There is an entire “institute” devoted to the idea that Bitcoin will forever be the only dominant cryptocurrency. Long and complex arguments are made to justify the notion – it’s purely scientific, you see, personal preference has nothing to do with it. You simply take the network effect and extrapolate that no competing network could either draw nodes away from the Bitcoin network and, even if they could, after a certain point all nodes would eventually gravitate to the new dominant network.
At around 28:00 of the above video, Daniel Krawisz makes the point for us:
Nobody is going to buy Litecoin if they think that nobody else is going to buy Litecoin. If there is a realization that the best money is the one that everybody uses, then they’re always going to go to the biggest network.
In the context that Krawisz means it, of course, he’s entirely correct. But let’s not forget that everybody, literally nearly everybody everywhere, uses the old US Dollar, and in terms of holding value, it’s remarkably ineffective by comparison to any deflationary currency in history. In any case, we have reached a situation where people are confident that others will buy a multitude of cryptocurrencies, including Bitcoin.
The Bitcoin congestion issue had only just begun when Krawisz was making these statements, after all, so some hindsight could be forgiven. But as we know, he represents a common viewpoint: everybody just wants Bitcoin, and every other coin invented is only an attempt at unscrupulously getting other people’s bitcoins away from them through scams and schemes.
We have to take a step back at this point and ask: is such a stance rational at this point in history? If I had to bet, I’d say that Bitcoin could drop to $0.00 right now and Litecoin, Dash, and Ethereum would retain cash value without the need of Bitcoin at all. This might sound like an insane bet, as there would have to be some kind of insane turbulence to cause such a situation in the first place, but the point is that these alternatives to Bitcoin are outgrowing the stage where they need grandfather Bitcoin to survive. Seeds at first, and for a long time fully reliant on Bitcoin for entry and exit, but now it’s 100% reasonable to imagine exchanges and other services using one of these as their base currency for operational savings or just preference.
The Bitcoin maximalist was first identified by Vitalik Buterin as someone who does not believe there is need or room for other cryptocurrencies (in essence), and the theories held by such folks were nurtured during a time when they made the most sense. But after a point, we have to ask ourselves: is Bitcoin the only one? Should it be the only one?
It’s not a matter of preference, it’s a matter of value and values. If people can comfortably transact for less on competing networks, they are going to do that. If people want a system whose developers have the foresight and wherewithal to solve rather than antagonize problems, they will gravitate to those which have such developers.
The idea that “Bitcoin is best because reasons” has seen its day. Now there are others coming to the fore.
The problems that effect Bitcoin do not necessarily always effect Litecoin, nor Dash, nor Ethereum, and vice versa. Increasingly, cash-to-non-Bitcoin trades will normalize. Bitcoin’s dominance in price or hash power or any other metric will become increasingly marginal, until it is one of the pack. Arguments against this future I envision will predicate on the bursting of the current ICO bubble, but I submit to the reader that such a bursting will have no effect on the march of history.
“There can be only one?” Pfft. There should only ever be more than one, more like.
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Last modified: March 4, 2021 4:57 PM