Bitcoin was first ‘mined’ in 2009 and since then it has gone through a roller-coaster ride of developments and price swings. More importantly, the cryptocurrency world has rapidly expanded to include numerous other currencies with various functions.
Some of these currencies are in direct competition with Bitcoin for the use case as a store of value, and for others the competition is a little more subtle. In this article, we will go through the different competitive pressures on Bitcoin and examine the different reasons Bitcoin may end up fading away.
Bitcoin vs. Fiat
There are two major competitive areas for Bitcoin. It has to both prove itself to be better than fiat currencies and to be the best cryptocurrency. Fiat currencies are governed by major institutions within each country and have the advantage of being required in order to pay taxes to said institutions.
However, there are a lot of places in the economy where Bitcoin (and other cryptocurrencies) have potential to compete. The main arguments against cryptocurrency are over its stability and backing. The price has gone through a high degree of volatility since its inception, and shows little likelihood of calming down soon.
With the price moving through rapid swings, it is clear that Bitcoin wouldn’t make a good cash substitute at this time. However, as an investment, it has a way higher likelihood of yielding a positive return than cash in the USA, which inflates away a portion of its value every year.
And in terms of governance, naysayers will criticize Bitcoin by saying it is weak because it is not backed by any government, but this is actually a strength. Bitcoin has no centralized power to induce hyperinflation for political ends, and is instead governed by a democracy of voters (or nodes). And it is backed by trust in the mathematical certainties of the algorithm, rather than fallible unelected officials.
The Case for Competitors
There are many other cryptocurrencies out there, but assets like Ethereum and Ripple are not in direct competition with Bitcoin. They have different use cases, and large as they may be, they do not seem to pose a direct threat to Bitcoin. However, Bitcoin Cash and Litecoin are directly in competition with Bitcoin’s end goal.
“../bitcoin-hard-fork-august-bitcoin-cash/” target=”_blank” rel=”noopener noreferrer”>Bitcoin Cash was created from a fork in the blockchain for Bitcoin, and it has a devoted following of those who believe that Bitcoin should be both cheap and fast to use. The main trade-off that occurs here is in the decentralization supporters of Bitcoin believe is essential to the survival of Bitcoin. Bitcoin Cash supporters are willing to sacrifice decentralization in the short-term to enable the faster payments, but many believe this puts it in direct competition with companies like PayPal, which is a battle it cannot win.
Litecoin was invented to be the silver to Bitcoin’s gold and provide a trading pair that could fill in for Bitcoin’s high transaction fees and block sizes. Rather than taking every 10 minutes for a block, Litecoin takes 2.5 minutes. There is set to be a higher supply (84 million coins) than Bitcoin, and this helps create the feeling that Litecoin could work in tandem with Bitcoin.
Also Read: How To Mine Litecoin?
Currently, the market capitalizations of Bitcoin Cash and Litecoin are ranked at 4th and 6th, respectively.The market capitalizations are a measure of the market sentiments about the priorities of the cryptocurrency, which indicates Bitcoin is still seen favourably.
Accessibility is another pull Bitcoin has over its various competitors as it can be found at all exchanges and traded for almost any currency of your choice. However, it is fair to say that Litecoin and Bitcoin Cash do not lag behind. Despite being a ‘freshman’ in the market, Bitcoin Cash, for instance, is now immediately available for purchase with popular fiat currencies like USD and EUR at virtually all exchanges. Though, some trading platforms opt for even greater diversification and start accepting GBP alternatively (as the review of CEX.IO exchange says). When it comes to trading Litecoin, the range of fiat options is more extensive, and so is the number of cryptocurrency exchanges dealing with it.
Evolutionary Aspect of Bitcoin
The cryptocurrency world works differently than any other monetary assets, because the competitive landscape is so different. In the USA, there is no potential competition to the USD, because it is produced by the same institutions that collect it for paying taxes. This gives it an undeniable use case which can’t be infringed upon in any conceivable way.
The main difference with cryptocurrencies is they are competing for other use cases. Right now, the USD is commonly used as a store of value or measure of wealth. It is not uncommon to report your net worth in terms of USD. With Bitcoin and other cryptocurrencies competing to be the new medium of transfer or store of value, all of this is finally coming into question.
Natural selection works in nature to ensure only the strongest survive and are able to pass on their genes. The theory is that natural selection may work in monetary terms as different cryptocurrencies are introduced. As with Bitcoin Cash or Litecoin, they end up getting compared to Bitcoin (BTC), and the more likely successor is chosen and invested in.
As a result, you will see larger swings when perception changes and a level of mob rule occurs and pushes investment out of one cryptocurrency and into another. Bitcoin was the first cryptocurrency conceived that actually solved all of the problems ingrained in the model, but that doesn’t mean a new cryptocurrency couldn’t be invented that operated better.
With this possibility, it is important to keep in mind that Bitcoin could very likely fade away if a cryptocurrency came around with a stronger development team and more ardent following.
Finally there is Competition
Before now, there has never been any competition in the world of monetary assets. USD has remained the most stable and trusted currency for decades without anyone questioning the amount of inflation and centralization inherent in the currency. In the future, we have Bitcoin competing with USD for dominance, as well as many other cryptocurrencies entering the market in an attempt to capture that value. There is a possibility Bitcoin could fade away, but it has a massive head start for now.
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