Bitcoin, the first and the most commonly known cryptocurrency in the world is not a perfect currency for every use. It now faces stiff competition from alternative currencies (altcoins) such as Ether, XRP, Tether, Litecoin, among others in terms of market capitalization as well as the amount of data stored on its blockchain.
Bitcoin dominates the cryptocurrency ecosystem
On January 3, 2009, the bitcoin network was inaugurated by the pseudonymous Satoshi Nakamoto to become a medium of exchange independent of the control of central authorities. Back then, if someone mentioned “cryptocurrencies”, they were simply referring to Bitcoin. Bitcoin became the only cryptocurrency until April 2011 when Namecoin, the earliest noteworthy alternative digital currency crafted from the bitcoin idea of proof-of-work algorithm launched. It went on and on, several other cryptocurrencies were created including Litecoin in 2011, Ripple in 2012 and more. As of January 2020, there are more than 5,000 cryptocurrencies in the world. Even then, bitcoin remains the best-known cryptocurrency.
Bitcoin still claims a lion share of the crypto market compared with the rest of the alternative coins combined. At the beginning of 2020, bitcoin alone was equivalent to 64% of the crypto market size. Actually, in July 2019, the figure was at 70% and it stayed around there for several years. Although there are more than 50 million crypto wallets today, the majority of those still belong to bitcoin users. Many proponents of bitcoin mention security, its relatively higher price, “network effect” and autonomy from governments as the key reasons for its dominance.
Bitcoin faces threat from altcoins
Although the growth trajectory of altcoins is mostly determined by bitcoin itself, it is evident that altcoins are outdoing bitcoin little by little and while bitcoin growth always seemed to be on an upward course, the curve is eventually flattening and altcoins are slowly gaining momentum. According to CoinMarketCap, an online crypto platform, altcoins accounted for over 34% of the total cryptocurrency market in February 2020. This is contrary to 2009 and later days where bitcoin claimed almost 90% of the total market capitalization.
Some altcoins have been found to present much more convenience than bitcoin in several ways. Bitcoin blocks take up to 60 minutes to confirm and this is a long waiting time and inconvenience to many users wanting to crack quick transactions. However, some altcoins have been found to solve this challenge.
For instance, Litecoin transactions are way faster, while Primecoin transactions can be completed in just 60 seconds. Also, Dash and Monero defeat their father, bitcoin in how they handle anonymity. Although the enhanced anonymity feature might as well scare off ordinary users due to the “criminal” background of privacy coins such as Dash and Monero. As per the report by CoinIdol, a world blockchain news outlet, darknet entrepreneurs tend to choose XMR over BTC for illegal transactions. This fact might strengthen Bitcoin dominance instead of weakening it.
Although bitcoin is still the denominator and influences the crypto market behaviour significantly, its dominance is slowly fading out due to the fierce competition exerted by altcoins. The market got more competitive in recent years due to the growing awareness about cryptocurrencies and blockchain.