Commentary: Wait for a Better Bitcoin Before Investing, Fortune

Spil an avid cryptocurrency nerd and someone who is fascinated by the meaty appreciation and volatility wij are eyeing te this massive fresh market, I am permanently being asked, “Is Bitcoin going to $100,000 vanaf coin?”

I make no attempts at predicting short-term pricing (under Ten years). It would be akin to answering the question, “When will the stock market crash again?”

That said, I do have some predictions on the development cycles of cryptocurrencies that could prove useful when considering a potential investment strategy.

Spil the CEO of a tech company, and spil someone who has rebuilt, from the ground up, the technology on which my company is based four times, I do not envy the founders of blockchain startups. When you build fresh technology, it is almost unlikely to get things “right” on the very first go. You make the button too big or too blue. You leave behind about some super-important factor. Or you realize, with time, that no one cares about your main product—it is that little side project that is selling like crazy.

Spil a traditional tech company, you have the luxury of being able to pivot. Wij can build a product and continuously iterate until wij get close-ish to being mostly right. This lets us allocate resources te a limber way. Wij can build a minimal fresh feature and only develop it further if there’s a proven request. This helps us stay ahead of the competition and build a good product that improves overheen time.

When you launch a cryptocurrency, your main problem is that it’s exceptionally hard to iterate. Blockchain tech is built on decentralization and democracy, both of which toebijten to be diametrically opposed to prompt iteration.

Here’s how the process for improving many cryptocurrencies works. Very first off, anyone can do it. Because the protocols are open source, you can sit down, look at the Bitcoin protocol, and come up with a more awesome way to do things. Anyone can develop fresh code that meets whatever need the old protocol missed.

Now, ter a traditional startup, once you are done with an improvement, you thrust the code to production, frantically run around fixing the unintended consequences, and, voila, that’s it. You have improved your technology.

Te a blockchain startup, not so much. Because the blockchain decentralizes the administration of the protocol (its greatest strength), you have to woo the majority of users (either miners or owners depending on the blockchain) to adopt your fresh protocol. You can’t just thrust something to production and force everyone to switch. You have to engage te a democratic process te which unless you get 100% buy-in (which is harshly spil hard spil winning a political wedren with 100% of the votes), you create a fork te your currency—which tends to be bad news, albeit forks have bot ter vogue recently. At that point, you just have to hope that the other fork dies quickly, and that you have immobile the problem fully so you don’t have to embark overheen again.

This is a massive weakness of blockchain companies ter general. When you launch your tech, chances are you are going to be stuck with it for a while, and switching it will be a massive undertaking. This is too bad, because odds are you got many, many things wrong te your initial vormgeving.

Just imagine if Amazon’s 2001 webstek would have stayed static for the last 16 years because it couldn’t deploy code. It would be a nightmare, and Amazon most certainly wouldn’t be around anymore, let alone the massive success it is today.

This train of thought should be considered if you are evaluating whether or not you should invest te a cryptocurrency overheen long periods of time (think more than Ten years). Because it is so hard to iterate ter a blockchain startup, my prediction is that a prompt follower strategy will be immensely successful.

Ter traditional business, you wait until someone has a superb idea, copy it, and then build a better version. This will occur ter blockchain spil well. An entrepreneur who has an idea for a better, quicker, more secure blockchain will simply copy all the best parts of an existing currency, add their own spin, and commence a fresh company. The currency that got copied won’t be able to defend itself by copying that fresh and improved feature, because there is no effortless way to switch anything.

If the fresh idea is any good and provides more value, users will switch from the old currency to the fresh one. Then someone else will come up with an idea for improving that fresh currency, and the cycle will repeat itself, either until people run out of fresh good ideas, or until wij arrive at a state of “good enough,” te which the marginal improvements aren’t substantial enough to warrant users switching.

So the question is, when a rapid follower builds a better version of your beloved blockchain, what happens to the original one? Just like te traditional business, I think that successful prompt followers will kill their predecessors.

It will look somewhat like this:

So with this ter mind, I would be very hesitant to buy into Bitcoin, or any of the current currencies, if you are intending on a long-term hold. This is by no means to say that I don’t believe te blockchain technology. It is actually fairly the opposite. I believe that 50 years from today, wij will only be using cryptocurrencies, and government-run currencies will have gone by the wayside.

I just don’t believe that the current crop is the best it can possibly be. I think fresh, better, and swifter tech will come along, which will be bad news for the existing currencies because they won’t be able to adapt. On a positive note, this means that there is massive chance ter attempting to find the next “hot” currency, spil you can rail this cycle overheen and overheen again—buying low and selling high.

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