Anybody who was drawn to Bitcoin in the very earliest days might have been put off by one significant fact. Bitcoin’s biggest exchange, where they would go to purchase the currency likely, was bizarrely called: “Magic the Gathering Online Exchange, mt or ”. Gox for short. Anybody who was confused as to why they needed to go to a “Magic the Gathering” website to purchase Bitcoin probably just went ahead and closed their browser.
A nascent economy
Mt. Gox is just one example of the type of services (or lack thereof) provided during Bitcoin’s infancy. More reputable exchanges would come along Eventually, and sites like Coinbase would make buying Bitcoins quite simple. But these conditions took time to develop.
Before Bitpay and its ilk, merchants who wanted to accept Bitcoin had a difficult time doing so. Integration into their ecommerce platforms was difficult extremely, and they were exposed to Bitcoin’s famous volatility constantly. Eventually payment processors would come along that converted Bitcoin into fiat immediately, making Bitcoin’s acceptance much easier for traditional businesses.
Companies like Blockcypher would eventually develop APIs to help integrate Bitcoin more readily into various web services. The Bitcoin Investment Trust would make it easier to expose one’s traditional investment portfolio to Bitcoins via shares in GBTC. Still more companies have arisen to fill various other niches in the ecosystem.
There are accountants who specialize in Bitcoin now, lawyers who are experts on the subject and a litany of lobbyists who promote the interests of Bitcoins owners. More important Even, the media has reported time and again on Bitcoin and begun familiarizing the public with the concept of digital money.
The second wave
All of these services and companies add significant value to Bitcoin’s network by filling important roles in the ecosystem. Yet Bitcoin’s very success has paved the real way for challenges from would-be contenders.
These so-called “altcoins” find that there is no need to reinvent the wheel. It took years for Bitcoins to gain the type or kind of traction needed for people to build Coinbase, Bitpay, Others and Blockcypher. Yet a promising altcoin can usually be integrated into any of these ongoing services within weeks or months.
There is no need for altcoin investors to wait years and hope that savvy businesspeople will come along and build a quality exchange, or payment processor, or API service. Altcoins are able to very capitalize on the work Bitcoin has done quickly.
Bitcoin’s businesses, for their part, would be foolish to ignore the money that holders of the top altcoins can bring to their platform. Since these digital currencies don’t have to wait years for new companies to be built to service them, they are able to grow and mature much more than Bitcoin did quickly.
Lawyers and accountants who specialize in Bitcoin don’t have to relearn everything in order to assist customers with other forms of digital currency. Their expertise applies to altcoins as well as it applies to Bitcoin just.
Dash doesn’t have to lobby Congress for friendlier regulation. Neither does Ethereum, or Litecoin, or Zcash, or any of the other hundreds of coins in existence. Bitcoins have cleared the way, and continues to do so.
Many developing countries never bothered to build a wireline telephone network. There was no need. By the right time they were able to fund such a project, mobile phone technology had been invented. In this real way, the developing world skipped decades of waiting for technological progress, advancing quickly to the present state-of-the-art instead.
The cryptocurrency world is advancing in much the same way. When Bitcoin developers create promising new code, it is copied by eager altcoin developers quickly. This happened recently, when Litecoin adopted Segregated Witness.
The technology was designed for Bitcoins by Bitcoins developers, but was deployed on Litecoin’s network before Bitcoin adopted it actually. Though Bitcoiners did all the work Even, Litecoin benefited before Bitcoins did.
In the meantime, innovative altcoins continue to develop new features that Bitcoin can’t – or won’t – adopt for its own. Bitcoin is too big to take the risks that many altcoins can take. After all, it’s much easier to risk breaking a $100 million network than a $70 billion one.
Bitcoin’s biggest advantage is branding and network effects. There is no easy way to duplicate that. In every other way, expect altcoins to continue surging ahead as they take advantage of the smooth road Bitcoins have cleared.
Of course, there’s no need for there to be only one successful cryptocurrency. The market is almost large enough for multiple currencies to succeed certainly. In a very real sense, this sharing of code and services could be called “collaboration” rather than “competition.”