Amid the turmoil of the past few months in the cryptocurrency space, advocates and developers have been speaking out. Bitcoin developer and entrepreneur Jimmy Song adds his voice, with an explanation of why Bitcoin is exceptional, and how investors can assess its long-term value.
Using Medium as his platform and referring to the recent roller coaster of cryptocurrency investing as both thrilling and painful, where investors can lose sight of what they are investing in, Song asks:
How is one coin to be distinguished from another? And more importantly, how is an investor to know what the long term value of a coin will be?
The Biggest Innovation Has Already Happened
Song outlines how every new coin, ICO, or hard fork is described as innovative or as answering a problem that Bitcoin doesn’t answer, hoping that Bitcoin will be relegated to the “dustbin of history” due to the lack of a “feature”.
What’s missed is that the biggest innovation has already happened. Decentralized digital scarcity is the real innovation and Bitcoin was the first.
The “features” and innovations proposed by Bitcoin alternatives are “really tiny variations on the giant innovation that is Bitcoin.”
Song then goes on to criticize the success rate of ICOs and points out that many early altcoins had premines, and most no longer exist. Altcoins and ICOs adopt many different features, but most fail to become useful or adopted.
The Network Effect
Song contends that because Bitcoin has the largest network and benefits from the network effect – a phenomenon where the value of a product increases as more people use it – other altcoins are merely playing catch-up. As the network grows, subtle benefits accrue, so time is on Bitcoin’s side as the first cryptocurrency.
Bitcoin, in a sense, has the world’s richest bug bounty to reveal any security flaws. As a result, Bitcoin has proven its security with the only thing that can really test it: time.
Bitcoin grows in utility by having the most users and having an ecosystem makes getting, and keeping, bitcoins easier than altcoins or ICOs.
No Other Coin has Bitcoin’s Decentralization
When it comes to decentralization, nothing tops Bitcoin. Nothing. As Song points out:
Bitcoin does not have a single point of failure or choke point.
Every other cryptocurrency that came after Bitcoin has a founder or company behind it and those people exert greater influence over their coins than anyone else.
Based on this, one could make the argument – as Song does – that ICOs and other cryptocurrencies are far more centralized than they would care to admit.
Consider ICOs, for example. The company that issues the ICO becomes the “centralized party” and can:
- create tokens
- issue tokens
- change the tokens’ usage
- issue additional tokens
- decide what currencies (crypto or otherwise) they will and will not accept
If this is starting to sound like governments’ control of fiat currency, it’s because it is.
Altcoins share the same centralized characteristics, albeit to a lesser extent, because they have a creator that can control the coin in the much same way that a government can control a fiat currency.
Bitcoin is simply different. When Satoshi disappeared, he left behind “users of various affiliations”, all with some say in how the Bitcoin network is run. With no central authority that can diminish utility, Bitcoin is actually scarce, and cannot change qualitatively without the consent of all users.
Bitcoin is the Real Revolution
Song concludes that market capitalizations are heavily manipulated, skewing Bitcoin’s own market dominance and that markets by nature have noise and only smooth over a long period of time.
He also recognizes it would be over-optimistic to assume Bitcoin couldn’t be displaced, but that creating another truly decentralized coin would be incredibly difficult. Song believes it would take an innovation as big as Bitcoin, or a bug that makes Bitcoin untenable.
Bitcoin will continue to be different because unlike centralized coins, it’s market driven, immutable and unseizable. These happen to be the properties of a great store of value and this gives Bitcoin a utility that no other token has.
Do you agree with Jimmy Song? Does another coin available today have the potential to displace Bitcoin’s lead? Stand up for your investment choice in the comments below:
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