Altcoins offer two main benefits to the Bitcoin community. First, they are a test ground of new features that theoretically could be added to the Bitcoin protocol if they are successful and desirable. In practice, it seems less likely that there will be big changes to the protocol moving forward given the contentious debate over the block size increase. Second, they are a fall-back position should Bitcoin fail. The possibility that if a flaw were found in Bitcoin that everyone would simply flip to the best altcoin was one of the first things I heard at the first Meetup I went to.
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The fact of the matter is, though, that the altcoin brand has been too damaged by the many pump-and-dump scams and lagging network effect. I still support altcoins in principle, but moving forward, their possibly contribution to the Bitcoin protocol or failsafe potential seem increasingly insignificant.
The Merkle is reporting that Diadem Jewelry has removed all cryptocurrency payment options other than Bitcoin due to a lack of interest, which also suggests that there is at least some interest in using Bitcoin for payments. This seems to support the notion that the network effect of Bitcoin has simply run away from its competitors.
At the same time, critics are saying that Bitcoin has largely failed as a payment option due to the fact that many companies that have accepted it see an initial burst of activity that soon trails away to small numbers. See Expedia and Overstock’s experience.
It is my argument that Bitcoin’s first killer app is as a store of value and an investment vehicle. It will need to see explosive growth if it’s really going to be relevant to the world economy, and that growth, though always in question, still seems a real possibility. Only after we see the first massive price increase that brings Bitcoin into parity with reserve currencies will we also really see merchants see sustained interest for using Bitcoin at checkout.