Bitcoin Maintains Market Share Above 50%, Have the Challengers Failed?

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Bitcoin has maintained a market share over 50% for the longest period since it begun falling in 2016 due to disagreements over how to increase capacity.

The Ethereum flippening that appeared imminent now looks long gone as the second biggest crypto faced its own capacity limits in late 2017.

Bitcoin Cash initially made a splash, but low uptake and a confusing name allowed BTC to fend off that challenge too especially after network demand dwindled as the bubble burst.

Is bitcoin unseatable? Or is there simply no need for a new bitcoin? Is its dominance a mere emotion, investors’ attachment, or do the rest simply not provide anything sufficiently useful to switch?

Top cryptos blockchain stats, Feb 2019.

There’s arguably no more revealing chart in any crypto comparison than the one above. Bitcoin is moving around some huge sums of money. Ethereum does not come to even 10% of it. In fact, there’s hardly any difference between the rest. ETH, LTC and BCH are all processing roughly the same amount.

It used to be quite different. ETH used to be miles ahead of the rest, but bitcoin usually still processed about 50% more than ETH.

What happened to eth that it fell so low is not very clear. Subjectively, it might be nothing more than a combination of its inflation rate and market cycles.

ETH just feels like bitcoin 2015 or 2016 when it too had an inflation rate of circa 7%. The then bitcoin bubble to $1,200 led to a similar brutal bear market, so you could say it is just the cycle of adoption and how awareness spreads for a specific crypto.

On the other hand, ethereum and other cryptos benefited due to bitcoin’s high fees as well as due to a perception that Bitcoin Core had no plans to address capacity. Thus in June 2017, eth stood at 32% market share, while bitcoin was at 39%.

Fees, however, begun rising in eth too when Cryptokitties launched. They then begun falling in bitcoin to now an insignificant level, although they might start rising again as the network is currently operating near fully capacity.

A number of airdrops then kept congesting eth. It’s primary differentiator, thus, was no longer applicable as ethereum too had to face the scalability challenge.

Bitcoin, the Most Advanced Blockchain?

Opinions are many and facts sometime anger, but if we look objectively, bitcoin has “sneakingly” become the most advanced blockchain tech wise at least out of the top ones.

The Lightning Network (LN) has many problems. Sometime routes can’t be found. You might need to open a direct channel first. The payment might fail due to insufficient “collateral,” and plenty more. But when it does work, it does have that wow factor.

Conceptually it is smart as well for some use-cases. With fiat, for example, you have a savings account where you keep most of your uninvested funds, and then a current account for day to day payments. Here you have cold storage as a savings account and then an LN wallet for day to day payments.

Now you can pay for as many pizzas as you like with the coins still secured by the bitcoin network through code scripts, but the LN payment generally has a lower level of security because it is small amounts.

If you want to transfer significant sums, then you can use the full blockchain security and benefit from the “volunteer” work of node operators who now have to store your data.

The idea seems to be this “schooling” if you like of bitcoiners to compartmentalize between small payments and significant value transfers so that the former can be compressed into one big transaction. Hence lowering the data burden on nodes.

Ethereum likewise is trying to do the same with Plasma and other second layer solutions. BCH on the other hand hasn’t effectively copy pasted LN for unclear reasons.

The argument there is that technology advances and thus data will become cheap. Sure, but why not compress it as much as possible, especially when in BCH it would be a voluntary choice on whether to use LN or otherwise.

In BTC too arguably it would sort of be a voluntary choice because you have to make an on-chain transaction to enter LN. On-chain fees thus would have to be low with the idea being more to raise awareness of the need to use LN and of the need for general infrastructure to incorporate it.

In that aspect that does make bitcoin more technologically advanced where simple payments are concerned in as far as maintaining the highest level of decentralization is the evaluating parameter.

The Ethereum Virtual Machine does arguably make eth more advanced where codable money is concerned as things like DAI, for example, wouldn’t be so easy in BTC. However for now ethereum has less capacity than bitcoin and just how much capacity BCH has, isn’t known.

BCH of course has a bigger blocksize, but while that has been tested in lab-like situations, it hasn’t in practice where there is real demand and thus miners might be tempted to constrain capacity so as to increase the fees paid to them or because the tech actually can’t handle it.

If we’re looking at say a billion transactions a day, there needs to be a real solution that significantly compresses data and or distributes it far more widely between nodes in a trustless manner, rather than giving it all to effectively one node that is cloned thousands of times.

The Sidechains Problem

Ethereum’s sharding plans are still very hazy with the focus currently being more on the beacon chain. At a high level, that beacon chain is the coordinating “node” that sort of “orders” the other shard nodes.

There thus might be a bottleneck in the beacon because for shards to talk to each other they have to go through the beacon at least in Polkadot which seems to have finalized more the overall architecture.

In some ways this idea is fairly old and known in bitcoin as sidechains since at least 2014. There are differences, but the idea there was basically you lock the coins on one end and get them out on the sidechain. Now on the sidechain you can do whatever you like, with the sidechain effectively being a network which can be PoS or whatever you want.

The problem is how to do this in a trustless manner and/or whether it can be done at all, at the same time as, of course, actually increasing capacity.

We’ll have to wait and see how eth or Polkadot or any other sharding solution really works in practice, but getting nodes that hold different data to “talk” to each other in a trustless manner is a very hard problem.

They might have to go through the central chain, which could be basically going back full cycle because there might not be any significant data compression without some tradeoff.

Scalability thus is a harder problem than it looks at first provided one wants to maintain the ability of an ordinary individual to have a say on the network by running a node or indeed by forking the network if they want to.

Hence why it is taking quite some time to solve with it unclear at this stage who will be the first to really solve it rather than do so in a way that makes unacceptable tradeoffs where it concerns the validation of what is “truth” by an ordinary individual.

Ethereum, of course, has a considerable chance of doing so, as do other networks preparing to launch and as does bitcoin which has been thinking about it for perhaps the longest time.

Until someone does, then perhaps there isn’t much reason for bitcoin to lose market share or to be overtaken because no one else is doing things better currently where the most important matter, scalability and overall capacity, is concerned.

Editorial Copyrights Trustnodes.com

 

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Ronald

DigiByte is doing it much better but shhhhhh