The market capitalization of many cryptocurrencies is deceptive since there has lately been a significant increase in the values of a vast number of altcoins. In this essay, I want to demonstrate how and why Bitcoin is distinct from all the other cryptocurrencies now existence. The more probable conclusion is that Bitcoin would devour additional use cases in one form or another, thus nullifying any advantage that an altcoin may have, visit Crypto Genius.
Application in a Specific Niche
Many cryptocurrencies, including bitcoin, have attempted to carve out niches for themselves in the market. Tipping one other and transferring value, sometimes simply to transfer value, were the foundations of Dogecoin’s success, for example. To begin with, Ripple was intended to be a means for banks and other prominent organizations to transfer money.
The primary reason why a niche currency makes sense is if it can perform a function that Bitcoin cannot or will not do. What Dogecoin soon discovered is that tipping using Bitcoin is just as simple as tipping with Dogecoin. Should the practice of tipping become popular again, the Bitcoin ecosystem would be well-positioned to accommodate it. Bitcoin enables banks to move money amongst each other in a secure manner. Because Bitcoin has a more extensive user base to deal with, entrepreneurs have every motivation to bring comparable, lucrative ideas to the cryptocurrency.
What Makes Bitcoin So Special?
The network effect and verified security are the two most significant benefits of Bitcoin. Both of these advantages are almost insurmountable. As a store of value, Bitcoin has a well-documented use case. It is interesting to note that most currencies attempt to differentiate themselves by focusing on relatively narrower use cases, such as prediction markets, fully anonymous shopping, or the addition of a decentralized name server. Bitcoin has a significant advantage over every other cryptocurrency as a store of value, having been there for eight years without failing. Bitcoin’s security has been shown much more thoroughly than that of its much younger competitors, using Bitcoin surpassing that of altcoins on virtually every measure.
Furthermore, Bitcoin is becoming more accessible, thanks to an increase in exchanges, merchants, software, and hardware that supports it. Bitcoin has the most significant developer ecosystem of any cryptocurrency, with more applications and more implementations than any other alternative cryptocurrency. Bitcoin has the most significant number of entrepreneurs forming businesses around it, putting a great deal of intelligence, commitment, and creativity into making it more useful.
Competition with Bitcoin involves fighting against the considerably bigger user base, development team, and mining operation of Bitcoin and competing against the vast ecosystem of startups, open-source projects, and entrepreneurs that have sprung up around the cryptocurrency.
An Illustrative Case
Consider the following scenario: I design a currency for the purpose of email spam filtering. Let’s name this cryptocurrency SpamCoin to distinguish it from the others. It’s an altcoin that allows you to contact someone only if you give them a tiny amount of SpamCoin in exchange. Consider the possibility that this turns out to be very helpful and that many people begin to use it, increasing the value of SpamCoin. What would be the outcome?
It’s doubtful that Bitcoin will directly include the characteristics of SpamCoin (however, given the existence of sidechains, it’s impossible to rule out the possibility). The chance that some businessperson would develop a comparable service based on Bitcoin, on the other hand, is relatively high. They would have a far more extensive potential user base, to begin with, and you would not be required to utilize SpamCoin to do so. The barrier to entry would be lower, and the user base would be more extensive, resulting in a new Bitcoin service that would have built-in network effect benefits that SpamCoin would not have had. That is not to suggest that SpamCoin will not succeed, but it will have to contend with greater odds.
This is not to suggest that investing in altcoins is a terrible idea. Each investor must assess their individual risk-to-reward ratio and determine whether or not it is a suitable match for their objectives. What is apparent is that other cryptocurrencies are not a very effective hedge against Bitcoin. Much of the risk and possible rewards associated with Bitcoin are present in altcoins, as is much of the potential reward associated with Bitcoin. A cryptocurrency could overtake Bitcoin, but it would have to demonstrate much greater (current, not future) usefulness first and develop itself to be competitive with the Bitcoin network before the Bitcoin ecosystem would have a chance to include a feature similar to that.
As Bitcoin develops, we may anticipate expanding in unexpected ways as new applications are discovered for it. Bitcoin owners may anticipate that the currency’s utility will only grow in the future. On the other hand, owners of alternative cryptocurrencies face a much greater danger of their currency becoming obsolete. In other words, Bitcoin has already surpassed the competition and has the ecosystem and resources necessary to compete on an equal footing with substantial advantages. The fact that Bitcoin has two distinct advantages over other currencies is very beneficial in this regard. Stability and the capacity to be self-sufficient. Both have a market capitalization that much exceeds that of cryptocurrencies and will make catching up very difficult.