What does the future of Bitcoin look like?
Decentralised cryptocurrencies could form the basis of the future of finance, but will Bitcoin continue to reign supreme?
There are plenty of situations where using decentralised cryptocurrencies like Bitcoin might make more sense than using a traditional bank. However, while we believe that certain cryptocurrencies are likely to be more dominant than others, there will likely be a whole range of coins for specific uses in the future.
We believe that we’ll more than likely end up living in a multi-currency world - here’s why.
The right currency for the right use
First, that certain cryptocurrencies by their very design might cater to a specific niche or need better than others can. For example, Ethereum might be a good way to interact with certain decentralised applications. Other currencies may offer different types of speed, cost or privacy benefits, and yet others, like Bitcoin, might be used for large-value transfers or could simply remain a store of value.
We believe that it's highly likely that one cryptocurrency –most likely Bitcoin– will continue to play a dominant role because of its properties as a store of value and the network effects it has shown so far.
Bitcoin might not replace all of the existing systems, but it adds a new layer of value – similar to how we still have regular postal mail and fixed-line telephones even though we have Facebook, Skype and Gmail.
Other currencies will probably play a different, more focused role and people may use Bitcoin to store or switch between these other currencies. Something like a global reserve cryptocurrency, not unlike the US dollar in the current financial system.
Here's a simplified view of what it could look like:
The clash of coins
The second reason is competition. In business, politics and pretty much everything else it's typically beneficial to the end consumer when there isn't a monopoly, but rather healthy competition. Competition makes players and the market more efficient, affordable and eventually allocates more value to society at large.
We already saw this play out in the cryptocurrency space where Bitcoin dominated for a very long time without the need to scale. As alternatives started gaining more traction due to improved performance, there was a new urge felt by some members of the Bitcoin community to make some changes.
In our view, this is important and healthy for consumers, businesses and the overall cryptocurrency ecosystem.
The road ahead
We're not necessarily Bitcoin maximalists at heart, but we also won’t blindly support any old cryptocurrency that comes across our way. Our biggest priority has always been maintaining the highest level of security when it comes to our customers and their funds. When considering any new coins and the benefits they may hold, there are a number of boxes they have to tick. Having said that, we're excited to announce we will be adding new cryptocurrencies to our platform soon!
Want to learn more? Read Luno's Bitcoin education series here.
This article was paid for by Luno