Given that the introduction ofNamecoin, the first serious attempt to build a public blockchain network separate from Bitcoin, there has been a surge of so-called “altcoins”?’“ & ldquo; bitcoin competitors?’& ldquo; which have looked for to unseat bitcoin from its throne atop thecryptocurrency charts. Up until now, none have come close to matching the marketplace need for bitcoin, with bitcoin commanding about 82% of the market share in the $ 12.9 billion cryptocurrency market at the time of this writing. This in spite of the various innovative functions offered bycompetitors: private deals in protocols like Dash and Monero, cross-currency transactions in protocols like Ripple and Stellar, energy-efficient agreement algorithms in procedures like Bitshares and NXT, and fully-programmable smart agreements in procedures like Ethereum.
It took over a year to discover if bitcoin might withstand competitors from a coin utilizing the exact same mining algorithm (namecoin), and it took nearly 4 years to find out if bitcoin could hold up against competition from a coin which didn’t need mining at all (ripple). Bitcoin has actually fulfilled these challenges, and has continued to meet extra challenges from coins with varying feature-sets, parameters, consensus algorithms, and user-base demographics. Regardless of bitcoin’s viewed drawbacks?’“ & ldquo; the absence of protocol-level features, the absence of governance structure, the bad branding and marketing?’“ & ldquo; it has astrong network effectthat is owed in part to its first-mover benefit and is supported today by alarge communityof developers, financiers, miners, and end-users, a worldwide exchange network, and extensive merchant integrations. In short, bitcoin is unlikely to be overtaken by a competing cryptocurrency at any time soon.
Scaling Up and Out To even more fan the flames that are fueling bitcoin’s rise to supremacy as the world’s requirement for electronic cash, a development has been developed that would allow bitcoin to be transferred to and from other blockchains thathave their own independent feature-sets and agreement algorithms, supplying a method for bitcoin to scale both up (in regards to deal capacity) and out (in regards to features) without needing to make risky modifications to the main bitcoin blockchain. This development, called a “sidechain,” is presently being prepared for production use.
An implementation of sidechain innovation calledLiquidhas already been embraced by a consortium of bitcoin exchanges to increase liquidity in the bitcoin trading market. Liquid enables traders to transfer bitcoin nearly quickly between participating exchanges and payment processors without needing to wait for confirmations on the primary bitcoin network. This is justone variationon sidechain technology and reveals exactly what is possible even with the restricted feature-set these days’s Bitcoin protocol. In the future, there will be bitcoin-denominated sidechains that can replace all the helpful performance of even the most popular altcoins (seeRootstockfor one such example). And as in the altcoin market, there may be lots or hundreds of sidechains contending for company?’“ & ldquo; all backed by bitcoin.
There are other cryptographic off-chain approaches for scaling bitcoin transaction capability that have actually been proposed, consisting of theLightning NetworkandOpen Transactions ballot pools. These approaches make use of Bitcoin’s native scripting abilities to lock-up bitcoin for an amount of time, track transfers off-chain utilizing payment channels when it comes to Lightning Network and triple-signed receipts in the case of Open Deals, and then redeem the locked-up bitcoins and move them back to an on-chain address when the recipient is prepared to take full custody of their coins. Like sidechains, these methods will never ever offer the specific very same kind of security as on-chain transactions, however the benefits gained with the security trade-off can include speed, privacy, and cost-efficiencies that make it more than worth it for users to briefly move low-value or short-term bitcoin transactions off-chain.
Software application advancements like sidechains, the Lightning Network, and Open Transactions mean exactly what the future holds for bitcoin, both in regards to how brand-new functions will be added and how bitcoin will continue to scale to fulfill market demand for a totally digital currency that can be transferred without counterparty danger to anybody anywhere in the world at the speed of light.
The Highlander Coin
The overall addressable market for a cryptocurrency?’& ldquo; comprised of not only all liquid and fungible stores of value and circulating media, such as currencies and rare-earth elements, however also all use-cases that need access to a tamper-proof ledger of record?’“ & ldquo; is in the 10s oftrillionsof dollars. Bitcoin, by comparison, has a “market cap” of “simply” $ 10.4 billion at the time of this writing (existing price times variety of mined bitcoins).
While hard, a competitor would “just” need to encourage investors, businesses, developers, miners, and usersthat their decentralized solution to the double-spending problem and/or their coin’s “monetary policy” was exceptional to bitcoinin order to surpass bitcoin as the most important cryptocurrency. When we consider how Metcalfe’s Law works when used to the strong network effects of a currency, in this hypothetical circumstance the liquidity in the present cryptocurrency market would ultimately leakage from bitcoin and other altcoins and into the exceptional competitor up until it had the very same monopoly position in the cryptocurrency market that bitcoin holds today. From there, it would become the total addressable market, ultimately regulating a market cap in the trillions of dollars. It remains to be seen if any in the existing stable of altcoins depends on the difficulty, or if a dark horse competitor will emerge that is better-funded and more well-organized than its counterparts in the Bitcoin ecosystem.
Provided the technological developments like sidechains and cryptographically-secure off-chain transactions that extend bitcoin capability and scale bitcoin deal capability to match or exceed that of rivals, it is increasingly unlikely that another cryptocurrency will ever even come close to matching or going beyond the market cap of bitcoin. Rather, we will continue to see bitcoin on top of the charts as the most valuable cryptocurrency by far, with new innovations being tested on testnets and rolled out as sidechains,soft-forks, or even hard-forks on the Bitcoin network.
Over time, altcoins will be commonly accepted as either pump and dumpscams or curiosities of a bygone period, a time when it was practical to think of a cryptocurrency that could contend or exist together with bitcoin on any significantscale. Until then, we will continue to see serious (and not so serious) tries at launching altcoins, with countless dollars invested to fund even more experimentation in blockchain technology and agreement methods, all of which will continue to benefit bitcoin as it finds out from and develops upon these developments in its own special ways.
The end result? There will be numerous blockchains, however only one cryptocurrency.
— This was adjusted from a post initially published at lightco.in