The Crypto Game is About to Change…
I was in bitcoin at single digits. I was in litecoin in the pennies. Unfortunately I didn’t capitalize on these positions or hold as long as I should have, but that’s a story for another post. Today I want to concatenize my over 4 years experience in the cryptocurrency sector into a summary of the current shifts which I predict will be huge over the next 2 years.
We’ve all been talked to death about the current bitcoin problems; high fees, hard fork risk, developers miners and users of different factions at a stark disagreement.
Currently bitcoin is the gold of crypto, a long term hold and storage/settlement vehicle (it has the network effect) though it’s becoming burdensome, or rather, not improving as a day to day medium of exchange for simple or otherwise ‘cheap’ transactions. I’ve been sending transactions with about a 50 cent fee so they’re not delayed. So much for a micro-transaction friendly online form of payment...
As we all know, within a few years after bitcoin was introduced, it’s code was copied, altered (sometimes not so much) and this new code was re-branded with a name of a fresh “alt-coin.” There came to be hundreds of them and today nearly 1,000 in total. In late 2013 to early 2014 these bitcoin competitors had a huge price run-up: as an example, litecoin went from a couple dollars to over $30. Today it appears alt-coins are having another major mid to long-term rally. In fact, only $19.6 Billion or 68.3% of the total $28.7 Billion cryptocurrency ‘market cap’ is from bitcoin. This is just about a record low, or rather a record high for smaller coins competing. Since 2014 most of the names have changed for the top competitors (besides litecoin) and so have the features; some with I would argue massive improvements over the original bitcoin code making their rise incredibly viable with bitcoin development seemingly locked up in a stalemate.
I’ll admit, 3 years ago I was blind-sided by the utter crash of the litecoin price and instead of holding since then (which would have taken a long time to just have the value at $10 where it is today) I did sell it at a loss when I needed the money cashed out. At that point I realized the irrational exuberance that was embedded in the market at that time. Alt coins were all hype, and the reality that there was a lack of secure and usable infrastructure for bitcoin as evidenced by major events (i.e. the Mt. Gox hack and bankruptcy) drove all the “get rich quick ‘cause I missed the bitcoin boat” speculators out of alt coins. In general, the whole cryptocurrency sector had simply grown too quick price-wise and the development and adoption of user base needed time to catch up. Yes there’s also the regulatory burden, but this is not what this article is about.
So now is the point where I convince you that this time is different. This time with the huge alt-coin run-up, there are legitimate reasons for these “spinoff” coins to be justified in their millions and billions of investment dollars backing them.
Reason 1: Bitcoin development is scary slow
There are some benefits to this like making sure any changes are fully vetted before being implemented to keep such a large programming project secure, and to maintain the peace of mind of big money investors; for gosh sakes there are nearly 20 Billion Dollars at stake here. So because of these reasons, only small changes can be implemented at a time, though I’ll admit many see SegWit as just a small change in itself, and I would almost be inclined to agree on the surface, were it not for the programming experience in my background. But not only are there these huge reasons making improvements slow to materialize (we’ve been arguing this blocksize debate for 2 years!), major developers are in direct conflict with each other of what to implement. One question I’ll throw out there is: With no internal blockchain-based payment to devs, who or what companies ARE paying them and what goals could they personally have for bitcoin? Some of these goals may be in conflict with the majority of the users. Why wouldn’t every user or potential consumer for bitcoin want faster transactions, lower fees and more capacity for the network in general? Not to take it overboard and overwhelm small miners and node operators but of course to have step by step increments as needed. This seems just too logical for me, and from quotes I find I think even creator Satoshi Nakamoto wanted it this way and also stated that most users don’t need to run a full node anyway. The other elephant in the room is the tsunami size problem that miners have too much power over the direction bitcoin development goes; that’s why we get this convoluted forking talk recently. I can’t tell which sounds more frightening; User-Activated Soft Fork [UASF] or a simple hard fork.
Just like a corporation growing too large and management becoming too fragmented, the direction of the entire company is muddied and confused so much they often end up shooting themselves in the foot. Just so, the community of bitcoin is so large that it’s hard to construct a solution with such a diverse group of people, not to mention how much tech savvy most of us have and thus many ‘expert’ opinions are thrown in to conflict with each other. I recently saw a ColdFusion video that exemplifies this point. Even Apple, the largest publicly traded company in the world looks to be faltering with higher prices, lackluster new products and making moves that disappoint their core fans (here’s an ironic Steve Jobs quote to accentuate the point). Even at their current near monopoly in some sectors, if Apple forgets what a good product is, they will fail.
Reason 2: Bitcoin is only the 1st Gen of cryptocurrency - room for improvement
I am not a bitcoin maximalist. I see the code as being the first generation of cryptocurrency. There are major structural flaws in the current code that should be fixed. Software is never perfect in its original version. We didn’t log-on to AOL 1.0, you used the latest version if you had it (Remember when you used to get those discs in the mail, AOL 2.0, AOL 3.0….OMG gotta try AOL 5.0 It has to be better!).
Time heals all wounds. 2009-2017 was a beta test of blockchain technology as money in the real world and it is wonderful. We should now be looking at HOW we take it to the next level in the best way to grow mass adoption fastest: to help people of the world and to outmaneuver the banksters and governments in general. We don’t need to fix bitcoin’s problems in bitcoin itself if it’s easier to move-on to something else. Businesses and retailers who’ve adopted bitcoin can easily alter their websites, API’s, code and interfaces to use a different coin’s blockchain. Don’t even get me started on lightning network.
Reason 3: There are too many disagreeing parties to please them all
Without miners agreeing with a current development roll-out plan, users understanding enough to know what to do with a UASF, hard fork or what have you, and massive investors and corporate interests at stake coming to a consensus, bitcoin will not go anywhere until the problems are too big, it would immediately benefit all parties to agree on something. All we are arguing now is whether or not this problem derived consensus will become too big or be too late to save bitcoin’s dominant spot as #1 crypto money.
I and many of you may be really passionate about bitcoin as the first in decentralized and censorship resistant digital currency, but we cannot reconcile the differences and issues that simply weren’t and could not have been anticipated, everything that has appeared since we joined bitcoin in 2009-2014. But fortunately with an open source project and the “free and open” internet, many competitors have provided solutions to some of bitcoin’s irreparable problems.
Take a look at the list of top 10 cryptocurrencies by market cap right now and try to tell me these do not have advantages over bitcoin or have reached achievements BTC hasn’t seen. Ethereum, the #2 worth over $4 Billion, is a smart contract platform; it’s not even a digital money! Ethereum is being featured on a television show watched by millions of people as well.
Ripple, #3 is...well it’s ripple and many of us fear it’s centralization attribute as we rightly should; it’s one I need to look further into but I’m definitely not interested right now.
Competing for 4th place is Litecoin and Dash. We all know litecoin: 4x faster block times, different hashing algorithm and 4x as many coins to be mined in total vs bitcoin. Basic changes but they provided some advantages over the original bitcoin for a while. For a long time (before SegWit signaling) the price was stagnant at $4 as people realized these changes were not enough to make it better than bitcoin compared to its other competitors.
Enter Dash. Yes, I like dash and for good (dare I say great?) reasons. From what I know so far it has key advantages compared to most cryptocurrencies: Internal governance structure (voting), using ‘masternodes’ to reward long-term holders with regular payouts, a blockchain-based pay structure for the dash team from everything from developers to marketing to pet projects, fast block confirmation times and it also currently features instant and private send features. They’re poised to respond to needed changes and community sentiment shifts rapidly. I spoke personally with one of the core team (Ryan Taylor, Director of Finance) and he explained to me how easy it would be for dash to raise their blocksize to accommodate more transactions when the time comes. This is for sure one of the most exciting coins out there besides their red-headed step child PIVX which also has a remarkably passionate team and recent price spike. The dash community is excellent at marketing and this matters a lot more than you think.
Also competing are Monero and NEM which I’ve seen featured a lot on youtube video reviews and having great technical features bitcoin is lacking and with no realistic implementation window on the horizon. Monero focuses on private transactions and NEM has a governance structure and 1 minute blocks as well as more energy efficient software. Overall alt-coins are building up notoriety and market steam again like the end of 2013, but this time I think we’re not dealing with a dry run. This is the real thing. Bitcoin proved cryptocurrency can work and these coins are proving cryptocurrency and the blockchain can be better than its first iteration.
There are way more people out today knowing what bitcoin is and it’s natural therefore that there is way more media coverage this time around with all cryptocurrencies. There are random no name seemingly everyday people turned investors promoting alt coins on youtube... and they know the differences in features between them! [As well as pointing out the problems with bitcoin like slow transactions]
Now I’ve gone all this way without much talking about Segregated Witness or “SegWit” or more importantly Litecoin’s potential implementation of it. As I speak, one tracker says 80.9% of blocks are signaling in the past 24 hours. This is good news for litecoin and for bitcoin in the short-term. This will be especially good for litecoin price which is over $10; a much different paradigm than I mentioned earlier where it was stuck around $4. Here’s the bad news: Litecoin even with SegWit does not have the other promising features other alt coins have. SegWit does not solve the blocksize problem long-term. Litecoin still has the same governance structure (mining kingpin dominance) as bitcoin. Don’t get me wrong, I love litecoin. I was nearly a litecoin millionaire at one point (in two different senses of the word). The biggest caveat here is even IF litecoin implements SegWit, which it needs 14 days of consistent signaling by miners that it wants this, bitcoin may not necessarily follow suite. Bitcoin has a much bigger hurdle to jump to implement it. Litecoin has only been talking SegWit a few months and bitcoin nearly a year and still has less than 30% mining support which is even less than Bitcoin Unlimited’s current support. In addition, there’s always the chance there will be a problem discovered in SegWit once litecoin implements it...yes I do admit LTC adding SegWit would be a big boon for Bitcoin’s SegWit supporters because it would be a proving ground to test it, and that’s something we need to realize, it’s not tested with real money yet! (besides some small alt-coin actually implementing it). Bitcoin has a current deadline to implement it by this fall. With the slow as molasses plague that’s been going on in bitcoin progress the last few years, I currently don’t have my hopes up for that.
Wrapping this up, whether litecoin implements SegWit or not... alt coins are increasing in market share. Litecoin’s SegWit affects litecoin & bitcoin only as well as any other bitcoin clones that would copy bitcoin or litecoin if segwit is implemented. Other coins like Dash solve the scaling problem nicely without segwit and for extra measure throw in completely revolutionary features that bitcoin will never see for at least years to come at best.
Myspace was first, but later facebook and twitter improved the social media platform.
Floppy disks and audio tapes fell to CD’s. Video Cassettes were replaced by the DVD which was replaced by blu-ray. CRT Monitors were replaced with LCD and flat panels. After Playstation came Playstation 2, 3 & PS4.
Bitcoin paved the way, but it's likely not the final mainstream adoption version of cryptocurrency. It will always be our first love though :)