Since the dawn of cryptographic electronic payments back in the mid-1980s, tech-minded developers have been steadily working on pushing out cryptocurrencies like bitcoin.
Today there are literally thousands of cryptocurrencies - also known as digital currencies or altcoins - on the market. So why does bitcoin seem to be the de facto standard?
Visit an online gambling site that accepts cryptocurrency deposits and you are virtually guaranteed that bitcoin will be among the options. Some of them also accept digital currencies like Bitcoin Cash, Litecoin, and Ethereum. Yet it is nearly impossible to find one that accepts other cryptocurrencies but not bitcoin. So what's the deal?
There are some very valid reasons that bitcoin dominates the cryptocurrency space. These are explained below. Note that none of the reasons necessarily make bitcoin any better than other cryptocurrencies. Like fiat currency and securities, the value of bitcoin is in the eyes of the beholder.
The first publicly available crypto
The history of crypto doesn't start with the development of cryptocurrencies. Instead, it began in 1983 with the development of a cryptographic electronic payment system known as 'ecash'. This system dealt in fiat cash transactions, but those transactions were conducted electronically and encrypted for user protection. The system required the use of specially designed software and specific encrypted keys to enforce security.
It wasn't until some 15 years later that the idea of replacing fiat cash with digital coins as a means of enhancing cryptographic electronic payments was born. And yet, there was a hurdle that would have to be overcome before digital currency could become a reality. That hurdle was centralization.
Crypto pioneers worried that introducing digital currencies that were controlled by governments and central banks would be subject to the same kinds of problems associated with fiat currency. All their worries were overcome in 2009 when bitcoin was finally released.
We say all of that to say this: one of the reasons bitcoin is seen as the standard is simply the fact that it was also the first centralized cryptocurrency made publicly available. When you are the first, that status goes a long way to also establishing you as the standard. Being the first meant that bitcoin developers had the opportunity to lay the foundation that future crypto developers would build on.
Coming up with a way to decentralize a currency is a lot easier than it sounds. The biggest challenge is figuring out how to record and track transactions in a way that is safe, secure, and doesn't vest control of the currency in a central organization. Bitcoin does it through something known as the blockchain. In fact, it was bitcoin's developer that came up with the blockchain concept.
A blockchain is, in its simplest form, a digital ledger that can be used to keep track of virtually anything. It was originally developed for bitcoin as a means of handling accounting transactions. Its name comes from the fact that the blockchain is just a long, continuous list of transactions. Each one is added to the end like the links of a chain. To keep the ledger manageable, the chain is broken up into multiple blocks representing a certain number of transactions.
Bitcoin's blockchain really defined how cryptocurrency could be used to complete financial transactions outside the realm of central banks and fiat cash. Bitcoin developers distributed the blockchain to multiple computer nodes located around the world. They then enlisted the help of volunteers to process bitcoin transactions via the nodes through something known as bitcoin mining'.
The blockchain system they developed prevents any one central authority from taking control. The decision to structure the blockchain this way has further cemented bitcoin as the de facto standard. Virtually every other cryptocurrency in the world is based on a blockchain that has been built, at least partially, on what bitcoin started.
Bitcoin name recognition
Of course, we cannot escape the reality that bitcoin has tremendous name recognition. For example, visit the MegaMoolah.com website and dig around for reviews of casinos that offer cryptocurrency as a banking option. It turns out you will find a lot of information about bitcoin casinos on the site.
It is not necessarily because MegaMoolah.com developers think bitcoin is better than all cryptocurrencies. It's not because they are in cahoots with bitcoin to make money. All the bitcoin references are due to nothing more than name recognition. Simply put, people think bitcoin first when they think cryptocurrency. It is as simple as that.
A lot of the casinos reviewed by MegaMoolah.com accept other cryptocurrencies alongside bitcoin. We have already mentioned options like Bitcoin Cash and Litecoin. But those other digital currencies do not have the same kind of name recognition. A site like MegaMoolah.com references bitcoin in order to generate interest among fans of cryptocurrencies. But the people behind the site are smart enough to know that crypto users are familiar with other digital currencies.
Bitcoin's trading value
Still another reason bitcoin is often considered the de facto standard is its trading value. Because it was the first and continues to be one of the most recognized cryptocurrencies, people considering investing in crypto often turn to bitcoin first. That means bitcoin is in high demand. High demand almost always equals high value.
At the time this post was written, a single bitcoin was worth more than US$6,300. The total number of digital coins in circulation stands at 21 million. Now think about that. Only having a limited number of coins available automatically increases the value of those coins as demand goes up. It also means the price falls as demand goes down.
What does all this mean for investors and merchants? It means that as long as bitcoin remains a popular cryptocurrency, it's going to have a relatively strong value backing it up. People see this value as a good reason to get on the bitcoin train. It doesn't hurt that bitcoin is considered an investment in the West, either. Investors pumping money into bitcoin keep its value both stable and relatively strong.
Popularity by attrition
There is one last reason that helps explain bitcoin's dominance in the cryptocurrency space. It is the currency's popularity by attrition. In other words, bitcoins popularity as a cryptocurrency encourages people just getting into the crypto space to get on board. The more people do so, the more popular bitcoin becomes. It is essentially self-perpetuating. Bitcoin continues to strengthen and grow in the midst of thousands of other cryptocurrencies because it has a certain amount of momentum that is hard for other digital currencies to overcome.
If you doubt the importance of this momentum, you might want to consider a movement afoot in Asia to start using bitcoin in place of hard currency. This isn't to say that Asian countries are thinking of replacing their currency, but rather that both merchants and customers alike are warming to the idea of transacting most of their business via bitcoin and leaving fiat currency out of the equation.
In many of these countries, hard currency is difficult to come by. And while people who live in remote areas may have hard currency, it is useless to them because they have no way to spend it. Converting that currency to bitcoin gives them the opportunity to buy and sell online - even across national borders - without all the difficulties that come with fiat currency.
It is hard for those of us in the West to wrap our brains around this concept. First of all, we think of bitcoin more as a security than an actual currency. Second, we also have access to hard currency everywhere we go. We can withdraw cash at any one of millions of ATMs. We can write checks, use debit cards, purchase money orders, and so on. Bitcoin is more of a hobby to us than necessity.
In other parts of the world, things are different. Bitcoin levels the economic playing field so that those without access to hard currency can still engage in the marketplace.
Cryptocurrency and fringe industries
In closing this article, it is necessary to briefly discuss the fact that cryptocurrencies are supporting fringe industries that may not otherwise survive if totally dependent on fiat currencies. Previously we mentioned the MegaMoolah.com site. It is an online gambling site that focuses on the world-record Mega Moolah jackpot slot.
It turns out that online gambling is one of those fringe industries that doesn't get a lot of support from mainstream banks and big-name financial institutions. That's due to a number of reasons, including regulation and the misconception that gambling and unsavory activities are intrinsically linked.
The gambling industry has discovered that cryptocurrencies like bitcoin allow them to flourish without having to rely on traditional banking solutions. It seems like every day more companies in the online gambling industry are discovering all the benefits of accepting bitcoin banking.
Yes, bitcoin seems like the de facto standard of cryptocurrencies. There is a lot of strength behind that name, strength that people trust. There's no reason to expect that bitcoin will surrender its position as the industry leader at any point in the near future. As long as it remains strong and stable, bitcoin will also remain the 'granddaddy' of all cryptocurrencies.