What an exciting time to be involved in cryptocurrency. We are in the midst of a bull run that will change peoples lives forever. Not only that, but finally, we are at a stage in the crypto life cycle where projects actually have built up and begun to deliver on their initial promises. While during the 2013 bull run, it was more speculation based and a whisper of what might come to be. In 2017, came the ICO hype and the speculation of potential promises of the tech. But now, we are finally seeing substantial results. It is an exciting time to be in the market. You may feel worried that you are too late to be investing into cryptocurrency, that you probably have missed the boat. That is false. While you may not be extremely early anymore, you are still early and the ability to change your life financially is still out there. You just need to know how to look in the right areas and separate the high quality projects from the junk projects.
But what does the future hold for cryptocurrency? That is about as big of a question that someone can ask, and there is no way I can detail everything in one article. But instead, I will give you a generalized version of two options that may come to be, or might not happen. A lot of this is based on the world outside of cryptocurrency and how markets tend to evolve. I'm assuming that there is a chance that one crypto does become mature, it might take the same route. But once again, cryptocurrency is unlike anything else out there and may become an outlier and not perform like anything else before it.
The question that I will be asking today is if this is a winner takes all market. Or more specifically, a few winners take all. There are a lot of layer 1 crypto blockchains in the market, and we can only assume that this number will continue to grow drastically in the future. There are often two types of people in the market. People who believe that one chain will win out and basically absorb the rest of the market like a black hole. And then there are others who believe that many blockchains can co-exist. That it all helps to build up the market and community. Which option will come to pass? No one knows yet, but it is an important question to ask and definitely something that you should think about when investing into cryptocurrency.
So let's dig into this more.
Let's start with option one. In this scenario, it is a winner takes all environment. Or at the very most only a few winners. This is take that bitcoin maximalists often take, and is something that I have seen ETH fans begin to say as well. Why would there only be a few winners? What is the reason for this? There are a few.
First you need to look at the history of markets. Specifically technology and software. More often than not, there are usually only a few winners. While there are many smartphone manufacturers out there, let's look at the software that they run on. The two most popular software options for smartphones are overwhelmingly iOS and Android. So overwhelmingly, that off the top of my head, it takes me quite a while to even think of a third option. These two operating systems have absorbed the market, and things often work smoother because of that. Apps and games have a higher reach, because it is available for so many people. The same also goes for computers and its software. There is MacOS, Windows and Linux. Those are the three most popular options. If you want to delve more into the internet tech side of things. Amazon has AWS, and has a stranglehold on the market with this. Often times in the tech world it is a winner takes all kind of market. Let's look at the financial world as well. There are many countries in the world, and also many currencies along with it. But if you actually delve deeper, that too is nearly a winner takes all kind of market. The US dollar is the world reserve currency and is the most dominant currency in the world. Outside of that, there are only just a few other currencies that are considered strong and potential reserve assets. The cryptocurrency markets are a combination of all the things above, it is technology, web protocols, and also money. It is very possible that it may behave in the same way. Bitcoin maxi's often feel that any developments that happen outside of BTC will eventually come to bitcoin. For example quick and cheap payments (Lightning), DeFi and NFT's(Stacks and Sovereign), Stable coins (Liquid) and the list goes on. It may or may not happen, but always remember that people and developers follow the money. The will go where they can make the most money.
Now let's talk about the second possible scenario. In this scenario it would be possible for many chains to co-exist together. I may be wrong, but I feel this is an approach that has become much more popular recently. Especially with the introduction of blockchains that promise the ability to be interoperable with other chains. The first few that come to mind are Polkadot and Cosmos. In this scenario, it isn't a cut throat market where every coin is against each other and trying to win. For example it isn't Cardano going against Ethereum, but understanding that the world is a big place, and there is enough room for many coins to be successful. In fact, many coins straight out say that they aren't competing against each other. Recently there has been a lot of hype with Solana and some people have praised it calling it the next ETH killer. While that thought is more of the first scenario. There is an idea that with the speed that Solana offers, it is possibly it could be a great place to have order books that would someday hold the tokenized stock exchanges of the world, and also allow you to participate in DeFi and NFT's very cheaply. In that same world, if you want more decentralization and security, or go to the place that had the most network effect, you would then do the above on Ethereum. There is room for many players.
How about me? Personally I fall more into the middle of both scenarios. I think things from both options will happen. I do think that there are quite a few junk projects out there and a few years from now they will no longer be around. Just look at the top 25 market cap from just five years ago. It looks very different than it does today. I also think that blockchains like Bitcoin, Ethereum, Polkadot and Solana will only continue to become stronger and stronger. I'm of the view that there will be no more than five layer 1 chains that become massively adopted. While there will be other layer 1 chains out there, they will only be moderately successful. This means that you need to be careful what you are investing into. There are many people that have seen layer 1 chains taking off recently and have begun looking lower down on the market cap list to find coins that will help them make money. There is no guarantee that those chains will ever see any great adoption or appreciation. It is just as likely that bitcoin, or ethereum could absorb everything. I don't know what will happen. All I can say is that I'm very excited to find out. We are on the cusp of a new world, and brand-new technology. We are the pioneers that will benefit greatly. Life changing wealth is in our grasp!
How about you? Which scenario do you think will take place?
As always, thank you for reading!
I tend to agree with you that there will be maybe 5 major players at some point. Perhaps only 3 or 4. But who knows? I suspect BTC, BCH, and ETH could be the top 3, with BCH actually being #1, CTC being #2, and ETH being #3.
But that's pure speculation. I really have no idea. The thing most people, I think, need to keep in mind is that this is a very young thing in the world of money. It's only 12 years old. Compare that to the stock market which is 410 years old. And of course currency itself which is thousands of years old.
We are almost literally watching this like we might watch our children, wondering if they will grow up to be a doctor or flipping burgers at Burger King. lol