When Bitcoin first went mainstream, there were a lot of people who believed that alternatives would
eventually overtake it. Not too long ago, we wrote about 10 of those alternatives, including big names like Litecoin and Peercoin and a few lesser-known options, and there’s some enthusiasm attached to each one. Every time a new cryptocurrency emerges, there seem to be passionate advocates praising a single unique function or feature that could help said currency to become a market leader.
And sometimes, it’s not just fans of particular altcoins that suggest one or the other might overtake Bitcoin, but rather major news outlets or financial analysts. For instance, back in 2014 there were numerous articles suggesting that Litecoin could become the superior cryptocurrency, and this year we’ve seen some similar reports with regard to Ethereum. The common assumption appears to be that Bitcoin’s secretive founder stumbled on a great idea, but that others would be the ones to perfect it and put forth a lasting, dominant digital currency.
So far, however, predictions that competitors would overtake Bitcoin have fallen flat. Certainly, there have been other cryptocurrencies to gain some influence and perhaps catch up marginally to Bitcoin, but none have overtaken the original, and frankly none seem particularly close to doing so. But how and why is it that Bitcoin is still out in front? Let’s consider some of the factors at hand.
First To Market Matters
In the popular HBO comedy Silicon Valley, which is about a tech start-up attempting to make it big, there’s a very insightful line about competition in business. Basically, one character argues, citing several examples from the tech world, that “inferior products win out all the time” by being the first to market. This is not to suggest that Bitcoin is necessarily an inferior product; many would still argue that it’s the best digital currency out there. But it does imply that even if another cryptocurrency were superior, it might not matter given that Bitcoin was the first one on people’s radars.
To cement the point, it should be clear that this isn’t merely an assertion from a television comedy. In fact it’s a clearly recognized fact of business. Ad Age wrote about this in a thoughtful article about numerous marketing myths, arguing that the better product does not always win, and that numerous examples have demonstrated that being “first in mind” is crucial. For instance, Heinz came before Hunt’s; Google came before Bing; Harvard came before Yale. You’ll absolutely find people who will argue that the second options in those pairings are superior in one way or another, but the first options are considered to be the industry leaders in their relevant categories. Similarly, Bitcoin came before all of its competitors, which suggests that even if some of them are as good or better, it might not matter when it comes to market share.
The Blockchain Reigns Supreme
Some have argued in recent years that the blockchain — the digital ledger that automatically records all Bitcoin transactions — is the real gem of the cryptocurrency phenomenon. Already, the blockchain is being implemented and imitated as a new tool for transparency in various areas in businesses and financial institutions, and it appears to be a game-changing technology. The thought among many has long been that even if Bitcoin were to fizzle out or lose ground to a competitor, the blockchain, or some form of it, would survive. However, so far the blockchain mostly seems to be lending legitimacy to Bitcoin. The fact that so many people view it as a major shift in how we record financial transactions and avoid large-scale theft or fraud essentially implies that Bitcoin has a uniquely secure platform on which to be traded.
When Bitcoin first came onto the scene, it was billed almost exclusively as an alternative to everyday, government-issued currency. Its most enthusiastic advocates suggested that it would flat-out replace ordinary currency in a matter of years. When those predictions proved to be a little bit overzealous, some began to look at Bitcoin more as a commodity or long-term financial asset than a spendable currency. And in fact, those who may have “invested” in Bitcoin, so to speak, may well be feeling pretty good about treating it that way right about now, given that the value of the cryptocurrency is approaching a two-year high.
But even if Bitcoin looks relatively strong when considered as a commodity, it’s also become undeniably more useful as an actual currency, and that’s something that currently sets it apart from much of its competition. If you actually take the time to look into where Bitcoin can be spent, you’ll find that there are several major online retailers accepting digital currency payments, as well as an increasing number of brick and mortar businesses. From huge chains to local shops, there are now countless places to spend Bitcoin just as easily as you might exchange cash or use a credit card, and that could gradually lead to market dominance. It’s not that alternative cryptocurrencies can’t be used practically, but none can quite match the scale of Bitcoin in this regard.
It’s also important to mention that Bitcoin is the most valuable of the major cryptocurrencies — and it’s not close at all. As mentioned, Bitcoin is near a two-year high, and been flirting lately with its highest peak since the incredible highs in the middle of 2013, when the initial surge of interest pushed the price up around $1,000. At the time of this writing, Bitcoin is worth just under $600, while Ethereum and Litecoin, the two leading competitors, are worth about $12 and $4, respectively. That doesn’t at all mean that Bitcoin can’t crash back down to Earth while its competitors seek slow, long-term growth and catch up. But the numbers right now do provide some perspective regarding Bitcoin’s dominance.
There’s still no telling which cryptocurrencies we’ll be talking about in 10 or 15 years. It could be that we’re discussing a full range of competitors still vying for supremacy. Perhaps Bitcoin will have fully vanquished its opponents and emerged as the only viable option or maybe some new option we don’t yet know about will ultimately take over the market. It’s important for those who are interested to recognize that we’re still very early in the process of this market’s development.
That said, however, a combination of factors have helped Bitcoin to establish a fairly commanding lead at this stage. Because it was first to market, possesses unique technology and utility, and is simply worth more than the competition, it’s still leading the way.