Bitcoin has had a few milestones. It’s ten years old and growing in popularity and just recently reached 18 million coins mined, which means there are only three million left to be discovered. Certainly by now, every trader in the cryptosphere has heard about Bitcoin but many still may not realize why it stands out among the thousands of other altcoins.
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Bitcoin will always have its maximalists and purists; those who would never sully their digital wallet with those other tokens, and there are some who have completely adopted altcoins and not looked back at Bitcoin. In most cases, the value of, and motivation to accumulate cryptocurrency is relative and subjective.
Why people buy altcoins
In many cases, people trade or HODL altcoins as a way to hedge against Bitcoin. Let’s discuss some common reasons for someone to hedge with altcoins:
- Bitcoin may have some catastrophic failing and altcoins are not expected to follow suit
- An altcoin may have some future utility and features that are significantly better than Bitcoin
Bitcoin vs Altcoins
Bitcoin continues to be considered the “gold standard” of cryptocurrency; that which all other tokens relate their value against. Even with a volatile market, Bitcoin continues to hold value but there is room for altcoins to grow and compete, perhaps catering to specific niche consumers and investors.
All blockchain projects and the overlying cryptocurrencies are susceptible to technical, economic or consensus flaws.
Technical flaws
A technical flaw would be something like a vulnerability in the cryptographic code. Instances might be flaws in the system’s security that could prompt a hack, or ability to jam up the network with a 51% attack.
Economic flaws
Economic flaws might be code-based or human error. In a case where code changes accidentally distribute or burn tokens could affect the economic stability of a token. There was even a case where someone put too many zeroes in the send transaction.
Consensus flaws
Support fails or lack of consensus between nodes for hardfork changes may cause instability in the network, but may also launch a fork from the original token to create a separate entity with their new consensus model.
Flaws happen. Vulnerabilities are often found after a project is launched, even between beta and live testing. With smaller altcoin projects, consensus might be reached rather quickly to tackle vulnerabilities, and a hardfork is often required to implement those changes. In some cases, projects lose their community and technical support; they get delisted and eventually die, but the Bitcoin network is over ten years old with enterprise-level support. Changes could take a while or previously supporting nodes jump ship and fork to a new chain. Yet Bitcoin remains top crypto by volume and market capitalization.
Scaling
Another comparison between Bitcoin and other altcoins is the ability to scale for mass use or speed in which transactions can take place. Bitcoin can take anywhere from ten minutes to a few days to finalize a transaction. Altcoins like Ripple and Ethereum are constantly seeking ways to increase speed while maintaining security.
Even in this, Bitcoin has the first mover advantage as it is truly a decentralized network whereas many altcoins have a creator who acts as the de-facto benevolent dictator. Is the fact that Bitcoin doesn’t have a leader and isn’t authoritarian a good or bad thing? The answer is subjective to those who do or do not support it.
Will Altcoins Rule?
Altcoin investors and enthusiasts will most likely aim to overtake Bitcoin in the top spot by market capitalization, adoption and use cases but in truth, altcoins have much of the same utility of Bitcoin as far as being a token of exchange and value proposition. Even with base codes being substantially different between altcoins and Bitcoin, the economics are similar.
By sheer history of existence and the ability to last this long with signs of growing adoption, Bitcoin has become synonymous with cryptocurrency; kind of like how Kleenex, the brand, has become synonymous to tissues, the product. Never underestimate the power of that kind of branding with mass adoption.
Remember too that Bitcoin is a blockchain and it is also a token. A blockchain can support the token but the token cannot support the chain. Mass adoption will depend on developers creating apps that can utilize the Bitcoin blockchain, much like altcoin app developers are doing. Additionally, there are opportunities beyond mining that can turn a profit for Bitcoin and its altcoin counterparts.
Certainly, many altcoins have tried to carve out niches uses for their tokens. Dogecoin, for example, was built on tipping each other and transferring value, often just for the sake of transferring value. Ripple was originally conceived as a way for banks and large institutions to transfer value.
The main way a niche coin can compete with Bitcoin is to have abilities or advantages that Bitcoin cannot offer. Ethereum is currently ranked number two by market capitalization and Ripple is in the news because of their innovation in banking and remittance. Yet still, when you ask a random person on the street their thoughts about cryptocurrency, more often than not, they’ll respond with, “Oh, you mean Bitcoin?”
That alone is marketing gold and a marker for why Bitcoin stands out among the rest. Recognition, adoption and similar utility will make it very difficult for any altcoin to compete.
Disclaimer
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