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Will innovative advances in competing altcoinsâ blockchains be enough to overtake Bitcoinâs success?
When the famous Satoshi Nakamoto first designed his masterpiece, few could possibly have imagined the almost $63,500 peak that sent investors into a frenzy. Even these days, the first-ever cryptocurrencyâs price feels hard to believe at times and investors might be pinching themselves every now and then. Taking a seat alongside Bitcoin (BTC) on the roller coaster, altcoins like Litecoin (LTC), Ether (ETH) and Bitcoin Cash (BCH) joined the ride â and, more recently, DeFi giants Polkadot and Cardano.
But for the long haul, looking into the crystal ball, itâs difficult to see the future of a coin shrouded in uncertainty. Ray Dalio raised fair points in his critique of Bitcoin, arguing that uncertainties regarding how governments will react to digital assets supplanting fiat currency in utilization are causes for potential concern down the road. He further argued that the Bitcoin blockchain will soon be outdated, and without any central governance to adapt it to emerging blockchain technology, a superior coin could overtake it.
Related: DeFi wonât last long without unlocking Bitcoinâs $250B treasure chest
And that nails home the point: Bitcoinâs underlying blockchain protocols are very limiting in terms of enabling broader financial applications. It would be unfathomable to operate a massive DeFi ecosystem on top of the Bitcoin blockchain given Bitcoinâs proof-of-work transaction consensus algorithm.
Despite its limitations, itâs difficult to predict whether innovative advances in competing coinsâ blockchains will be enough to overtake Bitcoinâs success. It all hinges on the utility factor: Will crypto stay a store of value, or will it become a viable alternative for exchanging value?
Related: Did Bitcoin prove itself to be a reliable store of value in 2020? Experts answer
Emerging blockchain technologies and DeFiâs success
Since the dawn of Bitcoin just over a decade ago, the blockchain industry has given rise to hundreds of different projects, with each one aiming to forge a new coin into stardom. Many succeeded in the long term. Ether, the second closest coin in value to Bitcoin, continued hitting new all-time highs throughout April, validating not just the coinâs potential as a store of value asset but also Ethereumâs potential as a blockchain network.
Related: Where does the future of DeFi belong: Ethereum or Bitcoin? Experts answer
Similar to Ethereum, a number of projects aimed to emulate the titan that Vitalik Buterin and his associates built, such as Cardano, EOS and, most recently, the hot and popular Polkadot. Each project tries to build off the limitations of the other to varying degrees of success. Hype has been the majority of whatâs been delivered to users, as only time will reveal the true validity of these projects.
Regardless of the blockchain projects and their creative names, theyâve spurred on an ecosystem of collaborative development. Together, theyâve created decentralized apps, or DApps, that can bring the unbanked out of the doldrums of impoverishment, opportunity to the financially excluded and new investment avenues to the already-savvy.
Related: Itâs time to put the dukes down and work together for blockchainâs future
The flourishing of coins and DApps serves up plenty of optimism to many outsiders looking in, offering hope that there is real potential to foster a booming decentralized finance ecosystem â or at least a hybrid of it combined with centralized markets. But itâs all thanks to belief in Bitcoinâs value, which is the fixation point of many investors.
Related: Was 2020 a âDeFi year,â and what is expected from the sector in 2021? Experts answer
Bitcoinâs store of value is whatâs really on the mind
What drove the inquisitiveness of investors, developers and crypto enthusiasts alike was the appeal of Bitcoin as a store of value. Against fiat currencies, Bitcoin is deflationary; so, during periods like the COVID-19 pandemic, Bitcoinâs appeal turned white-hot.
Related: How has the COVID-19 pandemic affected the crypto space? Experts answer
While discussions about Ethereum, Polkadot and other blockchain platforms caught the attention of the DeFi world, many outsiders remained numb to them and fixated on the coin prices. And thatâs why Bitcoinâs appeal stays as a store of value, for the most part.
Related: The butterfly effect: Why DeFi will force BTC to break its 21M supply ceiling
Many ordinary retail investors and institutional investors donât have a firm grasp on cryptoâs inner workings. According to a Cardify survey, only 16.9% of crypto investors âfully understandâ it, while just over 33% of them have limited or âzero knowledge.â Over 40% of crypto investors are newbies who are riding the hype wave. Itâs arguable that the entry barriers to the DeFi world are quite high and literacy is rather hard to attain, but thatâs a story for another time.
Related: Institutional investors wonât take Bitcoin mainstream â You will
Moreover, institutional investors remain wary of the volatility issues facing Bitcoin and other cryptocurrencies, with ongoing predictions of an imminent bubble â another signal that underlying blockchain technologies are less of a priority. And this is precisely why other coins will not overtake Bitcoin. So long as the mainstream fixation remains pinned to coin value and not underlying blockchain value, Bitcoin will stand atop the cryptocurrency podium. Whether investors can become more literate in the inner workings of the DeFi world will determine how much value investors will find in the underlying technologies of new and emerging coins.
For now, Bitcoin is the king of the hill and will likely stay that way for a long time as the price continues to climb and mainstream investors hop on board.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
The views, thoughts and opinions expressed here are the authorâs alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Ariel Shapira is a father, entrepreneur, speaker, cyclist, and serves as founder and CEO of Social-Wisdom, a consulting agency working with Israeli startups and helping them to establish connections with international markets.Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.