A number of spinoffs and imitations have been developed in response to Bitcoin’s success. Many genuinely try to replicate or extend Bitcoin’s innovations, while others are affinity scams that try to get investors by using Bitcoin’s reputation.
These alternative coins, also known as altcoins like Ethereum and stellar, might seem like a threat to Bitcoin in various ways. But the fact remains that altcoins cannot really copy Bitcoin’s fundamental properties.
What’s different about Bitcoin?
- Recognition and network effects
Being the first successful cryptocurrency has given Bitcoin a huge advantage. Over the past 12 years, it’s attracted some of the brightest developers. Bitcoin’s network has tens of thousands of nodes worldwide based on hash rate, market capitalization, or volume. Although many altcoin names and logos are similar, Bitcoin’s dominance makes it stand out.
- Lindy Effects and reliability
There’s no technology or company like Bitcoin when it comes to uptime. Since 2013, Bitcoin has been active without interruption. Google, Microsoft, or Facebook haven’t achieved this level of reliability. Bitcoin has survived external attacks, government bans, and internal disputes over its direction. Bitcoin’s price has risen and dropped significantly over the years, and its volatility has decreased. Lastly, Bitcoin has been around for more than a decade. It’s a good sign that Bitcoin has survived so long in the eyes of many investors, developers, and critics.
- Antifragility principle
In many ways, Bitcoin has become more resilient over the past 12 years. Bitcoin had a single point of failure, the central leader. Over time, a group of early developers took over Satoshi Nakamoto’s project. After that, decentralization continued. Currently, Bitcoin has tens of thousands of nodes and an unknown number of miners. A government or leader can’t shut down Bitcoin.
Bitcoin has also seen rapid technological advancements. Syncing the full blockchain has improved, and transaction throughput has gone up. Scalability and privacy solutions are being developed. As patents expire, Bitcoin is integrating better signature verification. The code has a few bugs that have been fixed. A growing number of developers are contributing to Bitcoin’s codebase thanks to better tools and education.
A lot of bearish theories have also been disproved by Bitcoin’s social and political trials. The U.S. government shut down the Silk Road in 2013, and Bitcoin gained attention. After the first few halvings, many critics predicted Bitcoin couldn’t defend itself against a 51% attack. Critics were worried that the price would fall due to the drop in security, stripping more hash rates from the network. Some say Bitcoin’s drop from $19,000 to $6,000 proves it’s a bubble and will go away slowly. Some people said Bitcoin couldn’t scale or a fork would ruin its network effects. Bitcoin has grown from these experiences, and none of these fears came true.
Other types of concerns
- Is altcoin inflation to blame?
Altcoins don’t cause inflation for Bitcoin because they’re different assets. An IPO on the New York Stock Exchange doesn’t inflate existing shares. Bitcoin isn’t fungible with other cryptocurrencies because of its unique nature. It’s impossible to pass off hard forks of Bitcoin as real Bitcoins, despite other cryptocurrencies launching and inflating their supply. Therefore, bitcoins will never exceed 21 million.
- Can altcoins beat bitcoin?
Cryptocurrencies like Bitcoin have a few advantages. Since Bitcoin was the first, it has the largest network, the most legitimacy among institutional and retail investors, and the most secure database. Bitcoin’s network effects shouldn’t be underestimated.
Money has a bigger network effect than social media. Choosing the wrong social media could make you bored, and holding the wrong money could lead to starvation.
Conversely, an intelligent investment decision early on can pay off big. Altcoins, however, won’t be able to supplant Bitcoin because of its fair, immutable monetary policy. This can’t be improved by technology.
Bitcoins are primarily a money innovation. It’s an innovation in payment methods, but it’s not groundbreaking either. Payment methods and money are different because they have different characteristics. It’d be nice if payment methods were fast, cheap, and universal.
In contrast to other assets, including other cryptocurrencies, Bitcoin promises to store value over time and space better than anything else. Since Bitcoin has a strictly defined monetary policy, it stores value for a long time.
Bitcoins will never exceed 21 million. Imagining a more attractive investment or a more sustainable monetary policy is difficult in economics.
Bitcoin’s monetary policy is enforced by tens of thousands of nodes worldwide. There can’t be any changes to Bitcoin’s monetary policy at a committee meeting. Bitcoin’s monetary policy can only be changed by persuading nodes to change their rules, which isn’t possible.