Bitcoin: the 21st century Betamax?

Bitcoin: the 21st century Betamax?

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If you’re under 40 years old, you can be forgiven for asking: what in the hell is Betamax? It’s a good question, because this brand of video cassette fell spectacularly from its pedestal despite being the first of its kind to market. If you’re under 25, feel free to also ask: what in the hell is a video cassette?! Allow me to fill in the gaps.

Waaay back in 1975, Sony revolutionised the home entertainment market with its Betamax video cassette recorder. It was the first product that allowed you to record a TV show to watch later. Trust me, this was a huge deal at the time, and spawned a whole new industry: movie rental. As with all new technologies, competition was never far away, and before long, JVC released their own VHS format. It did the same thing, but lacked the picture quality and build quality of Betamax. And yet, despite dominating the market for a whole year before JVC got in on the act, by 1981 Betamax’s market share was down to 25%. By 1986 it was down to 7.5%, at which point it quietly curled up and died.

So what does any of this have to do with Bitcoin? Altcoins. They’ve been in our rear view mirror for some time now, but honestly, it’s been something of a smug pleasure to watch them just trying to keep up. Even more serious projects like Ethereum, while earning our respect, have never come close to being worthy adversaries in the domination stakes. Yet suddenly we’re being tailgated by a handful of learner drivers, hell-bent on driving us off the road. Who are these potential usurpers, and what if anything can we learn from Betamax to save ourselves?

Out with the old, in with the new

While the world of cryptocurrencies is no stranger to extreme instability, there does seem to be a new genuine cause for concern. Emerging from the long shadow of the ETF debacle, Bitcoin prices fell below $1,000 again after more than a month above this high tide mark. But the price is only one piece of the puzzle. The more disturbing news is that Bitcoin suffered its lowest recorded market share at just 72% according to CoinMarketCap.com. This is no doubt part of the same dynamic that saw four other cryptocurrencies outperform Bitcoin in the last month. Four! Of course, Bitcoin’s market cap still dwarfs even its biggest competitor, but market cap does not drive investment. If you want to make money, you put it in something that’s growing. Something growing fast. Like Dash, which outperformed Bitcoin in terms of investment return by a staggering 233%, followed fairly closely by Ethereum, Monero and Litecoin. Dash outperforming Bitcoin? If that’s not a sign that something’s wrong, then I’m buying shares in Betamax…

Does that make Dash the fintech VHS?

So if VHS was clearly the inferior product, how did it come to not only dominate, but become the new standard? Interestingly, it all began with capacity. The superior quality Betamax tapes were limited to 1 hour of playtime, but VHS offered 2 hours. Crucially, enough time for a feature film. Additionally, the VHS machine was considerably cheaper than the Betamax, and despite its inferior build quality was the only solution available for the serious movie addict. This combination of price and capacity was enough to sideline Betamax in just a few short years. As the public decided that watching movies was the best thing about having a video machine, Betamax’s single hour home recording emphasis began to feel like a fad. Turning your living room into a cinema on the other hand was awesome.

Formerly known as Xcoin and Darkcoin, Dash has something of a chequered history. Beset by development issues, over-mining, poor planning and a bad reputation, it’s somehow managed to claw itself out of the gutter, and is now putting on a real display of power. In addition to its meteoric rise from near $8 to $37 in only 2 months, its market cap has shot up to more than $500m, and it’s now available for exchange or deposit at banks all over the world thanks to a new partnership with Wall Of Coins. And when you take unit price out of the equation, Dash compares very favourably to Bitcoin for the casual user. Transactions are quick, and instant send is an option for a small premium. There’s no bottlenecking of low-fee transactions even though the Dash fee market operates in the same way as Bitcoin’s, and there’s plenty of space in the blockchain for both the current demand and future expansion. This may go some way to explaining why the average Dash fee is between 1/50th to 1/5th that of Bitcoin, depending on whether you’re using the recommended or minimum fee. Either way, it’s a recipe for high-volume trading, which is the same conclusion investors appear to be making.

Maybe Bitcoin is the real Darkcoin?

So instead of signing off with yet another conclusion about how the block size debate is going to kill Bitcoin if we don’t find a way to settle our differences, I have something even better for you. Conspiracy! Thomas Zander has gone on the record to say that the scaling debate is really a smokescreen for the powerplay that lies at the heart of Bitcoin. You don’t have to adjust your perspective much to see that this is a real possibility. All you have to do is ask who’s benefiting from this situation? The miners seem to be doing very well right now – so much so that it’s even been suggested that some miners are investing in altcoins in order to capitalise on Bitcoin’s problems. Something to think about while you’re trying to sleep, isn’t it?

This article represents the personal opinion of the author and is not a recommendation to buy or sell Bitcoins.