Which is the best cryptocurrency to invest in? Many people may argue but 70% of my portfolio allocation in any scenario will be allocated to Bitcoin.
Bitcoin, since being born in 2009, has been challenged by so many different coins attempting to improve upon its features, but they all fail to realise that the biggest innovation has already happened.
Several ICOs or coins have tried to challenge Bitcoin’s apex position by claiming some change in fundamental aspects, including change in transaction confirmation time, change in proof, privacy or increased flexibility. Nevertheless, what they all miss are the biggest moats of Bitcoin – The Network Effect and Decentralisation.
The Network Effect:
Bitcoin has the largest network than any other coin, be it Ethereum or Ripple or Litecoin. Bitcoin is simple to use as a mode of payment and lacks complex features like smart contracts, making it even more robust than competition.
A large ecosystem has been developed with every exchange adopting Bitcoin and wallet in the world supporting it. Quite a few Indian exchanges such as Zebpay were only offering Bitcoin trading for the initial years before diversifying into other coins.
Bitcoin is in fact so popular that it is interchangeably used with Blockchain and cryptocurrency. A sample corollary would be that a popular car model would have accessories present with every vendor as compared to unpopular cars making their maintenance more expensive.
Bitcoin in terms of application has also seen massive adoption with quite a few countries adopting the same including Venezuela, Zimbabwe, etc. where the local currencies have failed or the central banks have filed for bankruptcy.
Further, quite many stable countries have legalized Bitcoin as a currency for its qualities including Japan, the first to adopt Bitcoin as a mainstream currency in March 201. Germany has recognized Bitcoin as a financial instrument from January 2020.
I believe the best thing that creator of Bitcoin, Santoshi Nakamoto, did after introducing the concept Blockchain, was keeping his identity anonymous.
After sharing his paper or thesis on Blockchain and Bitcoin, he only provided limited coding assistance to the Bitcoin community before completely disappearing. This was the biggest favour he did to the Bitcoin community after creating it in the first place.
All other 5000+ coins as of today (April 2020) have a founder or centralised authority holding the steering wheel and controlling the destiny of their journey.
Having a central authority is generally good for a business to keep accommodating for any change in market requirements and coming up with centralised innovations to address the challenges.
However, that may not be the case when it comes to store of value which needs to have a value system – continuous value protection or appreciation, security and rising demand or adoption.
This was the genesis of Bitcoin when the central banks printed money to save the dying US economy in the financial crisis of 2008 by bailing out US investment banks with people losing faith in the dollar on all three fronts.
Every other altcoin has a centralised authority or CEO, who imposes features and applications on the coin usage making it qualitatively not very different from Fiat.
In fact, their founders are the largest holders of the respective coins which can be correlated to their decisions on imposing their decisions in the form of hard forks on the network.
While we will continue to see a slew of coins being introduced into the market targeting to overcome various hurdles in the adoption of Bitcoin, the decentralization and network effect of Bitcoin shall continue to increase over time.
Thus, Bitcoin will become even more competitive with increasing adoption, increased regulation, decentralization and speed.