Crypto diversification

I know I said I was taking a week off, but I’ve seen a few tweets doing the rounds lately that mentions “The only two cryptocurrencies that are up, since 2013, are BTC & LTC”, and I couldn’t help myself.

Now it’s partly true, but there’s more to this story than would first seem.

Should you have more than just BTC / LTC?

This was taken from a tweet by Samson Mow:

Now unfortunately, DigiByte wasn’t around 5 years ago back in 2013, so we can’t do a 1:1 comparison, this is a little apples : oranges here…

However, DigiByte was around 4 years ago (I’m writing this on the 30th August 2018), so if we look at things instead from the 4-year date here: https://coinmarketcap.com/historical/20140831/

We can now include DigiByte into the comparison alongside BTC & LTC

Here is the USD value of them all on the 31st August 2014:

• BTC — $497.47
• LTC — $5.11
• DGB — $0.000169

Let’s compare that to the USD value as of the latest snapshot on the 26th August 2018: https://coinmarketcap.com/historical/20180826/

Percentages are the increase in value in the 4 years

• BTC — $6,681.72 (1,343% increase)
• LTC — $56.95 (1,114% increase)
• DGB — $0.025534 (15,108% increase)

So if you’d put $1,000 into Bitcoin in August 2014, you’d have USD$13,430 worth of BTC 4 years later

If you’d put $1,000 into Litecoin, you’d have USD$11,140

Finally if you’d put $1,000 into DigiByte, you’d have USD$151,080

(And yes, I wish I had $1,000 worth from back in 2014!)

Now I will absolutely agree with Samson that too much diversification is going to end up being a waste, and I will also agree there are a TON of shitcoins, scams, and pointless tokens that will absolutely fall by the wayside.

Then you’ve also got to keep in mind that past performance is not specifically an indication of the future, however it’s an interesting comparison and I’m a believer that DigiByte will well and truly be dominating over many of the others that are in the Top #10 in Coin Market Cap in 4 years time, in 2022 and beyond.

However, should you only have Bitcoin and Litecoin?

Well let’s look at the primary reasons why you should have only Bitcoin and Litecoin, and not anything else:

• Bitcoin is the defacto standard, that all others are compared against
  If, as I do, you subscribe to the notion that Bitcoin doesn’t need to be a cryptocurrency that you use to buy your coffee with, but rather as the greenback to compare other cryptocurrencies against, then the speed / utility doesn’t specifically matter. You don’t need to do P2P commercial transactions, other Altcoins can do that, but if Bitcoin is the “base” to standardize upon then that’s totally fine.
• Litecoin is a “faster Bitcoin”
  I’ve seen people try to reason that LTC will be used for “cheaper onboarding" to the Lightning Network. If that’s the case, why not just use Vertcoin? Or any of a number of other blockchains that are faster, with a higher total supply?
• Track record
  Well even this isn’t a particularly good reason, there’s a lot of projects out there with a decent track record that for one reason or another fall by the wayside. Arguably LTC has been slow with their development even in terms of keeping up with BTC, only in August last year catching up to BTC Core codebase for the first time ever.

That point of difference of LTCs, of being a minor incremental improvement over Bitcoin, I personally don’t believe is going to be sufficient for long-term prosperity. Everything is faster than Bitcoin (Except for silly things like Quatloo), and if the combination of that plus a marginally improved processing capacity is all you have going for you, I perosonally don’t see a very bright future.

I mean, there’s nothing preventing people from integrating DigiByte into the Lightning Network, and then I would see no unique point of difference that LTC holds at all? In fact the only thing right now that Litecoin has vs Vertcoin is total market cap. Aside from that, I believe if you’re following Samsons logic that you’d be genuinely better to use VTC in every single way, from their decentralized mining (VTC vs LTC), to their Litbox development, to their room for future price growth (Based on the fact both have 84,000,000 max coin supply), to VTC’s more consistent development over time.

Do I think you should only have two cryptocurrencies?

Absolutely not, I’ve stated time and time again that I feel there will be multiple cryptocurrencies in the future that “duke it out” for the top market cap positions. Same can be said for profitability in the future, I’m sure that more than just two chains will be profitable. After all, 2013 was still very, very early days in the blockchain space. I don’t believe any of them will be ICO’s though, nor do I believe they will likely be the “Do everything” chains.

I strongly believe we’ll see Bitcoin stay, along with a much faster blockchain for things like P2P cash payments (On-chain), another for utility such as security / identity & document validation and more, and a few specific blockchains that will serve a rather unique function too. I’m still a very firm believer that Proof-of-Work is here to stay. However I’m definitely not convinced being a “faster bitcoin” is enough in this day and age to survive long-term on though, regardless of Lightning Network or not.

It is for this reason why I also feel that the “faster Bitcoin” narrative of why DigiByte is the best is not sustainable long-term. Because everything is faster, it won’t take long for another fairly launched Proof-of-Stake chain to instead claim the title. That said, the title for fastest Proof-of-Work blockchain I’m sure will stay around for a while with DigiByte.

Should DigiByte be part of your holdings?

Absolutely, right alongside of Bitcoin! However, I’m not convinced at this stage that Litecoin, Quatloo or Bitcoin Cash should be part of that spread. If you’re after something “faster” and more useful “as cash”, then even QubitCoin would be a better choice as it’s faster blocks, higher max supply, more room for growth etc.

Was Samson right? Yeah

Was it the whole story? Not really

Should you base your cryptocurrency investment based just on prior performance? Absolutely not…

Is it interesting to see the history though? Sure is!

~

I’ll make some more comments shortly on Lightning Network when I’m not at an airport waiting to pick up some family members for a funeral, so please excuse the brevity of this post.