As 2017 draws to a close, many wonder what the future holds for Bitcoin and altcoins. Alongside news that Bitcoin recently reached its highest value so far, smaller currencies like Litecoin and Ethereum grew in value as well. Litecoin recently broke the $300 USD threshold, and in the past month Ethereum rose to its highest value to-date. Bitcoin, however, is still a long way away from losing its title as the world's most popular digital currency. That being said, smaller currencies known as 'altcoins’ have the potential for widespread use over the next few years.
In 2018, it's unlikely that Bitcoin will stop dominating the market. It could be the year, however, that innovators disrupt the way we categorize digital currencies.Currently, most consider digital currencies in two categories, 'Bitcoin' and 'altcoin.' This is due to Bitcoin’s domination of the fintech market, resulting in the consideration that all other currencies are an ‘alternative’ to Bitcoin. Increasing public knowledge about the digital currency industry is challenging this consideration, with Bitcoin quickly joined in the public lexicon by currencies like Ethereum. Throughout 2017 as well, Bitcoin’s value moves positively correlated with the price moves of other currencies. This shows that often the success of one digital currency does not necessarily harm others. In fact, Bitcoin’s success could continue to benefit the value of smaller currencies.
If there’s one certainty, it’s that 2018 will be a major year for the issue of scalability. Most digital currencies are not future-proof in their current state. Bitcoin, for example, faces higher transaction fees and slower transaction times as its popularity grows. This issue is also relevant in altcoins, but most have not yet been tested on the same scale as Bitcoin. However, Ethereum is now processing more transactions than all other digital currencies combined, yet faces huge energy demands and spikes in popularity. These issues were recently emphasized when a decentralized game, CryptoKitties, congested the Ethereum network due to a spike in transactions.With some of the industry’s greatest minds, like Ethereum co-founder Vitalik Buterin and Casper-creator Vlad Zamfir actively working on implementing solutions, scaling will be an important topic of discussion in 2018.Additionally, currencies like Litecoin scale more effectively than Bitcoin. This sets them up to potentially profit from their more practical use on a day-to-day basis.
Due to scaling issues, Steam, a popular gaming platform, recently cut ties with Bitcoin, citing high transaction fees.“At this point, it has become untenable to support Bitcoin as a payment option,” the Steam Team said in a community announcement. “We may re-evaluate whether Bitcoin makes sense for us and for the Steam community at a later date.”If this represents the beginning of a trend, it’s not one that’s necessarily harmful to the industry as a whole. Platforms like Steam could opt to support other digital currencies with lower transaction fees, which would have a major impact on the market.We’re already beginning to see this shift. Popular marketplaces have begun implementing support for currencies that were barely considered even a year ago, and in response, currencies like Litecoin skyrocket in value.
As the public becomes more aware of the fintech industry, greater public education about digital currencies could have a major effect on the market. Currently, digital currencies are forced to ‘compete’ in unnecessary ways due to misconceptions about the industry.The fact is that many digital currencies can do well at the same time, and can even benefit from working alongside each other. We’ve seen this in the past when Bitcoin’s price increased the price of other top currencies. This is, in part, due to some digital currencies serving very specific purposes, but the underlying technology still enables collaboration. For example, Basic Attention Token aims to rebuild and restructure the digital advertising industry. Power Ledger aims to allow for individuals to buy and exchange excess solar energy. Neither are in direct competition with each other, or any of the major digital coins. Similarly, Ethereum aims to serve as far more than just a currency, and its success does not rely on a dip in other currencies. The pubic becoming increasingly aware of this fact could lead to a less volatile market and allow for better cooperation within the industry.
With the volatility of digital currencies, no one can predict what the industry will look like in a year. Digital currencies exist in a state of antifragility and shocks to the industry have not negatively impacted the market in the long term. It’s clear, however, that issues like scalability will be a major factor in determining which currencies are able to sustain their success in the following years. Additionally, increasing public education could dismantle the idea that ‘altcoins’ are an alternative to Bitcoin, and allow for less divisive growth in the future.
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