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New York — Bitcoin is definitely on the ropes these days. The price is well off its highs.
Elon Musk has been trashing it. A lot of people are getting ETH-Pilled (we have an episode of our “Odd Lots” podcast later this week about the enthusiasm for decentralised finance on the ethereum blockchain). And now my co-host Tracy Alloway has written about how bitcoin could be the next AOL or MySpace.
The basic gist is that while being the first mover is great, history shows that if something comes along that is better, then that first-mover advantage can only get you so far.
And obviously now is the time when people are talking about a better bitcoin. Maybe a better bitcoin could be greener and cheaper and faster. Maybe a better bitcoin could do more stuff, like make it easier to write smart contracts or launch side tokens that ride upon the core blockchain’s security.
But there is a big difference between bitcoin and MySpace or AOL. MySpace and AOL had specific product goals. MySpace wanted to connect you with your friends, which was great, but Facebook came along and offered a better way to connect with your friends. AOL offered an on ramp to the internet, but then other services also offered an easy internet on ramp, while also giving users access to a wider range of services outside AOL’s infamous walled garden.
This might sound weird, but bitcoin does not really have further aspirations. Well, its aspiration is basically to exist for a long time and be a predictable, reliable store of value. When your only aspiration is just to exist for a long time, it is hard to be supplanted.
For one thing, because bitcoin was the first of the cryptocurrencies, it will be a mathematical impossibility for another crypto to be around longer. Bitcoin also has a long history of not changing its rules or code much in part because its main figurehead, Satoshi Nakamoto, has departed. Other popular coins have living leaders with influence on the road map. And again, more importantly, other popular coins aspire to things.
Blockchains, for example, that are optimised for smart contracts and distributed computing are at risk from, say, another faster platform for smart contracts and distributed computing. It is impossible to know. A blockchain that is optimised for energy efficiency could be supplanted by a chain that is even more energy efficient.
A decade is hardly anything in the scope of monetary history, so who knows what the future of bitcoin will be. But in that time, the rules have been stable. And more importantly it has survived, despite being declared dead hundreds of times.
It will be a challenge for a coin to come along and match it on that longevity and stability.
Bloomberg News. For more articles like this, please visit us at bloomberg.com.
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Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.