Center for Strategic Assessment and forecasts

Autonomous non-profit organization

Home / Economy and Finance / Direction materials
What distinguishes Bitcoin from other cryptocurrencies
Material posted : Administrator Publication date: 02-06-2017

A week tearing my hair out and I think that prevented me to invest extra $ 100 in bitcoins a couple of years ago? Even last week had a chance to get on the leaving train and be in the black. Amid the sadness and grief had a chance to dig in the foreign press. Under the cut is a curious story of Jimmy song about how bitcoin differs from other cryptocurrencies.

I have previously described as the market capitalization of many altcoins is deceptive given the recent surge in the prices of most alternative cryptocurrencies.

How to invest in Bitcoin

Being already a long time and are intimately familiar with Bitcoin, I noticed that many people are gradually discovering this system, changing her attitude. As a rule, people think like this:

  1. Wow! Bitcoin is great! Their production is limited and my money is under control. Where can you find them?
  2. Mining or production sounds just great. I think it be money. Where do you find the miner and get the first bitcoin?
  3. Minig is very difficult. Probably better to just buy coins. And where to buy them?
  4. Great! Now I have bitcoins and what is this other coin? Will they ever replace Bitcoin?
  5. We definitely need to do something in this case. Could purchase any of these altcoins?
  6. But so many of them, I'll never be able to understand them. What to choose?
  7. You know, just buy the most popular they, most likely, more likely around Bitcoin.
  8. Hmm, but they are very expensive. Maybe its better to buy any other only just appearing?

A stop at one stage or another. For example, I know people who have never bought Bitcoin, and always finding them on their own. They are happy to spend thousands of dollars on mining equipment, but will never buy a single bitcoin in the market. Other stops on Bitcoin and are not interested in Althingi. And there are those who are trying to hedge by buying all the altcoins in a row. The point is that whichever way you choose, things will develop quite predictable, but each person has their own beliefs, and each will go his own way.

Why buy altcoins

Most often altcoins are buying, to protect yourself from possible problems in Bitcoin. Here are a few reasons to insure with altcoins:

  1. The Bitcoin network may one day come to a catastrophic failure, which is not subject to altcoins.
  2. Prospects for the use of altcoins in the future is much higher than Bitcoin, making one of the altcoins could eventually replace Bitcoin.
  3. Even if Bitcoin remains the most valuable cryptocurrency, altcoins still have a place and they will be able to find its niche, so maybe investing in them and have some meaning.

Let's examine each item in detail.

The Collapse Of Bitcoin

There are several options for the catastrophic destruction of Bitcoin. First of all, it's a technical failure (for example, a bug that will allow you to steal all the coins). Second, economic mistakes (for example, change the code and give it to someone for just 10 million coins). Thirdly, the error of consensus (for example, Bitcoin is divided into two roughly equal currency).

Among the technical fault most likely are vulnerabilities in the encryption used by Bitcoin, or security of the code used consensus. A vulnerability in the encryption ("smart" attack against a particular elliptic curve used in Bitcoin) will naturally move to the most other coins that use the same cryptographic library. Vulnerability in security will apply to all coins with the same code.

In any case, the question arises: what would happen if any of the above happens? First, if a vulnerability is discovered quickly enough, then most likely the developers of Bitcoin are able to write the necessary patch and may immediately create a fork, are not affected. Actually something similar has happened, and then the reaction of the community was the fork.

Interesting to see what would happen if the moment will be missed. Most likely dramatically drop the price and not just for Bitcoin but for most altcoins, because people will stop trusting the cryptocurrency as such. By and large, we do not know whether altonah not detected vulnerabilities?

Under the economic problem, to understand some changes of economic rules of the Bitcoin. Such a situation Bitcoin never was, moreover, such a possibility is never even discussed. But from the recent debate on the scaling of Bitcoin we know that any changes require the full consent of almost the entire community. Such an outcome is generally invalid a priori.

On the other hand, prevention of technical and economic error requires talented, dedicated and reliable team of developers, but also risk, which must be defeated. Of course, this risk affects all altcoins, however, it is worth noting that Bitcoin is one of the few cryptocurrencies that has a natural barrier in the form of alternative customers.

Last drawback, perhaps, is the real threat, which is to insure. The debate on scaling showed that the community at least, there is a desire to share the network. Offer to do a soft-fork that is activated by the user, or activate the mute function of the consensus. Both said that in reality, Bitcoin has no leader and no dominant position. Most of the altcoins there is a Creator, the so-called "benevolent dictator", is actually deciding the future of currency. The fact that Bitcoin it is not, carries a certain risk. Although in the absence of such a "benevolent dictator" is a positive thing — reduce the risk of economic mistakes.

Prospects of use in the future

Most altcoins are technically different from Bitcoin, and often for this reason people are investing in them means. To explain this pattern just altcoins can be used as a Bitcoin plus something else, so they are more useful than Bitcoin, and thus will ever be able to beat him.

It seems to be logical. With the same technical parameters altcon, existing in a vacuum, will not succeed as much or even more than Bitcoin, also existing in a vacuum. Even if the code base is substantially different, but similar economies, in a vacuum, most likely, the effect will be similar.

But we, of course, not a vacuum, and the life of Bitcoin affects its use in the future. Most likely, Bitcoin itself in one form or another, will adopt the necessary use case. So far, none of the altcoins properties that distinguish them from Bitcoin, had not proved its usefulness and was therefore not taken the first cryptocurrency.

If any of the altcoins will show its usefulness, there are a few ways in which Bitcoin can adopt the required property. First, Bitcoin can easily borrow the property that will find quite useful. As example confidential transaction proposed in the sidechained Bitcoin. Certain characteristics, however, may interfere with the current use cases of Bitcoin. Bitcoin, for example, retains the value, so it pays to think several times before adding options, creating more favorable conditions for attack. And here is a second opportunity to add useful properties of Bitcoin. Entrepreneurs can introduce similar functionality at a time until they make a profit. Given that the consensus is very difficult to change, the latter method is the introduction of the Bitcoin network of innovation seems the most plausible.

In other words, Aldona have to compete not only by Bitcoin, but with all the entrepreneurs who wish to make it. It turns out that despite the fact that in some cases the protection risks makes sense, still, most likely, the result of Bitcoin in one form or another will adopt other scenarios will reduce to zero all the advantages of altcoins.

Highly specialized use

Undoubtedly, many altcoins are trying to find its niche. Dogecoin, for example, built on a system of reward and move cost, often for the sake of moving. Ripple was originally conceived as a means of moving the cost for the banks and large institutions.
The only coins that fill a small niche, to achieve some results, i.e. to be able to do what cannot and will never do Bitcoin. Dogecoin quickly realized that to give as cash bonuses (rewards) Bitcoin is also easy. You can bet that it is quite problematic in view of the commissions on the transaction in Bitcoin and maybe Dogecoin has a chance to break forward, but let's start with the fact that bonuses in Dogecoin ever issued "on-chain" (network), and bonuses Bitcoin (ChangeTip was a centralised service). If the promotion will come back in fashion, the Bitcoin ecosystem easily cope with them. Banks that transmit to each other the cost may do so with Bitcoin.

Question occupy niches similar to the question of the future use, only not so big. Entrepreneurs have plenty of reasons to bring like, the best innovation in Bitcoin, given a broader base of users.

What is different about Bitcoin

The main advantages of Bitcoin is the network effect benefit and proven safety. Both of these benefits is almost irresistible.

Bitcoin has a proven use case — storage of value. It is significant that most of the coins trying to be different from Bitcoin, so I suggest less demand scenarios, including market forecasts, is completely anonymous purchasing or adding decentralized name servers.

Bitcoin is a leader in storage cost among all altcoins, and over 8 years of existence he has not had a single crash. The security of Bitcoin is much higher than its younger counterparts

In addition, Bitcoin is much more accessible — more exchanges, more sellers, more and more supported hardware. Bitcoin is much liquid in the volume considerably exceeding the volume of any alithina. Bitcoin is the largest ecosystem of developers with a large number of software and implementations, compared to Althingi. In Bitcoin and more businesses are investing their intellect, desire and creativity in the development of the network.

Competing with Bitcoin, you are competing not only with the largest user base, developer team and production, but you also compete with the largest ecosystem of startups, open source projects and businesses.


To make it clearer, imagine that I create a coin for spam e-mail filter. Let's call our currency SpamCoin. This Aldon allows you to send a message only after paying a certain amount of coins SpamCoin. Suppose that such a possibility has been very useful, and many began to use it, making SpamCoin began to gain more and more value. What will happen?

It is unlikely Bitcoin will directly assume the role SpamCoin (although in the case of Saidjanov, I think you won't be able to resist). But the probability that some entrepreneur will create a similar service based on Bitcoin. They originally much bigger base of potential users, and for the service do not need any SpamCoin. Before them, there are practically no barriers to entering the market, the user base is larger, so in the end a new Bitcoin service will initially have the benefits of the network effect benefits, can not be said about SpamCoin.

I'm not saying that SpamCoin lose, but on his way he will face great difficulties.


I'm not saying that investing in Aldon useless. Each investor must assess the risk-reward ratio and decide if he or those other coins. What is clear is that altcoins will not protect you in the event of a Bitcoin collapse. Altcoins are subject to the same risks, and a high proportion of potential profits in Bitcoin.

Undoubtedly, there is a probability that some allcoin will take the place of Bitcoin, but he must first show (now, not in the future) its benefits, should develop independently, to compete before the Bitcoin ecosystem will have a chance to add the same function.

In the process of its development, Bitcoin could start growing in the most unexpected direction depending on the emergence of new use cases. Bitcoin owners can be sure that over time its scope will only increase. The owners altcoins, on the contrary, exposed to great risk of refusal to use their coins.

In other words, Bitcoin is already ahead of all in the circle, with great advantage, given its ecosystem and resources. There are two factors that help Bitcoin to succeed: stability and entrepreneurship. Today, on both these indicators, Bitcoin is far ahead of any altcon, and catch up it will be very difficult.


RELATED MATERIALS:Economy and Finance
Возрастное ограничение