The world of blockchain technology and cryptocurrencies has come a long way in one decade. Bitcoin’s humble beginnings in 2008 paved the way for a new class of digital assets and birthed what has become one of today’s most promising and innovative technologies: the blockchain. Hundreds of new cryptocurrencies and blockchain platforms have emerged in a few short years, and since 2017 we’ve been seeing new ICO’s launch on a regular basis. In this climate of fast-paced development and diverse crypto and blockchain applications, some have begun to question where Bitcoin stands in relation to the movement it helped to create.
Learning From History
If we look at the history of significant technological breakthroughs, we see many instances in which an original, foundational technology is ultimately replaced by a newer, more developed version. For example, in the early days of the World Wide Web, search engines were only capable of retrieving websites using the exact wording in the file names and/or titles, rather than serving up links based on topics or keywords like most popular search engines do today. As Internet usage exploded throughout the mid-late 1990s, Netscape Navigator was one of the most popular web browsers, at one point making up around 80% of usage share, but it was eventually phased out in favor of tools like Bing and Google, which produced search results that were more in line with what users demanded. Similarly, we can see the same pattern in the evolution of social media networks. Early social applications like Friendster and MySpace were ultimately largely replaced by Facebook. Once again, a competitor created a more usable platform based around the same general vision.
Bitcoin Today: The Challenge of Scaling
Will this same pattern apply to Bitcoin? While nobody can say for certain what the future holds, there are a few potential directions that merit consideration. Bitcoin today is faced ostensibly with one major issue: scaling. The Bitcoin network, as it stands, cannot process all of the transactions that it’s getting in a timely fashion. If users want faster transactions, they can pay higher transaction fees to have miners move them to the front of the line. During periods of high traffic, which are becoming more and more frequent as Bitcoin’s popularity grows, these fees can become so high that using Bitcoin for everyday transactions, as a peer-to-peer cash, is ultimately not very practical.
Regardless of where you stand on debates concerning Bitcoin’s scaling situation, this issue is having a visible impact. Looking at the global cryptocurrency market, it is evident that Bitcoin’s dominance is experiencing a period of decline. In January of 2017, Bitcoin made up over 86% of the market; in January of 2018, it is sitting at around 35%. Whether or not this trend will continue remains to be seen. Perhaps this is a bump in the road, or perhaps it is a sign that newer protocols capable of handling higher transaction volume will come to the forefront. Even if Bitcoin does lose its market dominance, there is reason to believe that may not necessarily spell the end for the world’s first cryptocurrency.
The Future of Bitcoin: Cash or Store of Value?
If the Bitcoin network can solve its scaling problem, which may be well underway with the development of the Lightning Network, then we may see a resurgence of Bitcoin’s market dominance and increasing capacity for real-world usage. If not, many people believe that Bitcoin will still maintain an important role in the digital economy as a store of value, even if it is not ideal for smaller day-to-day transactions. Already, many people consider Bitcoin an asset rather than a cash currency, more akin to owning gold or property than paper money. Unlike early search engines or social networks, which were exclusively proprietary technologies tied to companies, Bitcoin’s decentralised architecture and immutable ledger represent a new form of secure value storage tied to a digital asset. Considering Bitcoin’s history and position as the longest public blockchain in the world, the well-established security of its protocol, and the built-in scarcity factor, there is a strong argument to be made for its continued usage, even if its role changes over time.