In over a decade of its existence, Bitcoin [BTC] has found itself going toe-to-toe with several prominent financial assets in different areas. In the medium of exchange space, Bitcoin has faced the wrath of fiat currencies, most notably the US Dollar and in the store of value sense, the digital gold was at odds with real gold.
However, another key battle has been raging. Bitcoin vs the altcoin market.
Within the cryptospace, there exists tremendous competition between altcoins and against Bitcoin to emerge as the one true cryptocurrency. Since Litecoin charted the altcoin path, CoinMarketCap has recorded over 2,200 altcoins in the market. But, if one were to count the number of altcoins that have since come up and failed, the list would be endless.
Jimmy Song, Bitcoin developer and author of “Programming Bitcoin,” listed out a few key reasons which he succinctly summarized as the reasons leading to “altcoin death.”
The BTC developer tweet read,
Top causes of altcoin death:
1. Liquidity dries up
2. Development ceases
3. Mining becomes unprofitable
4. Exploit of one type or another
99999. Someone declares it dead
— Jimmy Song (송재준) (@jimmysong) June 17, 2019
The cowboy hat aficionado primed liquidity to be key. With little value and need to hold the altcoin in question, trading dries up and the coin market is illiquid. Hence, traders depart while leaving the altcoin in shambles.
In addition to the drying up of liquidity within the market, there is a lack of motivation, both monetary and otherwise, to continue developing altcoins and the ecosystems they operate in. Hence, this stoppage of ‘development’ will force key developers out of the market and hence, the coin will be relatively lacklustre.
These factors will directly affect the source of the altcoin market. Is it even worth the production costs? Song also listed “unprofitability of miners” for “altcoin death,” with reference to miners calling it quits after their rewards fall in value as the altcoin’s price falls.
Song’s fourth reason for altcoin’s demise relates to some sort of ‘exploit,’ which could’ve been the original intention of the coin in the first place. Due to difficulty in understanding the technical aspect and the get-rich-quick theme of the cryptocurrency market, investors are often lured into an altcoin scam and dwindled of their savings. Many altcoins are set up for this very reason, including the likes of BitConnect, Onecoin, and GainBitcoin.
His final reason, humorously ranked, “99999,” read that the spearhead of such a project would declare it “dead,” based on the fact that most altcoins today operate on the basis of a single person’s whim.
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