The reasons Bitcoin is still first in the ranks
After a decade, Bitcoin is still ranked number 1 on the list of cryptocurrencies. No other coin has come close to taking its crown and reaching the level of the Bitcoin price. In fact, in 2018, it seems to be cementing its place at the top rather than slipping.
We know that Bitcoin is just a protocol and that protocols can easily be copied and forked to create new cryptocurrencies. Many of those new currencies seem to have a technological advantage over Bitcoin. So what is it about Bitcoin that keeps it at the top?
Bitcoin is Still Number 1
Despite everything that has happened, Bitcoin has retained over 50% of the cryptocurrency market share in 2018. It has managed to survive a network congestion, questions over its long-term viability from regulators, and a constant onslaught of new currencies and platforms that seem to offer a more sustainable technology.
This continued dominance has many people believing that it will continue for a long time. This viewpoint is often called “Bitcoin maximalism”. And there is a good explanation for why Bitcoin is still so strong.
First Mover Advantage
In the marketing terms, Bitcoin has what’s called the first mover advantage. It was the first cryptocurrency to get the world’s attention and set up a usable framework. Every other coin is still just catching up. This is powerful because buyers usually stick with the first brand they encounter that does the job satisfactorily. In Bitcoin’s case, that job is being a decentralized payment platform and an exciting new type of investment. Yes, there are other cryptocurrencies that are cheaper and faster to use, but they are still at a disadvantage.
The most important thing Bitcoin got from being the first mover is its brand name. Most people still equate the word Bitcoin with cryptocurrency. Many newcomers aren’t aware that other options exist, or they don’t have any interest in them because they aren’t called Bitcoin.
The Power of the Network Effect
Bitcoin is also benefiting from the network effect. In the tech market, the network effect describes the situation where each new user adds value to the network as a whole. As the first cryptocurrency, Bitcoin has acquired the most users and is, therefore, the most valuable network. If you want to send cryptocurrency to someone or buy something with it, Bitcoin will be accepted more actively than any other coin.
The network effect is a strong and well-understood force that exists on the Internet. It’s the reason that Facebook and Google are so dominant in the social media and search engine services. Another social media platform may appear with much better technology and features than Facebook, but without the users to connect to it, it’s basically useless.
Another feature that’s keeping Bitcoin strong is the fact that it has a limited and predictable supply. Many of other top cryptocurrencies on the list, such as Ethereum, XRP, and EOS, have an uncapped or unpredictable supply. That means that many more tokens may be mined or released in the future, reducing the value of tokens bought now. As the crypto market is still highly speculative, this is extremely important. Bitcoin investors can be sure that they are holding onto a scarce resource.
Proven Track Record
Bitcoin has a proven track record when it comes to security and attacks. Sure, billions of dollars worth of Bitcoin have been stolen in the past, but none of it resulted from attacks on the Bitcoin network itself. So far, it’s proven that despite storing hundreds of billions of dollars in value, it’s effectively impossible to attack.
Bitcoin’s proof-of-work consensus algorithm means that anyone wanting to hack it needs to do so with the control of most computing power on the network. There are no back doors or clever tricks you can use to get around it.
As Bitcoin is so large and successful, it’s estimated that just to buy the hardware capable of starting such an attack would cost over $8 billion at the cheapest rate. The fact that this amount of Bitcoin mining hardware simply isn’t available for sale, an attack would likely be impossible.
The Promise of Layer 2 Scalability Solutions
One of the biggest problems with the Bitcoin network is its apparent inability to become what it is meant to be, a global payment network. You would think that such a flaw would kill Bitcoin and open up for a more technologically suitable protocol to take over. But this isn’t the case.
The reason users are still sticking to the old Bitcoin protocol is the promise of layer 2 solutions. These are technologies and protocols built on top of the Bitcoin network that make it faster and cheaper to use. The most important layer 2 innovation is the Bitcoin Lightning Network. It’s a second logical layer to the Bitcoin protocol that can allow many transactions to happen ‘off-chain’. Basically, having many Bitcoin transactions compressed together into one.
These solutions are very appealing to Bitcoin users. They get the usability improvements like scalability and cheap transactions without having to risk updating the Bitcoin protocol or moving their money to a new network.
Things Probably Won’t Change Soon
Assuming that the essential usability improvements such as the layer two scalability solutions can happen within an acceptable time frame, Bitcoin should stay number 1 for the foreseeable future. There have been countless coins and networks that have come along labeled ‘Bitcoin killers’, but none of them have come close to achieving that. Bitcoin has the psychological and infrastructure advantages that have propelled it to number 1 and will continue to make it extremely difficult for competitors to knock off of its throne.