“The thousands of imitations of Nakamoto’s design are perhaps the sincerest form of flattery, but their continued failure to ever deliver anything more than what Nakamoto delivered is a testament to how singular his accomplishment is.”
– Saifedean Ammous, The Bitcoin Standard
Introduction
Following the widely documented success of Bitcoin in generating both value and adopters, its design principles were copied many times over to produce similar forms of currencies, commonly referred to as “altcoins”. They are not necessarily homogeneous and can be further segregated based on specific parameters. As of March, 2022, there are over 18,000 cryptocurrencies in existence. However, it is a big reach to state that any of these coins have the potential to replace Bitcoin’s functionality as digital cash and sound money. It also must be stated that due to this very fact, many of altcoins do not even claim to base its functionality on the tall order of replacing Bitcoin.
Yet, for the sake of clarity, it is important to delineate the core reasons as to why Bitcoin’s superiority as the digital cash of choice is here to stay. Namely, its truly decentralized character that precludes any third party from interfering with the usage of the protocol, and its sound design principles which from empirical evidence has even withstood the test of time, ensures that no altcoin is toppling it any time soon.
Bitcoin’s Decentralization, Sound Operation, and Potential as Global Hard Money
As is well known in the crypto community, the real identity of Bitcoin’s founder (the pseudonymous programmer titled Satoshi Nakamoto), remains unknown. The only publicly available information regarding the founder, apart from the pseudonymous title, are the contents of certain emails exchanged between Nakamoto and a small circle of cryptographers regarding feedback on the design principles relating to Bitcoin, the last of which was in mid-2010 — post which Nakamoto entirely disappeared from ostensible view. Hal Finney, with whom the network was launched, passed away in August 2014. In essence then, there exists no central authority which can disproportionately direct the course of Bitcoin’s development.
That is not to say that attempts have not been made at doing the same. Indeed, Gavin Andresen, who was nominated by Nakamoto as one of the custodians of Bitcoin post his withdrawal from public view, has tried at different junctures to exert his influence on the development of the network, but these have failed as they were not supported by the community at large (i.e., the operators of the nodes).
Despite missing a centralized body at the helm, Bitcoin has excelled at being a store of value, for empowering individuals with financial sovereignty, and settling international payments. With respect to being a store of value, owing to its supply that is strictly limited to 21 million, it is immune to the drastic deleterious impacts of the ever-too common phenomenon of debasement of currencies — which have decimated financial systems of civilizations across centuries and geographic identities.
On the issue of individual sovereignty, this marks perhaps Bitcoin’s most definitive feature — as individuals are able to transact large sums of value without the intrusive and inefficient interference by various third-parties, each serving their own vested interests. This weakens the chokehold that governments across the world exert on their populace, exercised through their unbridled control over monetary supply and decision-making; judging by the experience of the 20th century, it is clear how such monetary control was key to operationalizing the totalitarian and authoritarian tendencies of various destructive regimes.
As a medium of international and online settlement, Bitcoin provides numerous important benefits over its predecessors — for e.g., it is far easier to settle cross-border payments through the online medium of Bitcoin rather than transferring hoards of gold across jurisdictions, or through labyrinthine processes of fiat currency exchanges. Because all bitcoin holdings are publicly verifiable, this adds a dimension of unqualified transparency which simply has no parallels in the existing financial institutions. There is also optimism that Bitcoin may one day serve as a global unit of account, once the issue of its volatility is addressed.
Why Bitcoin > Other Cryptos: The Issue of Decentralization — The Ethos of Crytocurrencies
Any cryptocurrency built post Bitcoin has to suffer from several fundamental crises.These emanate from the simple fact that they are unable to match Bitcoin’s security, processing power, and its already established user base. Many cryptocurrencies are little more than glorified knock-offs, as they merely replicated the code of Bitcoin without creating much of value — and predictably, these have little scope for a demand growth. Unlike Bitcoin where its founder spent zilch on marketing/promotion, all such knock-off coins have dedicated teams working tirelessly at promoting said coins and desperately attempting to generate some demand.
Naturally, these have lacked credibility and have merely diluted the quality of the crypto market space. Further, when viewed in the context of an Initial Coin Offering (analogous to Initial Public Offering in the context of to-be publicly traded companies), we find the creation of a highly visible group of developers specific to a particular coin, communicating with the public and investors at large about the same coin. This effectively removes any serious distinction with centralized ventures.
For e.g., take the instance of Ethereum, which allows for the creation of smart contracts, decentralized applications, and decentralized organizations(DAO). Being a crypto built in the shadow of Bitcoin, it inevitably required its own team to promote its usage and operation, maintain its code, et cetera. Here we see it run into the first problem facing these coins — i.e., due to the unavoidable involvement of such a defined team, its very decentralization is put into question. Also, its DAO — the first implementation of smart contracts on the Ethereum network, in which over $150 million was invested — was hacked into in 2017.
This required a course correction by the Ethereum developers by which a new version of Ethereum was developed, and the hacked sum was distributed amongst the victims. However, this exposed a cardinal flaw in the Ethereum ecosystem, as human intervention as a means of regulation/correction negates the notion of regulation by processing power (i.e., through decentralized computing power). What remains then is a selection of venture partners within whom the currency holding, and programing know-how of the currency is concentrated; entirely negating the purpose of utilizing the blockchain structure.
Why Bitcoin > Other Cryptos: Inability To Serve As Global Hard Money
This was the predicament of the second-largest blockchain network, and is emblematic of the other altcoins. Due to these coins being unable to match Bitcoin’s truly decentralized structure and strong incentives for its users to adhere by the status quo consensus rules, they have failed significantly to keep up with the same resilience that Bitcoin has displayed during its history. With respect to being a candidate for global hard money, altcoins are yet again disadvantageous as they lack any clear monetary policy going forward.
For e.g., Ethereum does not have a clear vision as to what it wants its monetary policy to be, leaving the same for the discretion of its community. Such unclarity and the consequent volatility vis-à-vis a distinct monetary policy is a dealbreaker when considered against the functionality of a global monetary unit — which Bitcoin does not suffer from. Further, with these coins that have a publicly visible team at the core of its operation, any theoretical move towards its adoption as global hard money would be fraught with suspicions of concentration of profits, power; much akin to the central banks of today.
“But the notion that new web apps require their own decentralized currency is the desperately naïve hope that somehow unsolving the problem of lack of coincidence of wants could be economically profitable. There is a reason real-world businesses don’t issue their own currency, and that is that nobody wants to hold currency that is only spendable in one business.” (Ammous, The Bitcoin Standard)
It is easy to conceive of authoritarian governments working tirelessly to stifle the growth of any digital currency on its way to being a global unit of account, and this becomes that much easier when it can target specific entities such as the public teams behind the other cryptocurrencies. As highlighted before, Bitcoin entirely circumvents this issue — as neither it creator(s) known, and nor are there any defined agents which influence the decision-making of the network; that is delegated entirely to its processing power and algorithms. This is where the power of decentralization becomes crucially relevant.
Conclusion
To conclude, no other cryptocurrency can make the same claim to a truly decentralized identity as well as modus operandi as Bitcoin does, and it does so with authority. This is exemplified by its decade-long tenure where its user-base, mass engagement, and mainstream adoption (business, government spaces such as debt and tax settlement) have witnessed considerable growth that shows no signs of slowing down. This has not stopped a range of imitations from emerging, with a few instances where certain cryptocurrencies prudently make claim to use-cases other than that of being the digital cash of choice. These altcoins may offer other market-demanded services, and whether they succeed in achieving these remains an open question. Yet, on the limited and cardinal function of digital cash with the potential of being a hard global money, none of them possess the same resilience and robustness that Bitcoin has already displayed during its existence.
