For months, everyone from policymakers to financial experts has been fascinated by the meteoric rise of Bitcoin and the underlying technology: the blockchain.
The blockchain is essentially a decentralized digital ledger that contains every transaction in the chain’s history and is continuously updated. It is used by almost every cryptocurrency and is seen as a potential disruptive force in financial markets. The most famous application of the blockchain is Bitcoin, which has seen its value explode in the last year. But while Bitcoin’s growth has been making a splash, it has quietly been losing ground in the cryptocurrency market.
Until recently, Bitcoin controlled 85 percent of the total cryptocurrency market value, or market cap. The other 15 percent was split between more than 680 competitors. But as Bitcoin’s price began to take off, competitors like Ethereum and Ripple XRP grew faster.
By the end of 2017, Bitcoin’s market dominance was cut to 36 percent despite its price skyrocketing.
While Bitcoin may not stand to benefit from more competition, the overall market does. A competitive market can foster innovation, and blockchain technology is a fantastic platform for new ideas.
Some currencies have already added their own variations to the blockchain concept. Ethereum gives users the ability to create smart contracts, which can be used in anything from real estate purchases to Kickstarter campaigns. Ripple XRP converts currencies across foreign exchanges faster than traditional exchanges with virtually no transaction cost. Sometimes competitors in the same market complement each other. Ripple XRP has positioned itself as a way for Bitcoin to access traditional financial markets.
Bitcoin is still a major player in the market, but the rise of alternative cryptocurrencies has shown us they are not alone. A competitive market is great for working out the kinks and giving consumers a better product. In the case of cryptocurrencies, competition can help the market determine the best use of its greatest innovation, the blockchain.