The market for cryptocurrencies isn’t just growing rapidly but exponentially. It was less than a decade ago that bitcoin was introduced. Bitcoin is now pervasive in the public lexicon — perhaps even a household name — and although bitcoin currently dominates all other digital currencies, economists expect change sooner than later. While bitcoin may have set everything in motion, no one could have forecasted just how cryptocurrencies would evolve, and many industry studies suggest that bitcoin may not be the best option moving forward.
The Deep Web
There are Americans even now who remain distrustful of banks because they grew up in the shadow of the Wall Street Cash of 1929. Americans and people worldwide were not quick to embrace digital currencies. We have the black markets on the Deep Web to thank for accepting bitcoin at the start. It proved an effective way to facilitate anonymous trades of drugs and other banned substances. Young people took notice and were often drawn by the opportunity to mine bitcoins via their video cards.
Banks Embrace Cryptocurrencies
Many adults and businesses worldwide were ignorant of digital currencies just a few years ago, and even among those who were aware, there was great distrust not unlike the distrust of banks in the 1930s. Digital currencies are gaining trust, however, and that has a lot to do with their acceptance among banks. Modern people in the U.S. and throughout the West generally do have faith that their money is safe with banks, and if banks accept bitcoin, then it’s OK for them too. It’s worth noting that the interest from banks isn’t altruistic. Banks want to gain and exert control before it all gets away from them, so there’s a certain irony here as cryptocurrencies seem increasingly more uncontrollable.
More Mature and Complex Than Expected
What has surprised economists most is just how mature and complex the cryptocurrency market is just a decade later. Economists estimate about 600 digital currencies are actively traded and that the total value of all of these currencies is $54 billion. When you consider this phenomenal growth in the span of a decade, you might suspect instability. Many leading economists did. However, that isn’t the case. Using power law distribution, which applies to all kinds of ecosystems, mathematicians can demonstrate that major digital currencies have been stable since about 2013 and are evolving in a stable manner as well.
Order in What Seems Like Chaos
More than 600 digital currencies emerging from what bitcoin started seems like chaos, but the fact that size distributions are adhering to power law distribution shows otherwise. How is it possible that while the market for digital currencies grows exponentially that the market share for bitcoin falls? It’s possible because there is balance across all currencies. Another way to put this is that it doesn’t matter if you’re talking about Bitcoin, Dash Litecoin, or Ripple — they are all the same.
Versatility a Factor
A big factor in why cryptocurrencies are evolving in this manner is that they aren’t just used as currency. Bitcoin, for instance, is widely used for speculation and as a means of timestamping. These purposes don’t necessarily benefit from a consolidated currency. Speculative assets actually promote diversification. Traditional banking may promote unification, on the other hand, but there are many real-world examples, including traditional money itself, to suggest that there’s no guarantee that this will happen.