A common question I receive is: “What stops anyone from cloning Bitcoin and starting their own cryptocurrency?“ Most common reaction is a tie between confusion and shock when they hear my answer: “Technologically, nothing at all.”
Bitcoin has a hard supply cap at 21m. If there is nothing stopping anyone from launching another cryptocurrency, then cryptocurrencies as a whole must have an unlimited supply despite limited supply for any single one of them.
As a matter of fact, in the 2017 ICO gold rush many “alt coins” did exactly that. A quick fork of Bitcoin’s repo and an accompanying “white paper” with little to no technical detail was all that it took. Almost none survived. A handful such as Ethereum with true innovations and long-term vision stuck around and are thriving more than ever. Few are competing with Bitcoin directly. Most are building on top of it.
Several high-profile challenges to Bitcoin itself with the aim of improving its limitations (e.g., block size, arguably the most contentious issue in the history of Bitcoin) have failed to gain adoption anywhere near the scale of Bitcoin.
Networks are inherently “winner-takes-all” markets. Users tend to flock to places where the other users are. Think of how dominant of a social network Facebook is, anticompetitive arguments aside. There is only one Craigslist, despite having the looks of a website from the 90s. The basic technology behind either is neither proprietary nor insurmountable for a handful of developers to build something similar, if not better. Then why is Craigslist or Facebook still the largest in its space? Why aren’t there several clones of Facebook?
Bitcoin has become the store-of-value layer in cryptoassets. A remarkable achievement for a 12-year-old innovation that introduced Blockchain as a technology and Bitcoin as its best-known use case. Bitcoin is older than Uber. It is older than Snapchat. Somehow it still gets classified as an emerging or unproven technology despite its resilience over a decade.
Since early 2020, every month seems to bring yet another large institution which has invested an eye-popping amount in Bitcoin. Tesla’s $1.5 billion announcement today ranks as one of the largest I have seen thus far in corporate holdings.
Bitcoin now acts as the value layer in cryptoassets. This is partially why it gets labelled as “Gold 2.0” or “Digital Gold”. There is an enormous amount of value locked in cold storage, and an ever-increasing amount now lives on the Ethereum blockchain moving between various DeFi platforms looking for high yields in a world starved of it.
Almost all DeFi development is happening on the Ethereum blockchain, which is why I think Ethereum is the digital oil of cryptoassets. Ethereum still has a long way to prove its viability and certainly has formidable contenders should Ethereum 2.0 fail to realize its vision.
As for the unbiased value layer in cryptoassets, Bitcoin takes all.
This is not investment advice. All opinions are my own, and you should do your own due diligence, as always.
This article was originally published on Medium.