Some cryptocurrencies are just highly speculative pump and dump projects, but other cryptocurrencies are actually used as money. How can we however objectively determine the difference?
First we need to understand the difference in elastic and inelastic demand. Elastic demand is demand that can easily be lived without and only exists in fair market conditions, and inelastic demand is demand for a thing that is hard to live without and persists regardless of market conditions. Elastic demand usually applies to highly bountiful and diverse but also non-essential goods such as entertainment, particular food choice, and recreational activities. Inelastic demand applies to things that lack replacements such as lifesaving medicine, the general presence of food and water, and people's drug addictions.
Extrapolating this concept to cryptocurrencies, cryptocurrencies that are more speculative and hyped are based on elastic demand, and cryptocurrencies that derives its value directly from it's usefulness in commerce give it inelastic demand. One sure source of inelastic demand for a cryptocurrency is it's usage in darknet markets, as only (very few) cryptocurrencies are used in online darknet sales, and many people feel like they can't live without their drug fix. My definition of darknet markets also extends to small sanctioned countries that need to operate under the table to keep business with each other running. Bitcoin Cash is the least used of any coins in any darknet markets, but it's also the most recently added one (and listings are rare), so that can change.
Inelastic demand isn't the only important kind of demand, however. In fact, sometimes inelastic demand doesn't even settle in until there's a little elastic demand to bootstrap it.
An example of something that gives a cryptocurrency elastic demand might be fun and entertaining dapps build on top of the cryptocurrency network, and Decentralized Finance tools. Smart Contracts and token capability are a huge source of elastic demand.
Quality of elastic demand does exist too. A cryptocurrency who's only elastic demand originates from gambling dapps and staking/loaning mainnet tokens is a very weak source of elastic demand, and a project such as this could sink overnight. A cryptocurrency who's elastic demand comes from something that's unique and superior in function or marketing to other cryptocurrencies however gives it a stronger elastic demand, as people will prefer to use it over alternative sources of this elastic demand.
One example of superior elastic demand on Bitcoin Cash is this app right here, read.cash. Read.cash might not be distributed like Steemit, but it's user-friendliness and good marketing as a writing platform with easy donation-capability makes it a superior product that more and more people flock to. Merely by having read.cash exist on Bitcoin Cash, it gives a Bitcoin Cash that smidgen of greater value.
Cryptocurrencies with a small network effect suffer for one game-theoretical reason, smaller network effects are less likely to be globally adopted, and that means the project is less likely to succeed, scaring away new investors. Cryptocurrencies with a high network effect are confidence-boosting for investors.
There is more to network effect then just some static number, though. The maximum growth potential of a network effect is an important consideration, as is the growth rate of the network effect. There are also different kinds of network effects, but for a cryptocurrency, the most important one is always closed economic loops of users spending and earning the cryptocurrency in commerce, at the mindful exclusion of other things. A business that accepts Bitcoin Cash for payment but never receives any transactions in Bitcoin Cash wouldn't add to the social network effect of Bitcoin Cash, for example.
Most if not all cryptocurrencies claim censorship-restance, but the levels at which different cryptocurrencies have it varies a lot. For this reason, we need to actually look at these cryptocurrencies and decide if they actually are censorship-resistant or not.
The first thing to look at is block producer distribution. All that matters is how many block producers it takes to 51% attack the network. In Bitcoin Cash, it's usually around 4 or 5. In other cryptocurrency networks it can be less.
The second thing to look at is node implementation diversity. The more node implementations you have, the more options a block producer has in the case if one node implementation doing something harmful, which eases the attack vector of a developer group getting captured. Bitcoin Cash has around 5+ active node implementations, while most other cryptocurrencies only have 1.
Finally, we need to look at the history of deep reorgs, chain rollbacks, and chain freezes. Cryptocurrencies that have these in their past signify fundamental centralization, even if the design reasons for such an event to occur is hard to objectively ascertain.
Even if something had all the elastic and inelastic demand in the world, the largest network effect, and the greatest censorship-resistance, the inability to transact with a cryptocurrency cheaply and easily would be to it's fundamental detriment, and people would seek out substitute goods. The amount of opportunity cost one is willing to bear in a transaction is directly proportional to one's perceived benefit of transacting. Opportunity Cost isn't just expensiveness of fees or how long it takes for a block to confirm, but it's also the time taken out of your day, as well as the energy and mindshare extracted from you. If using cryptocurrency had no benefits above using fiat, then people wouldn't use cryptocurrency.
Bitcoin Core (BTC) seems to be the prime example of a cryptocurrency with all the desirable properties as an investment listed in this article, aside from opportunity cost. As a result of the network congestion on BTC, BTC fell from around 90% cryptocurrency market dominance to 50%, and only time will tell how long it can hold it's throne before being usurped.
Cryptocurrencies with a strong presence of both superior elastic and inelastic demand, superior network effects, superior censorship-resistance, and superior cheapness/efficiency are fundamentally the best cryptocurrency investments. Bitcoin Cash is best described by the combination of all these qualities, and honestly I don't know if a second-best option exists.
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