I originally made this
post in the French section in February 2018.
Two months later, I would like to share my point of view with the rest of the community.
Obviously, I’m not the first guy to talk about that, this is just to share what I think about the possible evolution of the market in the next years.
I am not a native English speaker, so there are certainly some mistakes, all my apologies for that.
Good reading!
Currently, the money market can be categorised like this:
- The FIATs
- Bitcoin
- The altcoins
This categorisation is, I think,
quite representative of the current situation. However, I would like to give you my vision of the potential evolution of the cryptocurrency market (and a bit of the FIAT currencies too) and discuss about it with you, to compare our points of view, and gather the opinion of more experienced people (I’m in cryptocurrencies for less than a year actually…).
Let’s begin by discussing of the Bitcoin/Altcoins separation. Firstly, it seems totally justified for several reasons.
The main argument going in this way is the fact that Bitcoin is the very first cryptocurrency that has been created. It's like the "mother" of all the other cryptocurrencies that exists, whether by concept or by the code (in a general way). It's the base of everything. The originator. In this way, Bitcoin was serving and still serve as a "guide" and as a model for other cryptos, that are looking on the evolution of Bitcoin and taking the interesting innovations (and adding their own ones).
Bitcoin is, on first sight, the inevitable way for (almost, see below) any person entering the cryptocurrency world, for two reasons. The first one is that the most people that are interesting them in cryptos don’t know this world well and focus on
the currency that everybody is talking about: Bitcoin, and buy a little bit of it “to try”. They often discover this other world apart that are altcoins afterwards. The second reason I’m thinking about is that most of the exchanges that are converting FIAT money into cryptos are especially selling Bitcoin. And beyond this entering on the cryptocurrency market, the alcoins exchanges are made with Bitcoin as an intermediary, that is used as a reference. For example: I want to convert Alt1 into Alt2, I have to buy some BTC with Alt1 and then buy Alt2 with these BTC.
Aucune altcoin même très innovante n'a jamais fait la moindre ombre au Bitcoin.
Pour accéder à la grande majorité des alts on est obligé de passer par le bitcoin et toutes les nouvelles personnes qui viennent aux cryptos font un passage obligé par le bitcoin car en géneral elles ne connaissent que celui-ci.
Difficile de le détrôner dans ces conditions.
Translation :
No altcoin, even very innovative, never did the slightest shadow on Bitcoin.
To access to the big majority of the alts we are obligated to use Bitcoin and all the new people that are coming to crypto do an obligatory passage by Bitcoin because in general they only know this one.
If we look at the
Bitcoin dominance chart on CoinMarkeCap, we can see that Bitcoin has been, indeed, the main cryptocurrency in the market, and by far (with 80 to 95% since 2013), to the beginning of 2017. (Important note: at this time I didn’t follow all this, so there are surely some events that occurred and that I’m not aware of) The dominance decreases radically during the first semester 2017. We see on the chart that it matches to the increasing of Ethereum and a peak of Ripple, but we particularly see that the “other altcoins” are also becoming stronger, in a general way. By the way, we can notice that this also matches to the moment when the market cap (and the value) of Bitcoin (and by extension the rest of the market) began to really take off.
This dominance, that went slightly up but stayed below 60%, decreases again not long ago: it happened in December 2017, when the cost of a bitcoin was at its highest and the network was overloaded. We saw a lot of people using other cryptos, altcoins, to avoid the Bitcoin network’s very high transaction fees. The peak of Ripple is involved too, amplifying this drop of dominance, but even if we have to consider it, we will not talk about it here.
We clearly see that the network didn’t hold out since it was unusable for everyday transactions. We can obviously rely on the actual and future development to improve this (I particularly think about the controversial Lightning Network). But in a meanwhile, we can see a group of additional cryptocurrencies between Bitcoin and the smaller alts, that is the one of the alternatives to Bitcoin. (Warning, what follows (and the previous sentence too) is only a personal theory, we can’t take it as a reality) So we have:
- (the FIAT currencies, obviously)
- Bitcoin, the big master
- A group of alts for the common transactions ((Ethereum,) Bitcoin Cash, Litecoin, Monero, Zcash for instance)
- The rest of the alts
The “group of alts for the common transactions” doesn’t have the purpose of supplanting Bitcoin or anything like that, but only do transactions with small fees. The cryptocurrencies that form this group are characterised by two things. The first one is (obviously) that the network of these alts is not saturated (that’s why I put brackets for Ethereum, although it doesn’t need fees as high as Bitcoin, it’s not far from its limit of capacity). The second one is the importance of this currency: it needs to have many users, to avoid problems like “well, I don’t have Groestlcoin, can I pay in Pascal Coin?” (this is just an example).
(
warning, big bracket: Personnally, I know some people that arrived in the cryptocurrency sphere by ETH, without buying bitcoins. Even if it’s only a personal example, this can be a proof that Bitcoin isn’t the only way to buy other coins like I wrote above (yes, I know, I contradict myself, but it’s normal: it was just to say that it’s no longer needed to pass by BTC, although it stays the main way)).
Important thing, these altcoins don’t aim to replace Bitcoin, or be better like Bitcoin. In this theory, they need to be considered more like some “BTC-like” reducing the load of the main Bitcoin network.
All these observations (that I will certainly develop afterwards with your comments) are based on the actual market’s state that, don’t forget it, is still very young. But the cryptocurrencies still have a very huge potential to deploy and it is sure that the market in 10 or 20 years will be really different from the one that we know today. I’m personally part of the “extremists” that are thinking that the cryptos could replace the FIAT currencies. At least, I am convinced that they have the potential to achieve it, supposing that banks and states don’t manage to take control over it. But let’s suppose that it could be achievable. ZenFr did a small calculus a few months ago (Topic [FR]:
Potentiel de valorisation du Bitcoin).
Bref, Bitcoin à le potentiel de devenir la monnaie transnationale.
Aujourd'hui, Bitcoin coexiste avec les monnaies nationales.
Les plus passionnés d'entre nous pensent que Bitcoin à la capacité de remplacer les monnaies nationales dans un avenir plus ou moins proche.
J'ai recherché quelle masse monétaire représentaient la somme des monnaies nationales du monde entier et je l'ai divisé epar le nombre maximal de Bitcoin qui sera atteint en 2145 pour obtenir ce qui pourrait être la valeur de Bitcoin si il remplaçait les FIAT.
En arrondissant, j'arrive au chiffre de 350 millions d'euros par bitcoin : 350 000 000 euros!
Le cours aujourd'hui de un bitcoin est de 3.500 euros.
Le potentiel de hausse serait donc, hors inflation, de x100.000 :-).
Translation:
In short, Bitcoin has the potential of becoming the transnational currency.
Today, Bitcoin coexists with the national currencies.
The most enthusiasts of us are thinking that Bitcoin has the capacity to replace the national currencies in a more or less near future.
I searched what money supply represented the national currencies of the whole world and I divided it by the Bitcoin's maximum supply that will be reached in 2145 to obtain what could be the value of Bitcoin if it replaced the FIATs.
By rounding, I come to the number of 350 million euros by bitcoin: 350 000 000 €!
The current exchange rate of one bitcoin is 3500 euros.
So the increase potential would be, without inflation, of x100 000 :-).
According to this calculus, one satoshi would have a value of 3.50€. It goes without saying that with such a value, and without talking about the scalability and other problems that may occur, it would be impossible to spend our bitcoins in the daily life (no, I won't pay 3.50€ for a baguette or a coffee!).
The
total supply of 21 million can be good enough as long as Bitcoin stays quite underground, but as soon as a lot of people begin to use it, it rapidly become few. Since 2013 the value of a bitcoin is count in hundreds of euros (/ dollar), and in thousands of euros (/ dollars) since the last year. The amounts of the transfers are of the order of 0.001 or 0.0001 BTC, we are maybe used to it, but for the general public it is not the best. (And without talking about inflation, etc.)
That's why I think that we should not consider Bitcoin as the only cryptocurrency that can reign over the others, that would stay
common alts. Of course, it will stay the originator of all of we can see today in cryptos, but to my mind it won't outshine the cryptocurrency world eternally. I think that it will stay important but it will be along with other currencies, as we begin to see (not necessarily the actual ones, of course), to divide up the charge of the transactions.
Personally, I think that it can be a good thing.
You all know that Bitcoin and the blockchain principle in general rest on an advanced decentralisation. Yet, the fact that Bitcoin represents the main part of the market can be dangerous. Indeed, let's suppose that something happens to it. It never happened in the past because the technology behind is well thought and the network is working quite well (except the scalability problem), but we all know that nothing is infallible and it is dangerous to put everything on Bitcoin (or any other crypto), even if this cryptocurrency is very strong. If a problem happened, the majority of the market would disappear (or would be affected, at least). If this market is divided in several / many different cryptocurrencies, if one of them had some problems, then the consequences would be less important. Not only the currencies would be decentralized, but also the capital would no longer be centralised on one only currency.
Over time, we would have:
- Bitcoin, the mother of cryptocurrencies
- The everyday life altcoins
- The other altcoins, with a specific utilisation (+ the tokens)
There you go, I wanted to give my vision of the current market situation and one of its evolution possibilities (there are many others!), sorry for the massive text but when I begin to write I can't manage to stop. I do not have a superior knowledge or anything, and I surely did mistakes, forgot some important things... You can say it, and don't hesitate to give your point of view on this. Also, sorry for my English, I'm not a native speaker, I'm trying to do my best but it's sometimes difficult. I know that the pro-BTC will not like this post, but anyway, for me this is the occasion of learning, and for us all the occasion of debating and think about what will become the cryptocurrency market in the next years.
Additions:- [coming...] what I mean by "cryptocurrency" in this post
- [coming...] About the Lightning Network
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