Contrary to popular opinion, Bitcoin (BTC) and Ethereum (ETH) are not competitors.
While both are cryptoassets, BTC is a first-generation blockchain-based cryptocurrency while ETH is a second-generation cryptoasset platform and network which facilitates the creation and usage of decentralized applications (dApps). There are three generations of cryptoassets, each with a distinct series of competitors.
Bitcoin and Cryptocurrency
In 2009, Bitcoin (BTC) introduced the world to a new form of currency. Using blockchain technology, cryptocurrency created a peer-to-peer (P2P) network that allowed transactions to take place without banks, monetary reserves, government treasuries, or related intermediaries. Unlike the dollar, Euro, and other fiat currencies, BTC promised freedom to those who used it.
As a result, the dollar and other fiat currencies remain the primary competition for BTC and other first-generation cryptoassets like Litecoin (LTC) and Peercoin (PPC). Other competitors include the banks and financial institutions, as well as governments and their agencies, who support the use of fiat currencies.
Furthermore, cryptocurrencies also compete with credit card companies like Visa which have built technology, developed products, and established services to facilitate transactions with the dollar and other fiat currencies. The speed at which Visa can process transactions is much quicker than which can take place on the BTC mainnet. To increase the speed of transactions, the Lightning Network was introduced as a solution to the scalability problem and a contributor to the overall value and utility of Bitcoin.
The Advent of Smart Contracts
Shortly after the birth of the blockchain, Ethereum (ETH) integrated smart contracts into the technology to create a second type of cryptoasset. The ETH Virtual Machine enables the creation of platforms to develop decentralized applications (dApps) while hosting the network in which they exist. Since ETH was first released, many other second-generation cryptoassets have emerged including Tron (TRX), EOS (EOS), NEO (NEO), Steemit (STEEM), and others.
Bitcoin’s biggest competitor is the USD, not ETH.
Taking marketshare from the USD is what motivates me. Staying ahead of the broken tamagotchi emulator is trivial by comparison.
— Pierre Rochard [⚡️] (@pierre_rochard) February 2, 2019
These cryptoassets mainly compete against each other. In a survey distributed to representatives of 160 dApps, reported problems included scalability, low user count, poor interfaces, and various other issues. Overcoming these is essential to the success of dApps and the platforms on which they are based. Some of these cryptoassets have developed dApps which showcase the ways in which blockchain technology can attain practical usage.
STEEM, for example, hosts the Steemit dApp which rewards users for creating, sharing, and replying to digitally written content. Similarly, TRX appears to be developing the BitTorrent Token (BTT) to add increased value to its platform. BTT has not yet established practical use-value like Steemit; on the contrary, it has only recently begun trading on Binance.
dApp Vs. dApp
DApps are developed for a variety of purposes beyond social media, blogging, and content creation. There are those which are used for virtual reality gaming, investing, gambling, web browsing, and much more.
The dApps with similar uses and purposes compete with each other for dominance within the dApp industry, but all dApps also have a common enemy — the centralized mobile and desktop apps and the companies which create and host them.All dApps also have a common enemy — the centralized mobile and desktop apps and the companies which create and host them. Click To Tweet
These apps and the data which they gather are located on centralized servers and often owned by the companies which create the apps. Private user data is often collected and stored by these companies as well. This information can be used by the companies which house it for unknown reasons, sold to third parties, or accessed by outsiders through a hack or breach.
There are many types of dApps which compete against apps with similar purposes and functions. For example, social media dApps compete against social media apps. Furthermore, the companies which develop, distribute, and maintain the apps are competitors of the dApp. Social media dApps compete against companies like Facebook and Twitter by competing against their respective apps.
DApps are developing within nearly every industry and compete primarily with apps developed by companies that already exist there. The entire dApp industry is in direct competition with the app industry and the conglomeration of companies which create those apps.
As always, decentralization remains the enemy of centralization. Cryptocurrencies are decentralized currencies which seek to erode the power of fiat currency and the institutions which control it.
Second-generation cryptoassets create a platform in which dApps can be developed to compete primarily against each other. The dApps developed on them are in competition with other dApps and apps developed for similar purposes. All cryptoassets aim to oppose any and all authorities which seek to centralize their power within a select group of people.
Do you think that cryptoassets will be able successfully compete against the centralized authorities of this world? Let us know your thoughts in the comments below!
Images courtesy of Shutterstock, Twitter