In any liberalized market, there is always a proclivity to have a dominant product or service. Things are not any different in the digital currency scope. The buzz was brought about by Bitcoin, and soon attracted other players into the market, such as Dogecoin and Litecoin, to name just but a few.
So why choose Bitcoin over other crypto currencies?
In a free market setting with two currencies, one currency is bound to be more liquid than the other. Liquidity hands one currency a clear advantage over the other because it brings about the concept of self reinforcement. If traders buy more of a particular currency over the other, it then follows that this currency will be more successful. This increases the value of the currency due to an upsurge in demand. The other crypto currencies will still be in the market but they won’t perform as well because their usage will be limited. In this case, the fact that Bitcoin is the dominant currency over altcoin is largely due its liquidity characteristics. The self-reinforcing ability of this crypto coin proves popular among crypto coin gamblers. Additionally, the fact that the currency is widely acceptable is appealing to spenders too.
The value of a currency is directly linked to its scarcity. In most countries, Bitcoin is used as a store of value owing to the volatility of other fiat currencies. A stronger currency is more likely to resonate well with a larger population because of its seemingly stable status.
Altcoins, on the other hand, fail to offer tangible advantages over their counterparts. The safety aspect of this currency can also be tied to the fact that it has the first mover effect. Its early entry into the market makes it stronger and battle tested owing to the hacking attempts it has had to put up with. The security proof features of this crypto currency make it a more preferable choice for most online gamblers.
The first mover effect factor contributes significantly to the preference of this currency – the advantage that a product or service enjoys owing to its entry into a market before the others is usually of great benefit.
3. NETWORK EFFECT
In business parlance, a network effect can simply be defined as the effect that one user of a commodity, be it a service or good, has on the value of that product to other people. The significant numbers of cryptocurrency users have a positive implication on the value of the currency. Since more people identify Bitcoin as the market leader owing to its liquidity and preference, it appreciates more in value as compared to other crypto currencies. With more and more people acquiring this currency, the result will be its ultimate domination, relegating the other currencies to marginal confines. It is particularly important to note that the concept of network effect is very important in many fields and may in many instances poses a challenge to products and services that are considered more innovative.
4. TECHNOLOGICAL ADVANTAGE
It is evident that this crypto currency has a more secure and breach-proof technological system. The incidences of fraud and hacks that dogged it for a long period enabled it to perfect its systems through formidable and intricate encryptions.
Its efficiency in sending and receiving money is also a testament to how advanced its technology is. Other crypto currencies, however, have more frequent technological upgrades as compared to it. This can be attributed to the fact that they have a relatively smaller infrastructure, and it may also be much safer for them to conduct upgrades since they have much lower currency reserves.
5. FUTURE PROSPECTS
The continued dominance of Bitcoin ultimately means that the value of other cryptocurrencies will erode in the long run. It is therefore much safer to place your bet on the former. Its wide acceptance as a preferred medium of payment boosts the value of this currency.
In conclusion, Bitcoin opened the path to a new era of digital currency. The efficient deposit, withdrawal and confirmation procedures are a first in the financial world. The future can only be brighter for Bitcoin, considering the instability of major world currencies.
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