3 developers and maximizes the user experience of its Web3 applications. Rangers Protocol provides comprehensive infrastructures for efficient complex-app development, successful cross-chain and mass distribution, diverse in-app NFT and DeFi features, and more. Through its full EVM compatibility, strategic industry partnerships, and curated all-in-one IDE, Rangers Protocol supports AAA and indie developers to succeed in the Web3 world.</p><p><a href="https://rangersprotocol.com/" rel="noopener noreferrer nofollow">Website</a> |<a href="https://medium.com/rangersprotocol" rel="noopener noreferrer nofollow"> Medium</a> | <a href="https://twitter.com/rangersprotocol" rel="noopener noreferrer nofollow">Twitter</a> | <a href="https://t.me/RangersProtocol" rel="noopener noreferrer nofollow">Telegram </a>| <a href="https://discord.gg/jCDv2NbwFy" rel="noopener noreferrer nofollow">Discord</a> | <a href="https://rangersprotocol.gitbook.io/rangersprotocol/tokenomics" rel="noopener noreferrer nofollow">Gitbook </a>| <a href="https://sg.linkedin.com/company/rangers-protocol?original_referer&#61;https%3A%2F%2Fwww.google.com%2F" rel="noopener noreferrer nofollow">LinkedIn</a> | <a href="https://linktr.ee/rangersprotocol" rel="noopener noreferrer nofollow">Linktree</a></p>

Homogeneity vs. Heterogeneity of Cryptocurrencies

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