By After the 2008 financial crisis, Satoshi Nakamoto set out to rebuild the entire financial system with a truly decentralized new form of digital currency. The result? Bitcoin.
It is a digital currency that can be created and mined via the distributed blockchain ledger. It facilitates digital payments via a peer-to-peer network while eliminating the need for a central controlling body.
While Satoshi wasn’t the first entity to propose a decentralized financial system, Bitcoin emerged as the first successful attempt.
That success opened the floodgates for a host of other new coins, with Litecoin being the first one out of the gates in 2011. These new coins are now called “altcoins.” They are cryptocurrencies that share similarities, such as decentralization, with Bitcoin. However, they generally have different use cases and are powered by unique technologies.
As the crypto ecosystem matures, reputable platforms have continuously listed brand new releases, intensifying the debate about whether any of them might overtake Bitcoin. The following sections examine the advantages and disadvantages of Bitcoin and these newer cryptocurrencies.
Why Choose Bitcoin?: Pros
Bitcoin has the following advantages over new coins:
1. High Liquidity
Since 2018, more than a billion dollars worth of Bitcoin has been traded daily. As of January 28, 2024, Bitcoin’s daily trading volume stood at $49.68 billion. This implies that a large number of traders and investors exchange Bitcoin daily.
As a result, it is easier to convert Bitcoin to cash as the bid-ask spread is negligible. In English, there’s a sufficient amount of Bitcoin in circulation, and a good number of people recognize it as a standard medium of exchange. This is the closest any coin has gotten to attaining fiat currency status.
2. Decentralization
Bitcoin operates on a flat, decentralized P2P consensus network, thus making it a digital P2P cash system. As such, it is not under a single control. Rather, the network is distributed among countless nodes (computers) and millions of users.
This architecture isn’t just an advantage over new coins but also over the established financial system, which can be susceptible to the inadequacies of a single or group of entities. With Bitcoin, all decision-making and work is truly in the hands of the community.
3. ROI Prospects
One of the first individuals to effect a transaction with Bitcoin purchased two Papa John’s Pizzas for 10,000 BTC in 2010. Considering Bitcoin’s price today, they might agree that wasn’t the best decision. That’s how much return potential Bitcoin has.
The world has a finite supply of 21 million Bitcoin, thus making it clear that Bitcoin’s value will only increase as its demand increases. As a result, Bitcoin has the potential to generate eye-popping returns.
4. Network Security and Market Dominance
Since becoming mainstream in 2013, Bitcoin has faced multiple external attacks, attempted government censorship, massive price swings, and even internal disputes about its direction. Yet, the digital currency stands firm, maintaining uninterrupted accessibility through it all. At that time, the crypto community witnessed the launch and crash of many new coins.
Bitcoin still maintains about 40% of the entire cryptocurrency market capitalization. This sustained stability and security proves that a massive amount of computing power backs it. As its market dominance grows, more miners and nodes are being added to the network, further strengthening the network’s stability.
No “new coin” has that at the moment.
5. Accessibility
Bitcoin’s high volatility, decentralization architecture, and ROI potential are major factors contributing to its network stability and market dominance. More people, investors, and institutions trust it more than any other cryptocurrency, so you can almost find it everywhere.
This accessibility is important for a new player in the crypto market who needs to make quick conversions and purchases. Bitcoin can be found in more exchanges than any other cryptocurrency. Likewise, plenty of software, hardware, and digital marketplaces support and accept it.
Bitcoin Shortcomings: Cons
Bitcoin could improve in terms of the following:
1. Volatility
Despite its enormous return potential, as we’re witnessing in 2024’s bull run, Bitcoin could also experience steep price slumps, as seen in the crypto winter of 2022.
Factors like market sentiment, speculative trading, demand, supply, and many others are often responsible for this. However, the negative aspect is that market players can run into huge financial losses. That’s why it is important to implement proper risk management strategies before making any major decision.
2. Regulatory Uncertainty
While countries like El Salvador have legitimized Bitcoin’s use as a legal tender, many other countries like the US maintain that “it isn’t illegal,” at least at the federal level. Many nations are tiptoeing around the topic, and that blurs the entire landscape.
This regulatory uncertainty could pose serious dangers for investors, traders, and random individuals who just happen to have some Bitcoin.
How are New Coins Better than Bitcoin? Pros
New coins have the following merits:
1. Improved Features
Having noticed some of Bitcoin’s strengths and weaknesses, many teams have identified innovative ways to make improvements.
Leading the pack of new coins is Ethereum, which uses a more scalable Proof-of-stake mechanism than Bitcoin’s Proof-of-Work mechanism. Consequently, Ethereum can process up to 30 transactions per second, unlike Bitcoin, which processes three to six transactions per second.
2. Specific Use Cases
Based on those improved features, many new coins can now revolutionize different industries, even outside of finance. Their cutting-edge technology has the potential to offer innovative solutions to industries like healthcare, real estate, law, etc.
For instance, Ethereum’s smart contract technology can automate the distribution and licensing of digital content to maintain intellectual property rights. Likewise, other cryptocurrency coin development services are influencing the future of e-commerce delivery systems in supply chain management. These use cases, in turn, have the potential to drive up the values of new coins, potentially above Bitcoin. That, of course, depends on market sentiments and other factors.
3. Variety and Flexibility
Over a thousand new coins have been launched since Bitcoin’s launch. With many investors thinking getting into Bitcoin is already too late, it makes sense to assume there are a couple of coins that could potentially be “the next Bitcoin.”
New coins give investors the luxury of choice in terms of investment and use cases. For
Demerits of New Coins
New coins have the following disadvantages:
1. Too Much Variety
While the variety of new coins provides numerous investment opportunities, it also reduces the activity on individual options. This is largely one of the reasons why many altcoins struggle to get traction. And just like that, the market capitalization, adoption rate, and return potential reduce.
2. Lower Liquidity
Bitcoin alone accounts for 40% of the entire crypto market. Consequently, the remaining new coins, which are in their thousands, by the way, compete for the rest. This ratio implies that there’ll be less activity on each new coin, thus reducing its liquidity.
3. Insecurity
Most new coins simply do not have the right infrastructure to withstand the difficulties faced by the Bitcoin network. More importantly, many of them have turned out to be fraudulent schemes. For example, OneCoin, one of the early new coins founded in 2014, was touted as the “Bitcoin killer” by its founder, Ruja Katnova. Three years and $4 billion later, Ruja vanished into thin air after the authorities discovered it was a Ponzi scheme
Conclusion
Bitcoin has a huge head start, having launched ahead of the other cryptocurrencies. However, aside from being early, the technological architecture has also proven to be scalable and trustworthy. Nonetheless, new coins have identified important ways to improve on their shortcomings in terms of innovative use cases.
Regardless of these things, the value of both crypto categories depends heavily on market sentiments, and only time will tell which will indeed remain a part of our financial system in the years to come.
