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Let’s Give Credit Where Credit is Due: Bitcoin Provides the Foundation for All the Innovation Crypto is Experiencing Now

OP-ed disclaimer: This is an Op-ed article. The opinions expressed in this article are the author’s own. CoinCodex does not endorse nor support views, opinions or conclusions drawn in this post and we are not responsible or liable for any content, accuracy or quality within the article or for any damage or loss to be caused by and in connection to it.

By James Wo, Founder of Digital Finance Group

A la the ICO craze of 2017, Bitcoin and other cryptocurrencies are all over the news. Though institutional adoption of Bitcoin has been underway for a while, Bitcoin’s skyrocketing price (now hovering around $60K) and the moves made by household names have showered new attention on the fast-growing digital asset space. With exciting altcoin investment opportunities, DeFi, and NFTs rising to the forefront of public attention, it’s important to acknowledge that Bitcoin provided the foundation for all of this extraordinary innovation.

Bitcoin as a Foundation for the Current Wave of Crypto Innovation

Satoshi Nakomoto introduced the idea of Bitcoin in a whitepaper published in 2008 as the first peer-to-peer electronic cash system. The innovation was decentralized digital money that eliminated third party intermediaries while solving for the double-spend issue that plagued previous iterations of “internet money.” Incredibly, what started at a valuation of fractions of a cent is now close to $60K per coin.

Bitcoin gave rise to thousands of altcoins, including Ethereum, which set off another slew of inventions like DeFi and now NFTs, which have reached a pinnacle of hype with art NFT sales in the multi-millions. The excitement around Beeple’s $69M NFT art sale or DeFi’s remarkable growth from less than $1B Total Locked Value (TLV) in May 2020 to over $50B TLV today, might have led some to question Bitcoin’s place as the “king of crypto,” but the concept of Bitcoin is what made NFTs and DeFi possible in the first place.

That said, Bitcoin’s place as the best store of value owned and controlled by the holder remains unchallenged. Its current trillion-dollar market valuation adds further assurance that Bitcoin is here to stay, a fact that is increasingly acknowledged by long-time gold investors, corporations, and institutional investors. 

Is there anything that might threaten Bitcoin’s viability?

The biggest threat to the long-term viability of the Bitcoin and greater crypto economy continues to be regulations. Regulations have the potential to elevate or quash new innovations. When it comes to crypto, we’ve seen a wide set of responses from different jurisdictions around the world, from progressive approaches, such as in the European Union or the United States, to the conservative reactions like the imminent crypto ban in India. Such harsh actions will pause innovation around everything that Bitcoin represents in the region. 

Outside of outright bans, regulatory ambiguity stifles involvement and growth as well. Prior to Bitcoin’s explicit categorization as a commodity, many inventors remained on the sidelines awaiting regulatory clarity. On the other hand, we’ve seen how regulations that promote innovation, like in Switzerland, Malta, or Singapore, can inspire the formation of new businesses and lead to the establishment of hubs for financial and technological innovation. 

The fervor by many nations to develop Central Bank Digital Currencies (CBDCs) could also present a roadblock for Bitcoin at some point, considering some nations will see decentralized currencies as a threat to their central bank issued currency. There should be a place for Bitcoin as a store of value alongside CBDCs and other altcoins for different use cases, but some nations may not view the situation that way. As long as there are jurisdictions with innovation-friendly policies, Bitcoin and altcoins will continue to prosper. 

Altcoins: Riding Bitcoin’s Coattails

Building on the baseline presented by Bitcoin, altcoins will soon be incorporated into more corporate treasuries and institutional investments. While Bitcoin remains the best store of value, it is not the fastest or most scalable currency. The need for high transaction throughput, scalability, and interoperability led to the creation of such protocols as Ethereum and Polkadot.

These days, for layer 1 protocols to be successful, they must embody an innovation that is as disruptive as Bitcoin. Given the current market, small advancements will no longer make a difference. Altcoins must offer fundamental improvements and benefits for the entire ecosystem to achieve adoption. With recent trust funds announced by Grayscale, we can see that there is interest from investors to diversify within the digital asset space—a trend that is sure to continue.

Without Bitcoin there would be no digital currencies, decentralized markets, or DeFi. Bitcoin opened doors to a whole new age of technological innovation, from smart contracts to NFTs, with novel innovations that we have yet to imagine still to come.

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