by Denise Quirk, Health Advisor and a believer of transforming complex information into simple, actionable content. She is keenly interested in finding the value of crypto world. She writes for Coin Review, Bitcoin Warrior, Irish Tech News, etc. You can find her on Linkedin, Twitter and Facebook.
How usable a cryptocurrency is what determines its adoption for transactional purposes. Bitcoin was conceived to eventually be the new digital currency to replace paper money. Ever since its conception a decade ago, it has grown in leaps and bounds. Its valuation has reached billions in USD, and tons of investors have joined in the bandwagon.
Since then, hundreds of other Bitcoin alternatives began to appear. Dubbed “altcoins”, these digital currencies aimed at displacing Bitcoin. This started a race to see who would reach the top of the digital currency race. The prize? Be the next, widely used and accepted the digital currency.
The goal of all digital currency today is widespread usability. For a currency to be valuable, it must be used and accepted in everyday transactions. The primary hurdle with usability for these digital currencies is its volatility. If the value of your currency wildly fluctuates during a single day, it becomes very impractical. It would be next to impossible for merchants to set prices. It would be like a $1 apple in the morning suddenly becomes a $5 apple in the afternoon. Crypto assets management can help minimize this, but the volatility is still there.
Traditional analysts have long hated digital currencies because of this. Volatility also makes digital currencies a very risky way of storing capital or funds. The value of your balance would vary widely, and this makes it not viable for normal use.
What’s the source of this volatility? Mostly uncertainty. Public and investor sentiments with cryptocurrencies are widely varied. Enthusiasts praise it as the future of finance. But most people are skeptical, probably because most don’t really understand it. The slew of scams and negative publicity only add to this perception.
But it can be argued that the situation is changing. More and more merchants in some cities are accepting cryptocurrencies. Cryptos are also getting into the radar of some serious traders, thanks to tools such as crypto leverage trading. These increased investments can only bode well for cryptos.
So, cryptocurrencies, in general, face the same dilemma. But some cryptocurrencies are dealing with it better than others. So between Bitcoin and altcoins, who reigns supreme?
Bitcoin arguably has the advantage of being the first. Started back in 2009, it has had time to improve and mature over the years. It is also currently the cryptocurrency with the biggest valuation.
At the time of this writing, Bitcoin is king of the hill with a value of $112 billion. This makes Bitcoin a very desirable cryptocurrency for investors, which only boosts its value in the market.
This longevity and first mover advantage also mean most entities that accept cryptocurrencies will almost always accept Bitcoin. Of the estimated 54 companies worldwide that accept cryptocurrencies, only 2 don’t accept Bitcoin. An ever-growing number of small merchants in key cities also accept Bitcoin exclusively
If we look at this statistic alone, then we have a clear winner. It’s true that currently, Bitcoin is the most widespread and, therefore, most usable. But the keyword here is “currently”. The future might spell a different fate for Bitcoin.
For all its advantages, Bitcoin does have its limitations. The biggest is in terms of its scalability. This problem alone would be a severe obstacle for Bitcoin’s future of widespread adoption.
Why Bitcoin has a scalability problem has something to do with its design. Transaction speeds with Bitcoin are notoriously slow. Bitcoin currently supports just 1 transaction per second. In comparison, Visa processes theirs at a speed of 2,000 transactions per second.
Apart from slow speeds, transaction fees are also higher with Bitcoin. Both problems stem from Bitcoin’s mining algorithm, which is slow and expensive. The electricity needed to mine Bitcoins can rival that of a small country.
And on top of that, Bitcoin’s developers seem to be not doing anything about it. Changes like these seem trivial and easy for a typical software project. The way Bitcoin’s blockchain is made, however, makes it difficult to enact changes of any kind.
Predictably, lots of others sought to create alternative digital coins to overcome Bitcoin’s weaknesses. This led to a race to solve cryptocurrency’s scalability problem.
Notable examples of these altcoins included the next few digital coins in the value ranking. Names such as Ethereum, Litecoin, Dogecoin, and Ripple.
Litecoin is seen as Bitcoin’s closest competitor. Started in 2011, Litecoin sought to improve upon Bitcoin in many ways. Litecoin mines coins roughly every 2.5 minutes, compared to Bitcoin’s 10 minutes. This speeds up transactions by up to 4x.
Litecoin also allows for more coins in circulation – 84 million compared to Bitcoin’s 21 million. It also uses a different algorithm called scrypt, that is more memory intensive but lowers mining speed.
Ethereum is currently the second most valuable cryptocurrency next to Bitcoin. What Ethereum improves upon is not so much with performance as it is with usability.
Ethereum provides a platform for developers to host decentralized applications, or DApps, into the Ethereum network. It does this using Smart Contracts, self-executing pieces of code that triggers when conditions are met. This makes Ethereum to be a highly “usable” altcoin with practical, real-world applications.
The Altcoin Outlook
There are hundreds of more altcoins being developed by the day, with rapidly improving features. As of May 2018, this number is set to be around 1,500 different coins globally.
The biggest advantage of altcoins is in their rapid development. As more and more gets released, they collectively get closer to solving scalability. Eventually, one will surpass Bitcoin and achieve adoption. The math is simply on altcoin’s favor.
But, Bitcoin has some breathing room. Despite their growing number collectively, individually, they still see adoptions rates lower than that of Bitcoin.
Remember the 54 companies surveyed that accept cryptocurrencies? Of those, only 25 accept Litecoin, 15 accept Dash, 13 accept Ethereum and 15 accept Dogecoin. Compared to the 52 that accept Bitcoin, the winner is clear.
Altcoin has lots of advantages, but it still needs to prove that to the wider public. It needs to generate and market that value to make it stand out versus Bitcoin.
So for now, if we’re looking at which is currently the most usable, then Bitcoin is clearly the winner. Its early advantage and long tenure mean it’s the first in mind if people do get into cryptocurrency.
But the question though, is, for how long?
The race for widespread adoption is never-ending. If Bitcoin, or any cryptocurrency, were to achieve this adoption, surely adoption would follow suit for all the others. The influx of investors and businesses would lift the entire cryptocurrency for the better.
Being the first is not enough. Eventually, the much better altcoin will eventually surpass Bitcoin, regardless if it becomes widely adopted first. It all comes down to usability.
Real usability means being practical and reliable for everyday use. It should be something that can replace or even be better than traditional cash. We recommend looking at the various alternatives that meets the billing.
In the end, it would be wise to follow the old investment adage: don’t put your eggs in one basket. Invest in both Bitcoin and a high performing altcoin or two. It’s not so much as picking a side to see who wins. It’s more about getting more than one bet in the table.