It is common for successful inventions to generate imitations and spin-offs, and this is no different for Bitcoin. The consistent rise in the Bitcoin price since its inception has fuelled lots of interest in digital currencies, leading to the rise of altcoins.
Altcoins, or simply alternative coins, are digital currencies based on technology similar to Bitcoin, known as the Blockchain. These coins challenge Bitcoin in numerous ways, but many argue that they do not pose a serious threat. Why? Bitcoin has some key properties that these alternative digital currencies just can’t copy. In this article, we discuss these properties in depth.
Network Effects and Recognizability
Since Bitcoin is the first successful cryptocurrency, it is not hard to tell that it has experienced a significant first-mover advantage. The cryptocurrency attracts the brightest developers and over its 12 years of existence, it has established a huge diverse community.
Tens of thousands of nodes worldwide connect to create the Bitcoin network, which is larger than any other cryptocurrency when measured by market capitalization, hash rate, or volume. This dominance in the industry establishes an unshakable brand for Bitcoin.
Lindy Effects and Reliability
If you are a cryptocurrency enthusiast, you must already know that Bitcoin has an uptime that can’t be compared with any other technology. Since 2013, the crypto has remained accessible and active without any interruptions – a reliability level that not even companies like Facebook, Microsoft, and Google have achieved.
Besides that, Bitcoin has withstood the test of time. The digital currency has survived massive price drops and climbs and over time, leading to its volatility declining. This is thanks to various structures that were put in place during its creation, as well as the public perception that Bitcoin is the digital gold. And it is.
Antifragility
Surviving over fifteen years means only one thing – Bitcoin has built up resilience. The key thing behind this is that the cryptocurrency operates using a decentralized ledger, which means that it doesn’t have a single point of failure. Today, the network boasts millions of nodes and miners. And due to the decentralization, the blockchain is not subject to government or leader whim-based shutdowns.
Also worth noting is the rapid technological advancements Bitcoin has experienced. Syncing the full blockchain has gotten noticeably faster and so has transaction throughput. Bugs in the code have also been eradicated, and more developers are able to contribute to the digital currency’s codebase and associated projects thanks to improved interest and tools.
Different Use Cases and Target Audiences
Another reason altcoins do not threaten Bitcoin is that they have different use cases and target different audiences. For instance, Bitcoin was developed as a decentralized digital currency that aids in carrying out web-based transactions. At the same time, many altcoins have been tailored to serve specific purposes such as decentralized finance, supply chain management, and smart contracts. This means that although it is possible for altcoins to carve out a niche in certain areas, they are not in direct competition with Bitcoin for the same use case or audience.
Altcoins and Inflation
A question that most cryptocurrency investors ask is whether altcoins can create inflation for Bitcoin. The answer is NO, alternative currencies cannot create inflation for Bitcoin. This is because they are a different asset from Bitcoin. In the same way, a new initial public offering (IPO) in the stock exchange does not create inflation for existing stocks. Bitcoin is not interchangeable with other cryptocurrencies, making it an incredibly unique asset. Although other cryptocurrencies may launch and inflate their supply, it is impossible for any of these coins to enter the Bitcoin supply or be passed off as real Bitcoin. This contributes to Bitcoin’s resilience and increases trust from individuals and corporations.
