It sounds ridiculous, but it’s true: Bitcoin is the most valuable cryptocurrency precisely because it is the most valuable, and has been for the longest time. To understand further, let’s specify fully what a cryptocurrency really is.
First and foremost, a cryptocurrency is a digital protocol. This protocol defines the way in which users can participate in a network- i.e how they can transact without trust. It also embeds a set of incentives which encourage users to support the network even while acting in their own best interests. Additionally, the protocol must ensure the network is resistant to malicious attacks.
Protocols are nice on paper but don’t a network make. Thus, a cryptocurrency must also consist of at least one open source implementation of the protocol.
Finally, a cryptocurrency can only exist if enough people run said software and participate in the network. You need users!
To review, a cryptocurrency consists of:
- A protocol, defining valid behaviors in the network and establishing a set of incentives
- Software implementation(s) of the protocol
- Users running the software and participating in the network
All three components are intertwined and interact in unexpected ways. Critically, it’s possible for a network-destroying “bug” to exist in any component.
The protocol itself could have a fatal flaw in its design or incentive structure, leaving it vulnerable to collapse, attack, or centralization. This is what has happened to many early proof-of-stake coins.
There may also simply be a bug in the software itself- a flaw that can be exploited maliciously. This has happened in a number of cases. A notable recent example came when a bug in the Verge software was exploited, leading to chaos and an unplanned hardfork of that chain.
Finally, “bugs” can also exist at the level of the network participants. In fact, the most common failure mode of a cryptocurrency project isn’t a software bug or protocol flaw- it’s that no one cares enough to use it.
Bitcoin has, literally, always been the most valuable cryptocurrency in existence. It has always been the most lucrative target for would be hackers or malicious attackers. Yet it’s never been successfully attacked.1 No fatal flaw in it’s implementation, it’s incentive structure, or it’s user base has lead to its demise. Thus, for all its warts, it’s earned its spot at the top- and the longer it remains there, the more it deserves to remain.
This is not to say that Bitcoin will always be on top. Were this year 50 if it’s dominance, perhaps we could say so. But Bitcoin, and thus all of crypto, is only a decade old. For all the recent hype, it’s still barely in the mainstream consciousness and certainly not in mainstream use. There is still time for a flaw to emerge. In fact, some would argue the intractable governance and scalability issues represent just such a flaw.
Time will tell. Predictions are hard. For the moment, though, Bitcoin is the most valuable coin because it’s the most valuable coin. It’s Bitcoin’s game to lose.