No altcoin can compete with Bitcoin in economic fundamentals. Bitcoin has the first-mover advantage, the network effect, the famous brand name, and most importantly: Large numbers of people, rich and poor, of a thousand opinions and religions, are each and all forcibly united by their common selfish interest in Bitcoin. Bitcoin isn’t only a technology: It is a sociological phenomenon. That is Bitcoin’s economic foundation, and a power no altcoin can hope to match.
Thus, altcoins compete with either scam glitzy marketing, or features and technical advances. I will here focus on the latter.
As an economic giant, Bitcoin needs to be technologically conservative. People rely on Bitcoin to safekeep their life’s savings! Many have considerable fortunes held in Bitcoin. So Bitcoin can’t take risks on unproved ideas, however promising they may seem. It also can’t hardfork on demand, if needed to implement features which could not otherwise be added. Thus if you want a cryptocurrency which implements radical new ideas and experimental features, you can only get that with an alt.
This whole situation will change with sidechains (whether
Drivechains or otherwise). A sidechain allows implementation of almost any imaginable feature,
backed by genuine Bitcoin. Turing-complete smart contracts? Unlinkable transactions secured with zero-knowledge proofs? A coin which sings like a bird each morn at dawn, and changes hues with the days of the week? Do it with pegged Bitcoin, on a sidechain.
If and when that becomes a reality, no one of sound mind will buy into an altcoin—and no one with sound motives will
build a new altcoin. People with new ideas will simply create a sidechain. People who want new features will simply use a sidechain.
Absent the only legitimate means for an alt to compete against Bitcoin—
features—the only people left in alts will be speculators, scammers pushing hot ICOs, and fools buying into hot ICOs.
When that happens, will all altcoins crash and burn?
Corollary question: How much higher will the value of Bitcoin rise, when the capital currently in alts starts flowing into Bitcoin sidechains?
Note: For technical reasons, I am not thrilled by the proposed implementation of Drivechains. But the technical discussion is not here relevant, if
Drivechains become Bitcoin’s substantial implementation of sidechains. Any which way, sidechains are coming.
Disclosure: I currently hold a substantial position in an altcoin. I bought into it for ideological reasons (privacy), not for speculation. I paid bitcoin for it. At present, I am watching it slowly slide away into oblivion against Bitcoin. I will not say which one, because my purpose here is not to bash any particular coin—especially not one in which I myself am invested! Rather, I am questioning the future viability of altcoins altogether.
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