We empirically verify that the market capitalizations of coins and tokens in the cryptocurrency universe follow power-law distributions. The theory predicts that the exponent for tokens should converge to in the future, reflecting a more reasonable rate of new entrants associated with genuine technological innovations. Our results clearly characterize coins as being ‘entrenched incumbents’ and tokens as an ‘explosive immature ecosystem’.
A range of disruptive use cases, some more speculative than others, are foreseen. Regulators are watching the space, and their early statements about potential regulation send shock waves through the market. For guidance, we look to fundamental work on the nature of growth of firms and other entities. Zipf’s Law has been identified as a ubiquitous empirical regularity for firm sizes.
Some cryptos are ‘coins’ and others ‘tokens’ (which operate on top of a coin network as a platform) The coin market capitalization distribution is heavier tailed than Zipf’s Law, and that of the token market somewhat lighter.
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