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It seems like there's a couple of possible explanations for the continued dominance of bitcoin: 1. It's being mispriced by the market for some reason and will

It seems like there's a couple of possible explanations for the continued dominance of bitcoin: 1. It's being mispriced by the market for some reason and will correct over time (i.e. it will lose valuation compared to other cryptos). This seems to have happened some in the past 2 weeks or so, but it's pretty early to see how this will play out. 2. The network effect of already being the biggest is strong enough to offset its "weaknesses" relative to other currencies. 3. The primary value of bitcoin, at least at present and in the short to medium term, is different than crypto enthusiasts believe. There is massive value in being a decentralized, secure, easily transferrable store of relatively large amounts of money, as basically a settlement layer. And there is relatively less value (at the current time) in being a new payment method to buy everything down to a cup of coffee, or powering smart contracts, or other things that crypto enthusiasts get excited about. To the extent that those things become important to the market, usage of Ethereum or other coins will increase. To the extent that privacy becomes important to the market, usage of ZCash or Monero or other coins will increase, etc. But the increases of these others won't necessarily reduce the primary value of Bitcoin itself. I personally think #3 is true, although long-term factors like the energy consumption of mining may be strong enough to render other currencies significantly better even for this primary use case.

ThrustVectoring 9y ago
The most important value of bitcoin is that transfers are non-repudiable. Any situation where sellers do not trust their buyers and have to eat the cost of things like credit-card chargebacks, there's a huge savings in accepting payments in a form that the buyer can't reverse. Of course, the huge dark side to that is that there's now a way to easily send money in a way you cannot reverse. This provides a huge incentive for things like kidnappers demanding their ransom in bitcoin. It's often valuable to be physically incapable of doing things. I'm long-run bearish on Bitcoin because of this analysis - the majority of its value is in something that makes governments and other coordination mechanisms interested in destroying it.
- nicky0 9y ago
  However, another core property of Bitcoin is strong resistance to censorship and government interference, which is another big part of its value.
- saas_co_de 9y ago
  > transfers are non-repudiable Technically, but not legally. Transfers are 100% reversible by going to court, so Bitcoin is really only non-reversible for criminal activity (dealing drugs, gambling, etc) where someone cannot bring an action because the contract was illegal in the first place. This technical non-repudiability is a feature that only works for criminals and is an anti-feature for legitimate users.
  - deleted 9y ago
    [deleted]
  - detaro 9y ago
    True, there is a lot of middle ground where that higher standard for reversibility is useful though (e.g. compared to dealing with PayPal or credit cards, which are the primary alternatives for international/inter-currency transfers and provide very little in the way of security for the seller). Especially interesting for smaller sums though, and there the current level of transfer fees really gets in the way.
- dcosson 9y ago
  > There's a huge savings in accepting payments in a form that the buyer can't reverse. Bitcoin just kind of flips the problem, it doesn't solve it. In a world where payments can easily be reversed, sellers take on all the risk. In a world where they can't be, buyers take all the risk. You can get pretty far with a reputation system, and in a market with many more buyers than sellers it's nice that now only the seller's reputation matters. But for a lot of people there's still benefit in having a trusted middleman like Paypal.
realusername 9y ago
> the continued dominance of bitcoin It's less and less true as time goes by, Bitcoin dominance on the other currencies was about 85% in February, now it's only about 38%. https://coinmarketcap.com/charts/#dominance-percentage https://coinmarketcap.com/charts/#dominance-percentage
- runeks 9y ago
  Only using the flawed measure of market cap, which decreases in accuracy with decreases in liquidity. The problem with market cap is that it multiplies the last traded price with total supply, thereby assuming that there exists people willing to purchase all coins in existence at the same price (the mid price of the order book). Thankfully, we don’t need to make this assumption, since the order books of most exchanges are public. But, as far as I’m aware, no websites compare coins by market depth, unfortunately. It’s a bit like me selling a painting I’ve painted for $10,000, and then creating 100 of the same paintings and claiming I’m a millionaire. It doesn’t work like that for illiquid assets (I’d probably be lucky to find even a single new buyer at the same price).
  - vasilipupkin 9y ago
    but you can look at trade volume, which is also a measure of liquidity. and trade volumes for some of these alt coins are high.
    - runeks 9y ago
      No, trading volume is not a measure of liquidity. It doesn’t matter how many times per second some coin — deposited at an exchange — changes owner (according to that exchange’s database) if selling $1m worth of the coin crashes the price to zero. A trader can easily inflate volume by creating two accounts and trading back and forth with himself, thus making his two deposits count many times over in the trading volume of that exchange. But in the order book his deposits can only count once.
      - 6nf 9y ago

ThrustVectoring 9y ago

The most important value of bitcoin is that transfers are non-repudiable. Any situation where sellers do not trust their buyers and have to eat the cost of things like credit-card chargebacks, there's a huge savings in accepting payments in a form that the buyer can't reverse. Of course, the huge dark side to that is that there's now a way to easily send money in a way you cannot reverse. This provides a huge incentive for things like kidnappers demanding their ransom in bitcoin. It's often valuable to be physically incapable of doing things. I'm long-run bearish on Bitcoin because of this analysis - the majority of its value is in something that makes governments and other coordination mechanisms interested in destroying it.

nicky0 9y ago
However, another core property of Bitcoin is strong resistance to censorship and government interference, which is another big part of its value.
saas_co_de 9y ago
> transfers are non-repudiable Technically, but not legally. Transfers are 100% reversible by going to court, so Bitcoin is really only non-reversible for criminal activity (dealing drugs, gambling, etc) where someone cannot bring an action because the contract was illegal in the first place. This technical non-repudiability is a feature that only works for criminals and is an anti-feature for legitimate users.
- deleted 9y ago
  [deleted]
- detaro 9y ago
  True, there is a lot of middle ground where that higher standard for reversibility is useful though (e.g. compared to dealing with PayPal or credit cards, which are the primary alternatives for international/inter-currency transfers and provide very little in the way of security for the seller). Especially interesting for smaller sums though, and there the current level of transfer fees really gets in the way.
dcosson 9y ago
> There's a huge savings in accepting payments in a form that the buyer can't reverse. Bitcoin just kind of flips the problem, it doesn't solve it. In a world where payments can easily be reversed, sellers take on all the risk. In a world where they can't be, buyers take all the risk. You can get pretty far with a reputation system, and in a market with many more buyers than sellers it's nice that now only the seller's reputation matters. But for a lot of people there's still benefit in having a trusted middleman like Paypal.

realusername 9y ago

> the continued dominance of bitcoin It's less and less true as time goes by, Bitcoin dominance on the other currencies was about 85% in February, now it's only about 38%. https://coinmarketcap.com/charts/#dominance-percentage https://coinmarketcap.com/charts/#dominance-percentage

runeks 9y ago
Only using the flawed measure of market cap, which decreases in accuracy with decreases in liquidity. The problem with market cap is that it multiplies the last traded price with total supply, thereby assuming that there exists people willing to purchase all coins in existence at the same price (the mid price of the order book). Thankfully, we don’t need to make this assumption, since the order books of most exchanges are public. But, as far as I’m aware, no websites compare coins by market depth, unfortunately. It’s a bit like me selling a painting I’ve painted for $10,000, and then creating 100 of the same paintings and claiming I’m a millionaire. It doesn’t work like that for illiquid assets (I’d probably be lucky to find even a single new buyer at the same price).
- vasilipupkin 9y ago
  but you can look at trade volume, which is also a measure of liquidity. and trade volumes for some of these alt coins are high.
  - runeks 9y ago
    No, trading volume is not a measure of liquidity. It doesn’t matter how many times per second some coin — deposited at an exchange — changes owner (according to that exchange’s database) if selling $1m worth of the coin crashes the price to zero. A trader can easily inflate volume by creating two accounts and trading back and forth with himself, thus making his two deposits count many times over in the trading volume of that exchange. But in the order book his deposits can only count once.
    - 6nf 9y ago