I haven't heard this argument from anyone else, so there might be something very wrong with it. But I've been mulling it over for the past week and I think it's sound.
Why BitCoin has real value.
So, you understand blockchain technology. You accept that it's a new thing that is going to alter the course of civilization. In the coming months blockchain is going to embed itself into every enterprise of man and machine. If you don't buy that, then never mind. If you're on board, then keep reading.
So okay, blockchain is the bomb. But while BitCoin is built on blockchain, it is not the only blockchain. Indeed there are thousands of crypto currencies, or perhaps we should call them crypto tokens. Many of them have been created to perform some specific application, many others are designed to be a tool of general utility, and many are just another alt coin. I have no idea which ones will succeed and which ones will fail. But I am certain that many will succeed. As the demand for particular tokens increases, so will their price. I have no doubt that dozens of them will be selling for a thousand times their current going rate in 2018.
But how does BitCoin stack up against these newcomers? Poorly. Bitcoin was the first and enjoys first mover status. But the lessons learned from BitCoin were put into these alt coins. Features to make them more suitable to function at whatever task they were created to perform. BitCoin will not be the crypto currency to unseat fiat currencies. It has a limited capacity to process transactions which has led to long transaction times and high fees. BitCoin will not be a store of value to replace gold. High volatility makes it unsuitable to do so. Delays, fees, and volatility also mean it won't be underpinning payment processing.
So does BitCoin do anything better than everything else? If so, will it continue to do it better against future developments?
Yes. There is one thing BitCoin does that no other crypto token can do. It is the means of exchange between all the other blockchains.
As technology develops and blockchain gets deployed wider and wider, it will create demand for blockchain tokens. As business models change and peoples activitie's change they will use different tokens. And BitCoin is the coin of the realm that all others are priced against.
In the same way you accept dollars because everyone else accepts dollars, you will buy and sell cryptos in BitCoin. All the major exchanges that offer a variety of crypto tokens, allow you to buy and sell them with BitCoin. Some allow you to buy and sell with fiat, but dealing in fiat exposes you to delays, tax, and regulatory burdens. It is to be avoided when possible. Furthermore, no new token can be introduced that enjoys the reputation and ubiquity of BitCoin. BitCoin will continue to function as the reserve crypto currency because it already is.
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