Does Bitcoin lose its absolute advantage?

2017 is the first year for Bitcoin currency to encounter the dilemma of network evolution. Bitcoin’s initial 1MB capacity limit, after years of trading, has accumulated far more than expected data information records, making it close to being triggered in 2017, and Bitcoin is in ‘capacity cliff’.

In 2009, since the official issuance of Bitcoin, thousands of cryptocurrency have emerged: in 2011, Charlie Lee created Litecoin; in 2012, Chris Larsen and Jed McCaleb’s Ripple coins formed; in 2014, Ethereum successfully launched ICO.

The ever-increasing variety of cryptocurrency represents the strong explosiveness of blockchain technology in the field of financial technology. On the other hand, it also shows that under the belief that the algorithm is also the basis for currency issuance, the technical routes still Full of fierce competition. Before the cryptocurrency challenged the central bank’s legal currency system, the fierce competition began first within the cryptocurrency.

2017 is a crucial year for significant changes in the competitive position of Bitcoin. Prior to this, new cryptocurrency was continuously issued, and the total market capitalization and total transaction volume of cryptocurrency increased steadily, but the Bitcoin market value has been firmly maintained at over 80%, and the total trading volume is also 60% to 80% fluctuations within the interval. Beginning in the second quarter of 2017, Bitcoin’s market share declined rapidly to a minimum of 33%, so does the Bitcoin price. Changes in regulatory policies such as the closure of the Bitcoin trading platform in China are not sufficient to explain, as the total market capitalization and total trading volume of cryptocurrency have continued to grow steadily during this period.

2017 is the first year for Bitcoin to encounter the dilemma of network evolution. Bitcoin’s initial 1MB capacity limit, after years of trading, has accumulated far more than expected data information records, making it close to being triggered in 2017, and Bitcoin is in a ‘capacity cliff’. In the case that the block expansion problem cannot be reached, Bitcoin has appeared ‘hard fork’ many times. The split caused by ‘hard forks’ not only impacts the dominance of Bitcoin in the cryptocurrency, but also brings the early dominant cryptocurrency to lose the first-mover advantage brought by the positive feedback effect. The internal pattern of money has changed from a power law distribution to an approximate normal value.

The network evolution characterized by the loss of power-law distribution is a process of ‘decentralization’. The medium-value-size cryptocurrency of about 10 million US dollars has increased substantially, and the entire frequency histogram is close to the bell shape. The cryptocurrency network that loses the power-distribution characteristics of ‘no scale’ and ‘small world’ retains the ‘decentralized’ genes, but loses more efficient price information transmission and price discovery mechanisms, in response to financial and economic signals. The transaction costs are increased, the price is more volatile, and its identity as a potential central bank credit currency is widely questioned. Some people said that the Bitcoin historical price might never see again.