We’ve told you why Bitcoin is not dying.
We’ve told you why we don’t give it an A.
But we have not yet given you an answer to today’s question — what is the truefuture of Bitcoin?
That’s my goal for today. And I will seek to achieve it while responding to the recent post by guest contributor Tristan Amzallag.
His case: Bitcoin merits a grade that’s significantly better than our current B- (“good”).
OK, I welcome the criticism. It’s completely consistent with our goal of providing a forum for opposing viewpoints and meaningful debate.
I also agree with many of his points in favor of Bitcoin, all factored into our B-.
Here’s where I disagree or see the need for elaboration:
Argument #1. “Bitcoin wasn’t designed to address 90% of the market’s needs, and thus the emergence of new coins and technologies … was inevitable.”
Does this argument lead to the fact that Bitcoin will have continuing challenges … that other alternative projects are likely to outperform in terms of growth … and that Bitcoin is not the best investment one can make in the space right now?
If this is where the discussion goes, then I agree. Indeed, that is precisely the logic behind our B- for Bitcoin.
Remember: Our ratings are designed for investors, and as such we want to identify the coins that have the most potential for future growth. That’s not Bitcoin.
Argument #2 is all about Bitcoin’s utility in the past and immediate present. But what about the future? The reason we give projects such as Ethereum or NEO grades that are equal or higher than Bitcoin’s is because we recognize that the potential future value of these projects could be orders of magnitude superior to Bitcoin.
This is partially by design: Bitcoin is being developed primarily to be a secure, immutable, censorship-resistant and borderless value transfer network — one that cannot be hacked, manipulated or tampered with by any central authority.
This makes the Bitcoin network a strong store of value, something akin to the gold of the digital era.
Meanwhile, however, Bitcoin essentially fails at other potential applications.
It’s not “electronic cash,” as Satoshi described it. It’s too slow and expensive for that.
And it certainly isn’t built to support the smart economies of the future. Bitcoin developers themselves shy away from those applications due to their concern that the apps could compromise its robust security features. Thus …
Bitcoin’s true future is a niche use case — a store of value!
In contrast, we are strong believers in the technology that powers Distributed Ledgers — shared, synchronized data that’s spread across multiple sites, countries and institutions.
We believe it’s the future of how societies will be organized, not just financially, but also politically and legally.
We are confident that the entire structure of power — money, governance and more — will be transformed by these technologies.
Sadly, Bitcoin is not currently up to this task and likely won’t be in the future.
Yes, it can be argued that this is the price to be paid for Bitcoin’s strengths.
Yes, some make the point that it’s “a feature, not a bug.”
But as blockchain technology evolves, as it begins to transform civilization as we know it, it also means the Bitcoin network will lose relevance.
Argument #3 is about liquidity and ubiquity. “Bitcoin,” writes Tristan, “enjoys the largest trading volume. Bitcoin is the gatekeeper to the entire crypto world. When any investor, speculator or user wants to enter these markets, they will sooner or later encounter Bitcoin.”
This is very true. For now.
But is it due mostly to Bitcoin’s inherent strengths? Or is it mostly because of Bitcoin’s legacy, its obvious first-to-market advantage?
Sure, for a long time, Bitcoin was the only game in town. Other projects couldn’t even hope to compete with the “king of cryptos.”
Now, however, with the advent of Ethereum, that has changed dramatically, and this change is a trend that’s likely to continue.
Ethereum may also have challenges, including bugs we are not even aware of. But it opens up potential applications of blockchain and related technologies that go far beyond payments and currency.
Let me be very clear about this: I do not view cryptocurrencies as merely money 2.0.
First and foremost, I see their underlying blockchain technology as a revolution that will dramatically disrupt the way societies are organized.
Second, I believe these and related technologies are likely to change the way countries are run and governed, how elections are secured, how corporations make decisions, how profits are distributed, how property rights are defined, and who owns what.
In fact, the very nature of “ownership” is likely to be redefined by Distributed Ledger technology.
Third, I am quite certain Bitcoin is not ready for this new world. Nor does it aim to be. But as Bitcoin’s market dominance falls, so too will its function as the primary source of liquidity for the crypto world.
Exchanges like Binance have been quick to recognize this change and are setting up Ethereum-based currency pairs.
It’s a trend that can only continue. Ethereum is easier and cheaper to use. It’s orders of magnitude faster than Bitcoin even on its best days.
What about the Lightning network? Yes, it helps Bitcoin, but only to a limited extent. Moreover, there’s nothing about Lightning that’s specific to Bitcoin. Other projects can and will adopt it as well.
“Why Don’t We Give Bitcoin Credit for Its Superior Security, Adoption and Decentralization?” ask critics.
Answer: We do. We cover all these issues and more in our Bitcoin whitepaper and in our defense of Bitcoin against those who say it’s “dying.”
But there’s much more to our ratings than that. We also evaluate each coin’s blockchain technology based on its potential to support entire economies and revolutionize the world.
It’s this enormous constructive — and disruptive — potential that we believe can create the most amazing value for investors.
Best,
Juan
