The world of cryptocurrency is clearly dominated by bitcoin. That much most cryptocurrency investors can agree on. Being the very first commercially available crypto, bitcoin has long been the standard by which all others are judged.
It is also the most valuable cryptocurrency out there, with a market cap nearly 6 times that of its closest competitor, Ethereum. So, is there anything that could knock bitcoin off its throne?
Like all other cryptocurrencies, bitcoin is not a tangible currency. It is not like U.S. dollars or British pound sterling. Moreover, the total number of the coins in circulation is limited. That means you cannot just go mint more coins or print more bills. The end result of this reality is limitation. Despite being incredibly secure and nearly impossible to hack, bitcoin's inherent limitations could end up being its worst enemy.
According to a rather lengthy October 2018 post by MIT's Morgen Peck, there are three ways bitcoin's dominance of the cryptocurrency market could be undone. These are:
- Government takeover
- Social media involvement
- More effective competition.
All three are not only possible, but they are also very real. The first is already under way while the other two could happen just about overnight if the right people got their acts together. Let us look at all of them, shall we?
1. Government takeover
One of the reasons we highly recommend using bitcoin as a currency for gambling is the fact that it is decentralized. Here's what that means: no government entity or central bank controls bitcoin. It is a completely free cryptocurrency controlled by the people who own it in partnership with Bitcoin Blockchain developers. Should you choose to deposit bitcoin at an online casino so that you can e.g. play MegaMoolah.com, your deposit goes through without any government or bank interference.
Now, think what would happen if the national government of a powerful country decided to get in on the cryptocurrency craze. Does that sound fanciful? It's not. According to Peck, the U.S. government has already started working on it. So has the Canadian government. In fact, Canada has already created a test cryptocurrency similar to Ethereum. Even the UK has been researching blockchain, as it applies to cryptocurrency, for the last several years.
The nations of all three governments have discovered a couple of key things in their pursuit of cryptocurrency:
- Switching to crypto would provide an immediate boost to GDP.
- Countries could manage cryptocurrency at a lower cost than printed bills and coins.
- The value of cryptocurrency could be manipulated as easily as fiat currency by involving central banks.
The long and short of it is that eliminating hard currency for a crypto alternative would give national governments the best of both worlds. They would benefit from the security and efficiencies of cryptocurrency without giving up centralized control. You see, the decentralization of bitcoin is not essential to its function. It was built into the code as an ethical choice.
Government coders creating their own cryptocurrency would not have to build decentralization into their blockchain. They could give complete control over both the blockchain and currency to a central bank. The only question remaining is one of why a government-issued crypto would knock bitcoin off its throne. The answer is as simple as human nature.
Human beings have a tendency to rely on government for far too much. If they have a choice between bitcoin and a cryptocurrency controlled by government and backed up by the government's good faith, which one do you think they will choose? If all other things are equal, most people are going to choose the government option. It makes them feel better.
2. Social media involvement
The second way bitcoin could be knocked off its throne is the involvement of social media. For Peck, Facebook immediately comes to mind. Facebook already has billions of worldwide users on a network robust enough to serve them. Not only that, but Facebook's secure messaging app boasts 200 million users. The company could leverage the sheer power of its internet presence to knock bitcoin off its throne if they wanted to create their own cryptocurrency.
Peck suggests that Facebook could also leverage its financial resources to simply take over bitcoin. That seems less likely, given the value of bitcoin as compared to Facebook's net worth, but it is technically still possible. Either way you look at it, Facebook does have the muscle to force its way into the cryptocurrency space if they ever want to.
As for some of the other social media players, the jury is still out. Facebook is the dominant social media leader without question. Twitter, Google+, LinkedIn, Snapchat, et al may not be up to the task - either financially or in terms of technology support.
Facebook's advantage here is one of built-in network support. They can use their network of billions of users as miners. Just build coin mining into the Facebook website and app. Going online to say hello to your friends would result in mining a coin or two in the background. The size of Facebook's network would allow for incredibly fast mining by spreading out the workload among billions of nodes.
3. More effective competition
Last but not least is more effective competition.. There are now thousands of cryptocurrencies in the marketplace. Most you have never heard of. Why? Because the current mindset of cryptocurrency is one based on isolationism. The desire to be decentralized induces many blockchain developers to falsely believe that they cannot allow their cryptocurrency to interact with others and still maintain independence.
The most unfortunate aspect to this way of thinking is that it stifles the growth of so many cryptocurrencies. It doesn't have to be that way. Just think about fiat currency for a minute. The U.S. dollar is completely independent from the euro as a hard currency. If all the euros in the world disappeared overnight, the U.S. dollar would still have value.
Yes, currency values change on a daily basis as governments and central banks manipulate monetary policy and the money supply. But such manipulation does not interfere with the independence of each currency. The U.S. dollar acts as a currency in the States because the U.S. government and its people agree to use it. The same is true with every other fiat currency.
You can still spend U.S. dollars in other countries. You can exchange U.S. dollars for other currencies before you visit their respective countries. All the same principles could, and would, apply to cryptocurrencies if blockchain developers were willing to make it happen.
Imagine the crypto marketplace if the average consumer had a digital wallet with 10 different cryptocurrencies in it. Joe Consumer goes down to the coffee shop and pay for his morning brew using Ethereum. It just so happens that the coffee shop owner prefers that crypto. Later in the day Joe logs on to his favorite casino and uses bitcoin to play MegaMoolah.com. Finally, he goes out to dinner with friends and pays for his meal with Bitcoin Cash.
Cryptocurrency developers could start working together to convince merchants to accept their coins. They could work on an interoperability structure that allows for easy, on-the-spot conversion from one cryptocurrency to the next. They can work on a system that promotes the idea of using certain kinds of digital coins to pay for certain kinds of goods or services so that every cryptocurrency gets a piece of the pie.
Peck believes that such a scenario is not only possible, but that it would level the playing field between bitcoin and all its competitors. His vision of more effective competition suggests a world in which there are "millions of ways to pay for stuff."
The one most likely to succeed
The best way to conclude this piece is to discuss which of the three suggestions is most likely to succeed. Unfortunately, it is the one that is least desirable for cryptocurrency developers: government takeover.
As far as we know, social media companies are not even entertaining the idea of entering the crypto market. As for the thousands of cryptocurrencies already in circulation, there doesn't seem to be any attempt at creating a cohesive and collaborative way to work together. So while those two possibilities exist, they are long shots.
On the other hand, government adoption of cryptocurrency is already under way. It is only a matter of time before one or two governments announce they are abandoning their fiat currency in favor of a centralized cryptocurrency. And when that happens, people are going to have to make a choice.
None of this is to say that bitcoin will become valueless. It will not. Rather, bitcoin will undergo a correction that brings it more in line with other popular cryptocurrencies in terms of both coin value and market capitalization. That could turn out to be a very good thing among people who believe in the principles of cryptocurrency as a fiat replacement.
It's also possible that bitcoin will correct much higher in value, which would actually make it a more legitimate cryptocurrency. Either way this plays out will either make or break bitcoin hodlers.