I know, with this story probably all of the bitcoin enthusiasts will start to hate me, but I think that someone has to analyze this threat.
If you make a simple search online everyone sees Bitcoin as the Digital Gold, and maybe it was, anyone, talks about this simple question:
Could Bitcoin be surpassed from other cryptos in terms of market cap?
Usually in my opinion when an investment became obviously good for everyone as a status quo, like Real estate in 2008, I’m becoming skeptical… I think someone has to argue this threat with a serious and pragmatic analysis on what is happening in the crypto world.
Also, personally I never invested in technologies without future use cases only because people believe in it. So, I’m starting to think about what could happen if Bitcoin will be surpassed as market cap and if this scenario could really happen?
Analysis 1 | Technological Prospective
Let’s talks about the technology of Bitcoin,
Bitcoin is the first generation of blockchain technology designed to store and transact values without intermediaries.
For the first time in human history, we’re able to transact values without intermediaries and especially without trusting any entities, but a democratic and opensource governance based on anonymous miners (validators) and mathematical algorithms. Bitcoin introduced the logic of a trustable ledger without the possibility of eliminating data with the smart idea of transaction blocks system.
This concept was awesome and was starting to disrupt our concept of security, trust, and values, but now we’re in 2018 and every Crypto Coin have the same standard, a lot of AltCoins are designed to do the same things but faster and cheaper than Bitcoin, even Dogecoin have some improvement, for who didn’t hear about Dogecoin, is a Crypto Coin that become the 43 most valuable Coin for his style and his funny dog meme.
PS: I love DogeCoin is one of funniest internet memes ever!
The blockchain of Bitcoin is one of the slowest, expenses and larger in the entire blockchain community without any plans to improve except for the lighting network, that is no more than a state channel structure, not a real improvement but for different use cases and here I want to dispel a myth:
Lightning is a state channel like Raiden on Ethereum, this is not a solution because every transaction in a lightning network will not be decentralized but only the first state and the last state of the connection, so it’s massive dangerous that Bitcoin ambassadors sell it like an upgrade to improve the scalability.
In the tech industry the First Mover Advantage is never a killer app, but sometimes a gap, because the history of tech market, teach us that first mover advantage could be bad if the company are not able to reinvent himself quickly to compete with companies with late or even last mover advantage like Yahoo/Google, IBM/Apple, Myspace/Facebook, PayPal/Stripe or eBay/Amazon.
This doesn’t mean that the first movers usually fail, but that they open the market for who really understand how to disrupt it from the data about success and unsuccess of the first movers.
Analysis 2 | The community
In the Tech Market, a fast, visionary and strong leadership are critical. Bitcoin with his community have too many different points of view and different needs. Speculators want to improve the price, miners want to reduce expenses, developers want to improve transactions speed, enthusiasts don’t want to update anything from the WP of Satoshi Nakamoto and in the end, the tech behind Bitcoin is the most stagnant in the crypto ecosystem because anyone cares to follow a vision.
The early community of Bitcoin was awesome they change how we store values and this technology in my personal opinion is the most important invention ever made in the tech world.
But early adopters community and the early developers are no longer there, they are in other projects like Ethereum, EOS, AION etc. and on Medium, there is a lot of stories about from them about how the community is changed and how the left it.
The community of Bitcoin today is driven by speculators rather than innovators, today the community is dominated by conservatives laggards and it’s at the end point of the Technology adoption lifecycle and usually this period for every tech-related company is dangerous.
Bitcoin community today is in a conservatives state, in fact, lasts fork of Bitcoin like Bitcoin Cash, Bitcoin Gold, Bitcoin Atom etc, are from people that didn’t like the conservative and stagnant approach of the majority in the community.
Analysis 3 | Can the history help us to understand what could happen next?
In the tech history, I want to make some parallelism with IBM, MySpace or Nokia.
In the 80s IBM had a huge early mover advantage it was the bigger computer company at the time, and people had the idea that was impossible to surpass his value. But this idea wasn’t true, in fact in that situation IBM didn’t fail, but other companies like Apple, thanks to the late-mover advantage grew faster and better.
Today the IBM market cap is $80B and Apple market cap is $950B
IBM didn’t grow faster as apple for his stagnancy on innovation and to deliver the right product to the masses. Bitcoin have this problem today instead of other projects with 3/5 year’s strategy, great leadership, innovator-based communities and more applications on the real world than mere financial transactions. I’ll argue about this in the next chapter.
Another interesting comparison is with Nokia, the most famous cellular production company in the early day of it. As well as IBM, Nokia was surpassed and even disrupt by the idea of the smartphone with the touch display that opened the usage of cellphones to a lot of new applications rather than calls and mere SMS.
The case of Myspace in the social media space could be another interesting correlation. Myspace was the first massive social network as consumer adoption, followed by Badoo, Netlog and Live Messanger. But what they didn’t understand at the time was the idea to store and use data as a business model instead of the old concept about sell stuff to users or expenses memberships or too much casual adds without caring user experience.
This first wave of social Media was disrupted by Twitter and Facebook at the time because thanks to their late mover advantages they understood the values of data rather than mere online businesses and this were huge.
Analysis 4 | Use cases
To introduce this section I have to set the difference from:
Blockchain 1.0 technology, a network designed to store and transact financial values. (Bitcoin, Dogecoin, Litecoin etc.)
Blockchain 2.0 technology, a network designed to Decentralize and Transact values and logic, with a structure like an O.S. for Decentralized Applications, Smart Contracts, and Decentralized data. (Ethereum, EOS, NEO etc.)
The use cases of Bitcoin are not clear because it failed as a payment system, slow, not scalable and expensive. In the Blockchain 1.0 ecosystem, there are more efficient and cheaper projects.
In the Blockchain 2.0, the challenge is more difficult, the applications are larger, here everyone is more efficient than Bitcoin in terms of transactions and scalability.
So what’s the the real value and the real use of it?
Speculation? Maybe yes, because with bitcoin architecture you can’t decentralize applications, data or something that really could have an impact in the future, you can only make slow and expensive values transaction.
Analysis 5 | Is the bitcoin Governance still Decentralized?
This threat is more difficult to analyze than other because we are in a philosophical field, Decentralization is about to deliver trustless in general, from the bottom of the Proof of Work, in the case of Bitcoin, to the Community-Driven decision-making structure.
The problem that I want to analyze is more pragmatic if we’re in a scenario without leaders and the decision making is made by speculators or people without a vision of this technology or merely that makes decisions not for the future of the project but for their personal wallet, is this correct? Is this the culture-driven future we want? Is this a way that in the long run can’t destroy a project?
BTW Bitcoin is decentralized and I love that, but a lot of other projects are decentralized too, so it’s not a unique competitive advantage.
Analysis 6 | Is bitcoin still gold?
In the lasts, 8 years Bitcoin was interpreted as digital gold because was the only Crypto easily exchangeable in USD and every altcoin were calculated as values using the price of Bitcoin.
In this situation called Bitcoin, the digital gold makes perfect sense. But in the last two years, after the Ethereum release, Bitcoin is definitely no more the only digital gold, because decentralized exchanges are based on Ethereum, at the same time every centralized exchange are using ETH as BTC like gold.
Every new Blockchain related projects, especially after the 2017 ICO bubble, are exchangeable only in ETH and ETH is easily exchangeable in USD as well as Bitcoin. This would mean that in two years a lot of crypto values are not correlated directly with Bitcoin but instead only with the price of Ethereum and the price of Ethereum could drive Bitcoin price and vice versa because it’s exchangeable easily in USD too.
Analysis 7 | Financial
Analyzing in therms of crypto-financial values, the “Bitcoin Dominance” is massively fallen down from March 2017.
Bitcoin had always an 85%-90% dominance in terms of market capitalization respect other AltCoins, today this dominance is 40% and in January 2018 reached his bottom at 33%.
Ethereum at the same time during the Bitcoin Dominance bottom reached his high in July 2017 as 31% vs the 38% of Bitcoin and in January 2018 as 21% vs the 33% of Bitcoin. This financial scenario, express clearly that for the first time in history Bitcoin is starting to be called into question as the dominant Coin in the Crypto Ecosystem.
I want to ask a question for readers, is it possible that in 2017 the BTC price high in 2017 was driven by the price of ETH and the FOMO for ICOs? Does anyone have some proof of the contrary?
Another critical issue that could down the price of Bitcoin is the futures made from some non-crypto exchanges like Cboe’s “XBT” because this futures are in the regular market from regular banks and they could inflate the BTC without any ask order correlation in the Crypto world.
The problem is that Bitcoin hasn’t a company or a foundation, so in the future, the Bitcoin community couldn’t stop this kind of speculations, it’s like the other side of the coin to be a worldwide community without any regulated government issues.
The questions is, what makes Bitcoin more valuable than other Blockchain 1.0 projects like DogeCoin, liteCoin, or any other crypto that can transfer values only?
Without early adopters, without a tech-driven vision and especially without a real-world use case, it sounds like a religion… The concept of Bitcoin that have a secure value in the next years, in my opinion, it’s sounds like how people talk about the Real State investments before the 2008 bubble, were people saw houses a secure and trusted investment without cares on what was happening in the entire ecosystem.
BTC could be surpassed in terms of market cap from projects like Ethereum EOS, AION, Cardano?
My personal answer is YES, is not impossible based on their blockchain 2.0 structure, huge vision, and real-world use cases.
In the scenario were BTC is no more the most valuable cryptocurrency, what’ll happen next?
If BTC will be surpassed and the myth of digital Gold will be disrupted, people start to think about what makes it more valuable than other Blockchain 1.0 projects? A well-hidden question that I want to ask to the community.
With this article, I don’t want to say that Bitcoin is a bad or good investment or that his technology is unuseful but dispel the myth about Bitcoin-like digital gold.