The Need For A Diverse Crypto Economy – Opinionbr>
Twitter CEO Jack Dorsey recently remarked that bitcoin will become the world’s single currency within the next 10 years. While his belief in the strength and viability of the cryptocurrency space is certainly encouraging, Dorsey is overlooking the fact that the advent of blockchain technology has created a strong need for a diverse digital economy including, but certainly not limited to, bitcoin. While bitcoin was the first cryptocurrency and the one that most quickly achieved mainstream adoption, the competition has become undeniable, as altcoins like Ethereum and Ripple saw substantially larger growth than bitcoin in 2017. In a market that’s undergoing frequent and rapid change, it’s much too soon to crown bitcoin the victor of the cryptocurrency revolution.
The strength of the digital economy largely derives from the fact that it comprises a variety of cryptocurrencies and blockchain solutions. Each of them solve a particular problem across a number of industries, ranging from supply chain to education to healthcare. As a purely transactional currency, bitcoin cannot reasonably serve as the panacea to scores of complex industry problems. Not only does the Bitcoin protocol lack smart contracts, but its network relies heavily on the volunteerism of node operators rather than providing them with an economic incentive. As Ethereum and other blockchain 2.0 protocols rose to prominence in the past year, Bitcoin has maintained its stature largely due to its massive network size and brand recognition. However, in order for blockchain technology to be leveraged to its fullest potential, there’s a need for industry experts to study how it can be applied, and for developers to customize its underlying blockchain technology.
Indeed, as the cryptocurrency market has matured, bitcoin’s dominance has declined. Even in early 2017, its market capitalization made up nearly 85% of that of the entire cryptocurrency market. As other altcoins have entered this maturing market, that figure has since declined to 44%. Following the market’s most recent contraction, it can be surmised that the next wave of investors will pay extra attention to the purposes and features behind their cryptocurrency investments.
Though bitcoin has the largest network of any cryptocurrency, it will need to develop solutions to some substantial issues — including questions of scalability and protecting user privacy — if it’s to maintain long-term utility. Thus, there is a need for competition in the marketplace; other cryptocurrencies need to jump on the opportunity to address some of bitcoin’s shortcomings. For example, in response to Bitcoin’s very public and easily traceable blockchain ledger, there has been a meteoric rise in the number of number of privacy-focused cryptocurrencies, like Monero and ZenCash that incorporate advanced features like ring signatures and zk-SNARKS, respectively, to ensure that users’ transactions remain confidential.
While bitcoin remains the largest and most well-known cryptocurrency, it’s premature to imagine that it will achieve complete dominance in the markets, particularly in light of recent growth of altcoins. Bitcoin will likely remain a major player, as its technology and vision provides much of the backbone of the blockchain space, but it’s clear that cryptocurrency markets thrive when the market consists of many coins, each fulfilling a specific purpose.