Why Other Cryptocurrencies Will Keep Encroaching On Bitcoin's Market Dominance

Why Other Cryptocurrencies Will Keep Encroaching On Bitcoin's Market Dominance

By Brennan | Crypto Investing | 27 Feb 2020


I think we can all agree that Bitcoin is the best thing since sliced bread, and we all owe a debt of gratitude to the pseudonymous founder, Satoshi Nakamoto. Thanks to the efforts of the original founder(s), a more democratic, secure, and convenient financial system sprouted from the Internet in January of 2009.

Coinmarketcap now tracks over 5000 cryptocurrencies, and at the time of this writing, Bitcoin makes up roughly 63% of the entire 268 billion cryptocurrency market capitalization. The question on a lot of people's minds is, will Bitcoin's share of the market increase or decrease as we move into the future?

Bitcoin's Strengths and Weaknesses

There are many factors that have led to Bitcoin's 168 billion dollar valuation such as its brand recognition, security, and simplicity.

Since at least 2013, Bitcoin has been featured on mainstream news channels and in well-known publications, increasing people's awareness of it throughout the years. It also has the highest hashrate of any other Proof of Work based coin, arguably making it the world's most secure cryptocurrency. Updates to Bitcoin's codebase are slow and need to be well-vetted, as hundreds of billions of dollars worth of wealth are locked into it. Unfortunately, due to this need for stability, innovation on Bitcoin is severely lacking.

Hundreds of other crypto projects have emerged to fill this innovation vacuum. Coins like Monero and zCash have added privacy, to prevent transactions from being traced through the blockchain. DASH introduced the concept of a Decentralized Autonomous Organization (DAO), where a portion of block rewards are allocated to a community fund, and proposals can be voted on. Ethereum implemented smart contracts, making it possible to run censorship-resistant applications such as decentralized finance (DeFi) and prediction markets atop a trustless blockchain.

Public Awareness of Other Cryptocurrencies Will Grow

These days, the likelihood of someone's first cryptocurrency transaction involving Bitcoin is quite low. For most people, their first introduction to crypto will likely come through interacting with a decentralized application like STEEM, in which they actually earn it by performing some work. Other avenues into crypto will continue to increase.

Gamers are likely to adopt crypto through projects like WAX and Ultra that allow players to trade in-game items for tokens. Social media users may get their first taste of crypto through Telegram's TON of one of Facebook's many apps utilizing Libra.

The general population will gravitate towards cryptocurrencies that are fast, reliable, inexpensive and easy to use. This has been Bitcoin Cash's motto since they forked from BTC. They've tried to appeal to less technical users with the introduction of their user-friendly Bitcoin.com mobile wallet, which has had millions of downloads to date. 

Ease of use continues to be a top priority. The EOSIO-based digital asset trading platform WAX has developed a simple web-based wallet in which users can hold their WAX tokens and game items. This is much easier than managing the installation and maintenance of a desktop wallet such as Metamask or Scatter. 

In the new digital economy, the most user-friendly cryptocurrencies are likely to see the fastest adoption rates.

A World Of Opportunity Exists

The world population now exceeds 7.5 billion people, and only a tiny fraction own any crypto. The untapped market for cryptocurrencies is massive.

Different people choose different cryptocurrencies for all kinds of reasons. Be it the community, leader, country of origin, tech stack, logo, or history. Tribalism is rampant is crypto, as holders tend to have a strong emotional attachment to their coin(s). Therefore, I think that it's likely we'll see a future where a variety of cryptocurrencies targeting different markets gain adoption and thrive.

Some projects have targeted certain geographic areas. For example, DASH has focused a lot of their efforts on adoption in Venezuela, while others, such as SmartCash, are concentrated on the Brazilian marketplace. If these projects can gain a foothold, and provide citizens of those nations with a cryptocurrency that fills their needs now, why would they switch to Bitcoin's Lightning Network in the future? Familiarity and trust in the coin's brand will increase with every successful transaction the user performs.

Investors Will Follow

These days, if an investor decides to allocate a small portion of their portfolio to the cryptocurrency market, more than likely it will go into Bitcoin, as it is currently perceived as the only "safe" investment in crypto. 

For the time being, other cryptos are seen as riskier, more experimental projects. However once they have proven themselves, and user adoption takes off, a lot of the wealth locked up in Bitcoin will flow into these other projects. 

Bitcoin's Future Role

Bitcoin will go down (verifiably) in history as the first cryptocurrency, and it will always hold a special place in the hearts of those who value sound money and economic freedom. But I believe Bitcoin's marketshare will drop significantly as other more innovative and user-friendly cryptocurrencies arise.

Bitcoin could remain as digital gold, like a reserve currency in which other cyrptocurrencies are settled. Or perhaps eventually it will become more of a collector's item for digital asset collectors. In any case, it will be interesting to see how it all plays out.

 

 

 


Brennan
Brennan

Interested in computer science, economics, democracy and monetary theory. Supporter of projects that aim to bring more economic freedom to the world. Hoping to share knowledge that would help others navigate the crypto space.


Crypto Investing
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