Being best is still better than being first

Being best is still better than being first

Is it better to be the first or to be the best?

Thus far with cryptocurrencies it’s been better to be first.

As you may have read in Saturday’s Risk & Reward, the technology for cryptocurrencies had been around for years, maybe even decades, before we first heard about bitcoin.

So why haven’t cryptocurrencies been around much longer?

“The coders and cryptographers who dominated the field pre-bitcoin were perfectionists and purists.

“Satoshi [alias of bitcoin’s founder] was a pragmatist — push something out and see if it works. It did.”

Bitcoin has nearly hit $20,000 per coin, which seems to justify Satoshi’s decision to just go for it and see what happens.

Of course bitcoin’s value has largely been determined by investors speculating on it going higher rather than the use case of the coin itself.

I’m still not convinced bitcoin is the cryptocurrency that will end up offering what we want and need.

In the end the ‘survival of the fittest’ has got to apply to cryptocurrencies too.

Fixing real world problems

Yesterday I read an article about messaging app Telegram.

Telegram is a platform where users can send each other encrypted messages. Unsurprisingly it’s very popular among cryptocurrency investors.

Now the company behind this chat app is looking to launch its own cryptocurrency, called Gram, supported by its own blockchain platform, the Telegram Open Network.

The initial coin offering (ICO) it’s preparing could be one of the biggest yet.

That’s mainly because Telegram is a well-known company rather than an obscure start-up. Its ICO could raise millions if not billions.

Telegram users will be able to pay each other with this new cryptocurrency without any fuss. It fixes the problems a lot of people face when making international transactions.

That’s exactly why it could become so valuable.

“The potential for a cryptocurrency inside a widely adopted messaging app is enormous,” Mike Butcher and Josh Constine write on TechCrunch.

“With cryptocurrency powered payments inside Telegram, users could bypass remittance fees when sending funds across international borders, move sums of money privately thanks to  the app’s encryption, deliver micropayments that would incur too high of credit card fees, and more.”

I have been quite sceptical about cryptocurrencies replacing actual currency.

But as someone who regularly sends money abroad, I welcome any technology that makes international transactions as fast and as cheap as national payments.

At the moment sending money from my British bank account to a Dutch bank account can take days. Those delays can be quite inconvenient.

There’s a lot of progress that can be made in this area and cryptocurrency technology could certainly play a role.

Survival of the fittest

I wrote about ripple yesterday and how it is anticipated to overtake bitcoin in time.

Banks are interested in ripple’s technology probably because it might offer solutions to the problems mentioned above.

If there’s a way banks can move money around among themselves without delay or costs, they’ll want to know about it.

For this reason a number of big banks are working with IBM to develop their own cryptocurrency, the ‘utility settlement coin’.

Only the cryptocurrencies with the best technology are likely to have a future, which is why I think bitcoin will run into problems at some point.

There are simply too many problems with it, like the fact it’s taking so much energy to ‘mine’ bitcoin. That can’t be sustainable.

Many of these problems are probably due to bitcoin’s founder wanting to be ‘first’. But after the bitcoin hype dies down, it could soon be overtaken by other cryptocurrencies that are simply better.

“According to multiple sources which have spoken to TechCrunch, the “Telegram Open Network” (TON) will be a new, ‘third generation’ blockchain with superior capabilities, after Bitcoin and, later, Ethereum paved the way,”say Butcher and Constine.

Of course part of that will be a marketing message. Telegram’s blockchain still has to prove it can be a success.

But it’s not hard to imagine newer, improved blockchains with the bugs of older versions fixed will be better suited to stand the test of time.

Strategic Intelligence editor Jim Rickards believes the same thing. Even though he’s a well-known cryptocurrency bear, he’s impressed by blockchain technology and its potential.

“The [blockchain] technology is sound and has a bright future,” writes Jim.
“New improvements are being made all the time. Some new cryptocurrencies are emerging that have radically different governance models and security protections than bitcoin.

“Those new cryptocurrencies are worth a look. But not bitcoin. Bitcoin is a technological dead end that has no use cases other than crime, terrorism and tax evasion.”

Up until now bitcoin has been no match for other cryptocurrencies in terms of how much money it’s managed to attract.

However, in the long run it may also be true for cryptocurrencies that it’s better to be best rather than first.