In many industries, superior innovation can quickly erase the first-mover advantage. Think back to the likes of Yahoo and AOL, which once dominated the early internet. Go back further, and you might remember names like Commodore and Spectrum were once synonymous with cutting-edge computer hardware.
Those names have long been trumped in their respective industries, with Google emerging as the king of the internet in search, news, email, and many other areas. Similarly, no one owns a Commodore computer these days, preferring brands such as HP, Dell, Lenovo, and of course, Apple.
But sometimes, that first-mover advantage is just too strong, and nowhere is that clearer than in the world of cryptocurrency. If you are following crypto news daily, you probably know that.
To this day, Bitcoin remains by far and away the biggest cryptocurrency in the world, with a larger market cap that far exceeds any of the pretenders to its crown. While some may argue that Bitcoin isn’t scalable, is a poor medium of exchange, and lacks functionality, there are many good reasons why it’s still considered to be the king of crypto.
Why Bitcoin Is King
Bitcoin is still the most decentralized of all digital currencies, with millions of individual “hodlers” who own BTC tokens. Sure, a few whales own more than most, but those lucky few are far outweighed by the masses of smallholders who also believe in its destiny as the future of money.
Other cryptocurrencies can’t compete. Take Solana, which is widely believed to have sacrificed decentralization in a bid to become more scalable, putting it on the path toward becoming a neobank. It may be faster, more efficient, and cheaper to transact, but its centralization makes it far less secure. Centralized organisms are a big target for hackers because it becomes easier to take control of them. Countless banks have suffered hacks in the past, but that will never happen with Bitcoin simply because the resources required to do so far outweigh any potential rewards.
Bitcoin also has an incredible network effect, with over 15,000 nodes up and running. As Metcalfe’s Law states, a network’s value is proportional to its nodes’ square, and by that measure, Bitcoin is the most valuable network of all. The chances of another cryptocurrency catching up are extremely negligible too. It would be similar to creating a parallel railway system in China or Europe, with an equivalent track length. It simply wouldn’t happen, no matter how much “better” this new rail supposedly is. Both China and Europe already have rail networks in place, and they do the job just fine.
Further, Bitcoin is already extremely scarce. There can only ever be 21 million Bitcoins in existence, most of them have already been mined, and it’s believed that quite a few have already been lost – up to 4 million by some estimates. BTC’s supply is, therefore, low in proportion to demand. At present, just two million are available to buy on all the crypto exchanges in the world, meaning there will never be enough to go around.
These factors help to explain why Bitcoin also enjoys much stronger adoption compared to any of its rivals. Quite simply, Bitcoin is the most widely accepted cryptocurrency by some distance. Thousands of vendors and services all around the world will happily accept Bitcoin as payment today in industries ranging from food and drinks to cars and even real estate.
Probably the most famous company to accept Bitcoin is Elon Musk’s Tesla, which announced in early 2021 that it would sell its iconic electric cars for BTC at all of its stores. What’s more, Tesla doesn’t just accept BTC as payment and immediately converts it into fiat money, as many businesses do. Oh no, it actually keeps the BTC in its wallets because it believes in its value. It sees BTC as an asset that has an extremely bright future and one that will see its price multiply by many times over the next five to ten years.
There are hundreds of other companies that take BTC. One of the earliest adopters was Overstock, which has accepted the world’s most popular crypto since way back in January 2014. Fast forward to today, and it’s possible to spend BTC in MacDonalds, Starbucks and Whole Foods, or use it to buy more expensive goods at Microsoft, Etsy, and Home Depot. You can use BTC to invest, purchase insurance, pay for a hotel room or a flight, place a bet, and so much more.
Bitcoin Is Getting Smarter
Bitcoin is clearly the number one crypto king, and with the emergence of a new platform called Stacks, there’s no reason to think that will change. One of the arguments against Bitcoin is that it’s inferior to other blockchains because it does not support “smart contracts“, meaning it cannot be used to power decentralized applications, NFTs, DeFi, and other use cases.
Well, with Stacks, that’s no longer true. Stacks is an innovative layer one blockchain that integrates with Bitcoin to make it programmable, meaning it can indeed now support smart contracts and, with that dApps and NFTs. Moreover, those smart contracts may very well be superior to those that run on alternative platforms like Ethereum because they have the unique ability to inherit Bitcoin’s security and network effect.
Stacks brings smart contracts to Bitcoin through its unique Proof of Transfer (PoX) consensus mechanism that settles on the Bitcoin blockchain, thereby leveraging the full security provided by its decentralized network. It was designed to address the demand for greater functionality on Bitcoin, which was designed only to be an electronic currency and a store of value. The incredible success of Bitcoin to date has convinced many enthusiasts that it can provide so much more functionality than this.
The PoX consensus mechanism connects the Stacks and Bitcoin blockchains together so that all transactions on Stacks are eventually settled on Bitcoin. It adds other benefits, too, allowing users to effectively mine Bitcoin without any specialized hardware through something called “stacking” or staking (locking up) STX tokens. There are sustainability benefits, too, as the energy spent to mine Stacks partly reuses BTC and process transactions.
In addition, Stacks supports the Blockchain Naming System, which makes it possible to create “forever usernames” that are globally unique, human-readable, and “strongly owned,” meaning that only the name’s owner can alter it.
As for smart contracts, Stacks has developed a new programming language known as Clarity, which is both highly secure and easy to work with. What’s special about Clarity-based smart contracts is that they can read Bitcoin’s blockchain and make transactions more expressive. In turn, developers can leverage Bitcoin to create more functionality with its transactions. Whenever a Bitcoin transaction takes place, smart contracts on Stacks can read and react to them. This way, Bitcoin transactions can trigger conditions on smart contracts, making it possible to purchase and swap assets.
This capability enables Stacks to bring more functionality, such as NFTs, dApps, and smart contracts to Bitcoin, without needing to change Bitcoin’s codebase.
Building On Stacks
Stacks kicked off its ambitious mission to bring smart contract functionality to Bitcoin in January 2021. In that time, it has made significant progress, with dozens of interesting projects built atop of it to provide native Bitcoin-based DeFi, NFTs, and other use cases.
One of the most promising of those projects is ALEX, which is building a DeFi hub with a full suite of familiar products that can all work with native BTC tokens. Features include borrowing and lending, enabling users to earn interest on their BTC by loaning it to other users through a lending pool or borrowing BTC at a low-interest rate. Ultimately, ALEX aims to create an advanced DEX with additional DeFi products for yield farming, shorting, and leverage, as well as a Bitcoin-focused launchpad, to support new projects. This will enable new Stacks projects to raise capital in BTC through ALEX.
Staying with DeFi, Arkadiko has developed a protocol that will allow Stacks holders to use STX as collateral to mint USDA stablecoins. In other words, it’s similar to something like DAI or MakerDAO, giving investors a way to borrow without giving up their assets. Users will be able to deposit STX, borrow USAD, and then use this to invest in DeFi. Every DeFi ecosystem can benefit from having a highly liquid stablecoin, and the Arkadiko team is pushing for USDA to take the crown within Stack’s ecosystem.
What’s interesting about Arkadiko is that its loans can slowly pay for themselves. It relies on the PoX consensus mechanism to stake the collateralized STX and pay off the interest with the BTC that’s earned as a reward.
Arkadiko has also launched its own DEX platform for Stacks ecosystem tokens, with liquidity pools and yield farming features. Users can then earn the platform’s native DIKO token as rewards and stake these to earn lucrative APY.
One of the more creative projects building on Stacks is Sigle, a blogging platform that stores content on the Bitcoin blockchain once it has been published. It can be seen as a decentralized Medium that provides a unique way for writers to monetize their content. The way it works is, readers can stake STX on their favorite writers, who will then earn a part of the rewards those tokens generate.
To encourage more readers to publish content on its platform, Sigle has created its first NFT collection, which consists of 2,500 unique digital collectibles inspired by the writer Jules Verne. These serve as a kind of lifetime membership to the Sigle platform, providing users with their own custom domain, programmable newsletters, and analytics on their readers.
Whether or not Sigle will take off remains to be seen as there is an infinite number of online writing platforms available today. However, the unique monetization capabilities that derive from its direct link to the Bitcoin blockchain could well make it a favorite of the crypto crowd in the future.
Finally, a project called CityCoins deserves a quick mention because it promotes local communities to invest in their own economies. With CityCoins, cities can launch their own tokens and use them to promote local shops and services, which will be encouraged to accept those tokens instead of large corporations. The idea is that value created within the region stays in that region.
CityCoin allows users to stake their CityCoins and earn rewards in STX or BTC. The way it works is that miners can send STX for the chance to win a CityCoin of their choice. This money is then split 70/30 between the City’s wallet and the wallets of those who stake that CityCoin. Through this mechanism, CityCoin holders can earn a passive income paid in STX, which can then be staked to generate BTC itself.
The first-ever CityCoin to launch was MiamiCoin, which launched in April 2021 and has the backing of the city’s mayor, Francis Suarez. The launch of the New York Coin followed it, and many other U.S. cities have expressed an interest in launching their own tokens.
The King And Queen Of Crypto
It’s still early days for the Stacks ecosystem and Bitcoin, but the number of projects building on it is growing fairly rapidly. Moreover, these early projects cater to some extremely interesting use cases and appear to offer real value to their users. There will likely be many more projects to come. Because Stacks offers direct integration with Bitcoin, it’s sure to entice more developers to start building on its platform, where they can take advantage of the king of crypto’s unparalleled security and liquidity.
Bitcoin is the king of crypto, and with its newfound queen (Stacks) at its side, it’s hard to see how its reign will ever come to an end.