The following article represents the personal opinion of the author and is not financial or investment advice.
Shitcoins are scams and your money is at risk if you buy them. After the opinion of the author, your portfolio should be free of vaporware. Learn more about the reasoning and why you might want to think twice before loading up on alts.
Are you wondering if you should invest in AAVI, Cardanu, Ethireum or Digitbyt?
When you are deciding if you should go for bitcoin or altcoins or both, you will inevitably be forced to study many different pro and con arguments from all different angles. In this article, I will share some of my reasons that could help you make a smart decision. It’s not investment advice, just my personal opinion.
Someone on the internet recently said; “Could Cardano become the third force behind Bitcoin and Ethereum in the medium term? There is certainly potential, although they are better in marketing than in working through the roadmap.”
This is the type of commentary you will find a lot when researching altcoins. But are these arguments reasonable? Do alts really have fundamentals that can compete with Bitcoin?
We all hear the stories of youngsters who made millions of dollars with Dogecoin. So can’t you be just as lucky as them with the right strategy?
It’s not completely unlikely that with the right bet, you could win with altcoins. Just join the pump and exit before the dump. Some call that the “Binance Casino”. Others just call it fraud.
Do you have a track record of success in gambling in Casinos?
There is one ultimate reason why altcoins are not suitable as a long-term investment or for an accumulation plan. Altcoins come and go like seasons. But ultimately they fade away into Nirvana.
In short, the reason is that all blockchains face the same external costs. As you might know, decentralized databases want to be secure, decentralized, and speedy at the same time. However, speed is not very easy to get when you also aim at decentralization and security. This is called the blockchain Trilemma.
Even though many altcoins claim they have found the ultimate solution to this problem, none of them have delivered on their promise yet. And don’t forget, the altcoin experiment has been going on since 2013. Shouldn’t there be a Bitcoin-killer by now?
Below I’ll share with you 3 reasons why it will never happen.
1. No altcoin comes close to Bitcoin’s security and scarcity
No other altcoin is even close to Bitcoin’s level of security. You can compare the cost for 51% attacks here. https://www.crypto51.app
Now you may think that a 51% attack is a minor threat to an altcoin. But even if that is true, most altcoin projects have a deadswitch and can be shut down in a centralized manner. There are many recent examples where seemingly decentralized exchanges such as Uniswap turned out to be not as decentralized and the developer team changed to code overnight.
If a regulator would decide to shut down an insecure service, they could do it at any point. There are only a few altcoins that have significant transaction volumes but they are still too small to call regulators on the plan. They are safe to use only until they become larger. Most of the altcoins can be shut down, it wouldn’t be too hard. That means they are not suited for long-term savings as your money would be at risk.
Only bitcoin can really be called secure. Bitcoin never had a chain reorder and nobody can change the monetary policy embedded in the core protocol.
2. No altcoin is solving the blockchain trilemma
Because altcoins aren’t secure, their scaling approach will be nothing but an insecure and risky experiment. Scaling on a blockchain will always have a trade-off. And that trade-off is security and or decentralization. Once you sacrifice either one, say goodbye to censorship resistance and unconfiscatable money. There wouldn’t be any difference to the current fiat system. But this is the unique value proposition of Bitcoin. Nobody can shut it down or change the code.
Therefore scaling will happen off-chain or on side chains.
3. The open network will win the protocol wars
Just like our internet today, Bitcoin is an open protocol. Our internet is based on TCP/IP because it won the protocol wars.
“A long-running debate in computer science known as the Protocol Wars occurred from the 1970s to the 1990s when engineers, organizations and nations became polarized over the issue of which communication protocol would result in the best and most robust computer networks. This culminated in the Internet–OSI Standards War in the late 1980s and early 1990s, which was ultimately “won” by the Internet by the mid-1990s and has since resulted in most other protocols disappearing.”
Before the war was over, many private companies such as IBM and SAP had their own internet protocols and claimed they would be more secure. Just like altcoin companies are claiming they would be a better network.
Ultimately the open network will win because it’s a standard everyone can build upon.
In the future, we can see many more scaling features on top of Bitcoin. Currently, a few projects are already showing success such as the Lightning Network and the Liquid Network. Other projects such as RSK/RGB, Stacks or MintLayer are trying to convince developers and investors to join their vision of L2/3.
I hope this article was helpful. Be aware that you should always fully understand the technology and strategy behind a project before you invest money. Because you might be a victim of con artists otherwise. Take enough time for proper research and invest heavily in understanding bitcoin.
Remember, only Bitcoin is truly scarce. And scarcity is what makes money valuable. If it isn’t scarce, chances are high that a project falls under the category of “seignorage scam”, “kleptocurrency” or “craptocurrency”.
Altcoins sure sound amazing. But their marketing is often dishonest and manipulative. Do your research throughout to identify the true intentions behind a project. Is the promised goal feasible? How big is the pre-mine? What are the chances of a rug-pull or exit scam? All these things should be considered and analyzed.
Ultimately you might not see your money back. And the harsh truth you might only realize in hindsight: you could lose out on significant amounts of Sats. Missing out on stacking sats is arguably the most critical reason why altcoins should not be part of your portfolio. Every other asset you hold is a trade off.
For the same amount you could own bitcoin, the hardest asset in human history.