What is Bitcoin Dominance? We Explain it for You!

A Blockchain Supplemental Tutorial 

by

W. Paul Alexander

Bitcoin Dominance:  The Ratio of Bitcoin to all Other Cryptocurrencies; expressed as a percentage of total blockchain market capitalization.  

If you've just started diving deep into the Blockchain Universe, you've probably come across the term "Bitcoin Dominance" at one time or another.  Perhaps you know what it means, perhaps you think or you know what it means, or perhaps you have no idea what it means.  

Either way, keep reading for an explanation of the term, and why such a statistic is important for those who are involved in the trading side of cryptocurrency.  

So, when we refer to BTC Dominance, the technical definition is as follows: 

“[Bitcoin Dominance] is the ratio between the market cap of Bitcoin to the rest of the cryptocurrency markets.”

Well, that seems all good and dandy, doesn't it?  This means that, when it comes down to brass tacks, Bitcoin Dominance is expressed in the same ratio-type terms as what is meant by the statement, "The odds are 2:1 in favor of Fighter A," instead being stated like "BTC Dominance is well-over 66%."  

Let's take a look at an example where BTC dominance can be explained (these number values I am going to use are strictly representational only, to demonstrate the idea) in easy terms. 

Let's assume the the entire cryptocurrency-related market capitalization (the entire value of every blockchain in the world added together to get a sum) is one billion dollars.  We know that in real life, it is much larger than this, but for the sake of education, lets keep it at 1 billion USD.  

Then, let's assume that of that $1 billion, Bitcoin's ledger holds value equivalent to $650 million USD.  

Simply math shows us that 65/100 (the numbers above reduced to their simplest terms) is the equivalent of 65%.  

This means that the BTC Dominance is exactly that -- 65%.  

If these numbers were accurate, and the percentage is actually pretty close to today's BTC Dominance number, the 65% means that BTC doesn't only enjoy a majority dominance, but is very close to having a supermajority dominance.  

This means that, so long as it is on top, more interest will be given, more capital spent, more startups created around Bitcoin.  It's the 1980's equivalent to the IBM PC, which spawned an entire industry of compatibles.  In this metaphor, BTC would be the IBM PC and BCH would be an IBM-compatible clone PC, while quirky BSV is the equivalent of the Apple Lisa.

Does This Mean that Bitcoin will Always Be On Top? 

In a word.....NO!  In a few words....NOT AT ALL! 

No matter what topic is being discussed, be it crypto to politics to religion to empires -- what goes up must come down.  During the time of the sprawling Roman Empire, citizens could not fathom a world where Rome did not control the global economy of the time as well as the political and military might of the world and the wealth of nations in its coffers.  

However, the Roman Empire eventually failed, first losing the western empire and leaving the eastern empire with Constantinople as its capital.  Constantinople was eventually overthrown and the new Islamic Ottoman Empire came to power, ruling all the way up until World War One, when it collapsed.  Currently, like Bitcoin, the United States enjoys near-global dominance over others. However, both BTC and the USA will eventually lose that spot.  

BTC dominance shows us when this may be happening.  If BTC dominance drops to under 50%, it will no longer have a majority dominance, and will instead enjoy the top spot in a plurality of 3-4 other assets that enjoy market share of around 10-15% each.  Once this happens, these other project will actually be in a direct competition for survival with Bitcoin, and this is the point at which a newer, faster, easier-to-scale, and lower-cost asset that does away with some of the problems inherent in Bitcoin.  

This all comes down to a simple fact:  If the Bitcoin Foundation and the BTC Core developers are able to come up with innovative ideas to ensure the survival of their asset as the undisputed "top of the pack."  

All-in-all, with a disruptive technology like blockchain -- that is literally going to transform the world economic system -- there will be power struggles with the market domination likely being shared by many other actors besides BTC by the time everything settles.  

If and when BTC ends up with a plurality dominance situation where there are 3-4 other viable competitors for the top spot, an all-out "war" between the platforms will likely ensue -- think the Burger Wars, Online Wars, and the Cola Wars.  All of these occurred because the status quo market share leader became vulnerable and allowed disruptive actors to find a way in.  The result cemented many major brands that we still see today, but more importantly, these so-called "wars" also served to weed out smaller businesses that were not quite as solvent as the major players were.  This led to contraction of "choice," but rather increased the percentage of the market share that was consolidated in the hands of just a few corporations.  

Very similar scenarios could take place involving BTC.  In the upcoming CryptoWars, it's likely that the 3-4 smaller guys would first ally with themselves to take BTC out of the running, leaving them on more-or-less equal footing against each other.  This is a common wartime strategy involving the use of "coalition forces" to combat a larger foe.  

What's the bottom line, here, you ask?

I do not think that BTC dominance is going anywhere in the immediate future, although I believe that within 10 years, Bitcoin will no longer have a majority dominance (51% or higher).  If I am correct, probably within 5 more years, the stage would be set for the all-out CryptoWars to take place. 

I believe that the disruption caused to the global financial industry will leave a vacuum that blockchain tech alone will fill.  If and when the CryptoWars take place, one of the most glaring results will be that the industry itself becomes much more mature than it is now -- much more refined and developed.  

So, pay attention to BTC dominance every now and then.  Pay attention to the movement of this crucial statistical marker to get a better idea of where things are going.  In the end, these markets are simply that -- educated guesses based on past patterns.  

With that, I will close this post.

Now, you understand the meaning behind 'BTC Dominance."  I know it's pretty obvious, but there are some subtle differences between dominance and market share -- the substance of which I have presented here.  

Deo Volente! 

-W. Paul Alexander