Will Bitcoin be ever replaced from Number 1 position?

I get this question almost evert alternate day from friends and followers. While most believe Bitcoin is invincible, I have second thoughts. I don’t necessarily believe it will lose its Number 1 position so easily, but I am also not averse to the idea and open to the fact that a challenger can emerge & a better coin may eventually takeover Bitcoin

Who can be a potential challenger?

I don’t expect traditional altcoins to emerge as potential challengers. Here is my logic. Essentially we have the following type of coins in the system at the moment:

Utility Tokens

Security Tokens

Blockchain / Mineable coins

Fiat backed Stable Coins

Let’s go one by one & understand the valuation matrix for each one of them.

Utility Tokens

By very meaning, utility Tokens are Utility Tokens to be used within platform eco system as payment method. By that logic most utility tokens have no business to be listed on an exchange. The role of a utility token is merely allow the users to transact on the platform by using the token instead of using the traditional payment methods.

Let me repeat, Utility Tokens have no business to be listed on an exchange

Let’s take an example. Let’s assume Amazon.Com wants to launch its own token which you can use to purchase anything on Amazon. Assume they issue 100 Billion Tokens @ 1$ each

Now every time you go to Amazon, the only way you can purchase anything is by using Amazon Token. That’s the only payment method allowed on the platform now onwards

So it doesn’t matter where you are based in the world, first you will have to use credit card / cash / fiat or crypto to buy Amazon Token from Amazon (why would Amazon do this? Why will they allow only Amazon Token as a payment method? Well nobody in crypto is asking such questions)

Once you have the tokens in your wallet, you are now allowed to purchase from Amazon. Now here is what happens currently.

Assume you are not a crypto investor or trader, you will have to go through following steps before you can actually purchase anything from Amazon

Step 1 : Open An account with a fiat exchange like Coinbase (They Need KYC, which means submit your documents, that takes few days to open the account)

Step 2 : Once the account is opened in few days, send your fiat or use credit card for smaller accounts & send funds to the exchange

Step 3 : Buy Bitcoin Or any other coin. You sent $1000, and you received $980 worth of some coin after paying commissions

Step 4 : Now open an account with another exchange like Binance, Where Amazon Token is Listed

Step 5: Send whatever coin you purchased at a fiat exchange to an altcoin exchange (in some cases they can be same but in most cases it can be different)

Step 6: By the time you Sent your coins from from fiat exchange to Alt Exchange, price drops and now the value of your coin is $900 instead of $980 when you Sent

Step 7 : You now sell your Bitcoin / Whatever Coin you bought from fiat and buy Amazon Token. Amazon Token was 1$ a piece so you got 895 token after paying a small fee (you are already down almost 11% so far & it’s already 5–6 days since you first started the process)

Step 8 : You now transfer your Amazon Token to Amazon.Com platform wallet. Balance 895 (Hmmm… finally. Remember this scenario is for a regular amazon customer who doesn’t trade crypto)

Step 9 : Now you want to buy a Television. You found a nice 4K TV from Sony priced at $540 (Yes the TV is priced in Fiat value since Amazon Token is Listed & Amazon doesn’t want to take any exchange risk) you decided to buy it and checkout. Now at the time of checkout, the system checked Amazon Token’s current price. Apparently it has fallen down to 0.90$ per token now, so the system wants you to pay 600 Amazon Tokens to complete the order (Remember you bought it at 1$ but value has fallen to 0.90$ by the time you are trying to check out)

Step 10: You are in a dilemma right now. Whether to buy TV now or wait for the Amazon Token price to recover above your purchase price of 1$. You decide to go to Twitter & check some big crypto Gurus to see their opinion about Amazon Token price. One of them says, based on some Elliott Wave count B Wave C (its bla bla bla for you) Amazon Token will go to 1.5$ soon

Another guru says, Amazon Token is doomed based on some support level and it’s going to crash to 0.5 very soon

You wife is pushing you to buy now, but you are in two minds. If you buy now you are losing additional 10%, if you wait & if the twitter guru who says the price is going to 1.5$ than you can get this TV much cheaper. But at the same time what happens if the price falls to 0.5 (I will be screwed and I will pay double the price, that’s the thought in your mind)

Finally you decided to buy now, you again go to checkout but the price changed again, eventually you paid 620 Tokens & bought the TV

Now you want buy a washing machine. You are left with 275 Amazon Tokens. The price of the washing machine is 400$, that turns out to be 480 Tokens based on the market price of the token.

So what happens now ?

Well you go back to your fiat exchange. They don’t accept credit card. Which means you wire them the money. It takes few days to reach. You exchange your money for something like bitcoin send it to altcoin Exchange, buy Amazon Token there, send them to Amazon.com and repeat the whole process

Finally you managed to buy both Television & Washing Machine.

Now you are left with 50 tokens at Amazon, you decide to buy a small toy for your daughter. Apparently she likes something from Walmart & not on Amazon.

You go to Walmart only to realize Walmart also accepts only Walmart Token now. And Walmart Token is Listed only on the third exchange where you still don’t have an account. I can go on and on and on and on. Basically you got the point. We are talking about mass adoption, we are talking about day to day issues, we are talking about practical real life challenges. And therefore Utility Tokens don’t work in real world and don’t solve any problem.

Yes in my eyes utility Tokens solves none of the problems that we have currently. Infact they create more and more problems from the point of user experience.

Real world mass adoption based on utility Token’s present business model will be extremely challenging & difficult if not impossible

Any options ?

Yes, stable coins solved these challenges instantly. Stable coins as they are called are stabled (in ideal world, we aren’t talking about USDT / Tether)

If a credible stable coin emerge that can indeed work as a fungible fiat/crypto option, than the probability of mass adoption will be much higher. So for example you can spend 1000$ worth of stable coin at Walmart or amazon or a restaurant or a bar without any problem because 1000$ will always be 1000$

Now assume you get an option from Bank of America to instantly convert your cash to stable coin crypto with the click of a button in app, and if you can start spending on a coffee, that will be the real mass adoption scenario. You won’t be scared to convert your cash to Stable Crypto because you don’t have a fear to lose. Bank gets a small commission everytime you do this so they are happy to provide this service, merchants are willing to accept this crypto anytime because they don’t fear to lose any value. Now even if the banks don’t allow you to convert instantly and even if you might need to go to an exchange to convert you may still take the effort to do that because it solves many issues in real life (Utility Tokens solve nothing)

Conclusion so far: Utility tokens are merely used as utility on platform eco system and therefore have no real demand or usage beyond acting as a medium of commerce. And unless the demand on the eco system is humongous vs the supply of tokens, the tokens can not appreciate in value (in theory but in practice they may still appreciate in value due to speculative pumping from whales). So other then the speculative pumps, they have no real reason to appreciate purely based on demand & supply, unless if Amazon issued only 1 Billion Tokens And the demand of the platform every day is 20 Billion Tokens So price will sky rocket (which isn’t the case with most utility tokens)

So a utility token ever beating Bitcoin is ruled out based on this theory but hey it’s always about whales and their games. They can limp any Shitcoin to a trillion dollar market cap, who knows :-)

Conclusion Number 2 : Stable Coins, will always have a stable value. However a credible stable coin backed by a large corporation / country / institution can have billion or trillions of circulating supply & can in theory not only beat bitcoin but any other coins. That coin may effectively become the gold standard for global commerce and payment mechanism. None of the current coins have the appeal to take that slot yet. But something can emerge in future

Now let’s Analyse Security Tokens

Security tokens are “security” and by very nature, they will attract the same level of scrutiny and due diligence that a normal stock offering will receive. Most security tokens may be directly assessed at standard valuation matrix for normal stocks in traditional market. Can we get a Trianon dollar Security Token some day? I highly doubt for now. That’s a scenario for future when STO industry really takes off. But for now in next 3 years I don’t see that happening with global stock markets cooling off. And remember it’s just not sexy at the moment to raise 5 Billion Dollars through a STO. Most big companies still prefer traditional IPO vs ICO or STO. This may change but we are quiet far from that day

In conclusion : Security Tokens don’t seem to offer any threats to Bitcoin as yet

That leaves us with our last category, Blockchain / Mineable coins. For now Bitcoin remains the de facto number 1 choice with Ethereum as second close. I don’t see Ethereum challenging bitcoin’s dominant position any time soon. No other Mineable coins / Blockchain comes even close

Conclusion: No Blockchain/Mineable coins are threat for Bitcoin’s dominance at the moment

Final conclusion :

There is plenty of noise from the likes of Roger Ver & Craig Wright about their version of Bitcoin is better than the real bitcoin. Craig Wright has gone to the extent of saying his Version of Bitcoin (Bitcoin SV) will become bigger than real Bitcoin.

To what extent we should take them seriously? Most people want to laugh it off. Well, personally speaking I want to laugh it off too, but I want to give him 20% probability that he may actually flip his version of bitcoin with real bitcoin (why ? I will write another detailed article on why I give him 20% probability)

So the only credible treat to Bitcoin dominance at the moment is : credible stable coins. Nothing else seems close in the reckoning at the moment (Followers of XRP, don’t hate me, I am yet to understand your coin in details. Arrange one of your analyst to explain to me how it works and I may change my mind)

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(Pardon me for some typos)