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Witnessing the digital breakthrough

Will Bitcoin Be Replaced?

08 October 2019 15:01, UTC
Will Bitcoin Be Replaced?
By Sergey Ivanov

Throughout the history of cryptocurrency development, there were attempts to create a “Bitcoin killer” — a coin that will be able to replace the first and largest cryptocurrency. Some people tried to create a new currency from scratch, some just made forks and told everyone that this coin is “better than BTC”, but all these attempts failed. However, is it possible that Bitcoin “will give way to young” at all?

Why Bitcoin can be replaced

It is not to say that Bitcoin is an ideal cryptocurrency and nothing better can be created ever. On the contrary — from a technical point of view dozens of blockchains for digital currencies have already been created, which work much faster and more convenient for users than Bitcoin's. After all, Bitcoin is the first cryptocurrency, and the first sample of any technology sooner or later is replaced by a new generation, isn't it?

In addition, Bitcoin blockchain is really slow. The implementation of Lightning Network significantly improved the situation, but the “old man” can't compete in the speed of transactions with newer coins. In combination with high fees, this makes Bitcoin not the most convenient cryptocurrency for settlement operations.

So it would seem that the “fall of Bitcoin” and its replacement with a new coin should be right around the corner. But it's not that simple.

Cryptocurrencies are not just technology

Cryptocurrencies are a very interesting phenomenon. Despite the fact that the emphasis is usually on technological aspects, and first of all — blockchain, cryptocurrencies are primarily money. Therefore, the value of coins is largely determined by how much people trust them and how many fiat funds have already been invested in a particular coin. And no one can compete with Bitcoin on that field, even in theory.

Bitcoin is trusted because it is the first, largest and most stable cryptocurrency (the latter is also related to its capitalization). When more than half of the cryptocurrency market is BTC — it's hard to find a reason to trust another coin.

You can draw a direct analogy with fiat currencies: even if a small country's economy is growing rapidly, you will not store your savings in its currency. You'll buy US dollar. Bitcoin occupies roughly the same position in the cryptosphere as the dollar in fiat. Therefore, if you want to invest in cryptocurrency, you need to replenish your bitcoin-wallet for at least part of the allocated funds, creating a reliable base for your cryptocurrency portfolio.

Potential competitors

To be fair, among the currently created projects there are those that can seriously threaten Bitcoin's position. First of all, we are talking about Libra — Facebook cryptocurrency.

Due to the huge number of potential users and resources of mega-corporations (Libra Foundation includes, in addition to Facebook, dozens of companies, from Visa and MasterCard to Uber) Libra, in theory, has a chance to compete with Bitcoin for influence and market share.

However, whether it will happen — is a hard question. First, the Libra project has serious problems with regulators and its future is in question. Second, given the degree of centralization of the planned Facebook currency, it should rather be considered a PayPal competitor than Bitcoin's or Ethereum's.

But even if Libra manages to take a leading position in the cryptomarket, Bitcoin will have a major advantage - the trust of users. The first cryptocurrency will truly become a “digital gold”, giving up the title of “digital dollar” to the new coin.

Conclusion

In the foreseeable future, the prerequisites for Bitcoin “coming off the scene” are not visible at all. The coin will not lose its status as the most reliable digital asset.

Theoretically, there is a possibility that in a few years Bitcoin will no longer be the main cryptocurrency used for settlements. But, firstly, there are no guarantees of this, and secondly, even in this case, Bitcoin will remain the most important asset of the crypto market.



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