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Illustration of a cryptocurrency race where Bitcoin is in the spotlight but other crypto coins are slowly catching up.
Martín Elfman for Money

Bitcoin has always been the king of cryptocurrencies, but the day it loses that crown may be coming and some crypto watchers wonder what could happen next.

Bitcoin’s dominant popularity — which it's enjoyed since the so-called Bitcoin white paper kicked off the cryptocurrency craze in 2008 — has steadily eroded in recent years. Some analysts even think Bitcoin may eventually go the way of Netscape and MySpace, surpassed by imitators who have closed the recognition gap. That's because new “altcoins” such as Ether have design advantages that could lead to one of them topping Bitcoin in market value, an event known in these circles as “the flippening.”

As recently as 2017, Bitcoin represented 85% of the total value of cryptocurrencies. Bitcoin’s “dominance ratio" has waned ever since. Today, despite a nearly $1.1 trillion market value, it's now worth about 44% of the aggregate cryptocurrency values.

Strategists say concerns about Bitcoin’s energy consumption and relatively slow transaction speeds, could accelerate a shift to competitors such as Ether and Cardano. If current trends hold, the flippening could happen in the next five to 10 years.

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Bitcoin's bugs, and the cryptocurrencies that address them

Even champions of crypto, such as Elon Musk, have pointed to flaws in the original digital currency. These include its dependence on increasingly energy inefficient miners, and intermittent problems with the speed and expense of transactions.

The Bitcoin blockchain, the ever-expanding decentralized ledger that underpins Bitcoin, handles transactions in the same block sizes it has since its early days, which makes it slow by electronic payment standards. There’s an average of about seven Bitcoin transactions processed per second, compared to as many as 24,000 per second on Visa’s digital network.

To receive confirmation of a Bitcoin transaction can take anywhere from a few minutes to a couple of days, depending on network traffic and the size of the transaction, according to Coindesk. The average transaction cost is currently around $4, according to Website

Altcoins such as Ripple, or XRP, Cardano and Stellar have streamlined their blockchains for much cheaper and faster transactions, according to rankings from cryptocurrency creator Aleph Zero and others. Even Dogecoin, the "meme" currency started as a joke, is more efficient than Bitcoin as a payment technology.

It’s the remarkable energy inefficiencies that could render Bitcoin obsolete in the current climate-conscious age, however.

Bitcoin is produced using a “proof of work” system, where high-powered computers race to solve complex mathematical problems to verify each transaction. This process, known as Bitcoin mining, already consumes a remarkable 91 terawatt hours of electricity a year.

“The electricity consumption of Bitcoin is about the same as the electricity consumption of the Netherlands,” says Bruno Biais, a professor of finance at HEC in Paris. “It’s crazy…this cannot continue.”

There is an alternative to cryptocurrency mining, known as “proof of stake,” says Biais. This approach allows members of the decentralized computer networks that host the currencies to pledge their holdings for verification purposes. It’s a system already used by users of Cardano and one that the Ethereum network is supposed to switch to soon.

“Bitcoin doesn’t seem to be moving in that direction at all,” said Mr. Biais.

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Bitcoin's main rival

Ether — "ETH” for short — is in many ways Andriod to Bitcoin's iPhone. And for several years, it has been growing faster than its bigger, more famous brother. So far this year, the price of Bitcoin has doubled but the price of Ether has risen by a factor of five, thanks to its association with new computing and collecting trends.

Bitcoin’s blockchain, the decentralized ledger that underpins the currency, is only used to record transactions in the currency. Ethereum, the "programmable" blockchain underpinning the Ether currency, is home to at least $100 billion of software applications and non-fungible tokens in addition to Ether transactions.

“Ethereum is very similar to an ‘app store’ where any entrepreneur in the world can develop applications in anything: financial services — DeFi — but also art, gaming and music that we see with NFTs…the potential market cap is a lot bigger,’” said Eli Ndinga, head of research at cryptocurrency exchange-traded product firm 21Shares.

The trading of NFTs — non-fungible tokens — alone could one day overshadow cryptocurrencies, said Brian Armstrong, co-founder of crypto exchange Coinbase, in a recent Bloomberg interview. Bitcoin’s blockchain is not designed to support the smart contracts required for such applications. “The code in bitcoin is a very poor man’s’s not very sophisticated,” says Biais, the HEC professor.

What would the "flippening" mean for Bitcoin?

Of course, it's not easy to predict the demise of an asset that's worth $1.1 trillion, and whose value has doubled so far this year. One key feature of Bitcoin — the hard limit on the number of Bitcoins that can ever be mined — could help Bitcoins retain their value even if Bitcoin is overtaken by rivals and the speculative frenzy currently surrounding the original digital currency subsides.

Perhaps the most optimistic scenario is that Bitcoin's limited supply will help it continue to be viewed as "digital gold" even after a flippening. That would still leave its price plenty of room to appreciate, says Ndinga, who notes the estimated market value of the world's physical gold in more than $10 trillion.

Another possibility is that new better-designed cryptocurrencies will offer investors such compelling advantages that Bitcoin will eventually become obsolete. That could lead to an enduring but diminished role for Bitcoin, perhaps like the one radio has enjoyed since the arrival of television. Or it could mean that Bitcoin goes the way of some other world-changing tech innovations that didn't quite make it. Think Netscape, Napster or Friendster.

“I think it’s more like Netscape than like radio, because radio has a real intrinsic value,” says Biais.

To a greater extent than even conventional currencies, Bitcoin’s value is a matter of perception, says Biais. It’s successful as long as people think it’s successful — “or think that people think it's successful” — and this “vibe” may be hard to retain after it is surpassed by a rival.

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