Why Bitcoin and Ethereum will exist side-by-side
Bitcoin will continue to play an important role in the market, even as other cryptocurrencies grow, said Luno. The company believes the future of blockchain technology lies in a multi-cryptocurrency environment, with each token playing a role. Cryptocurrencies like Bitcoin, Ethereum, Litecoin, and Bitcoin Cash are all underpinned by different blockchain architectures, which are designed for different tasks.
Ethereum’s blockchain is designed to function as a virtual computer with transactions acting as data transfers or commands, for example.
Despite the increasing popularity of alternative cryptocurrencies, Luno said it expects Bitcoin to remain the biggest player in the market. “We believe that it’s highly likely that one digital currency – most likely Bitcoin – will continue to play a dominant role, because of its properties as a store of value and the network effects it has shown so far,” said Luno. It said Bitcoin could continue to grow as both a store of value and for large value transfers, as these operations are not heavily affected by transaction fees or transaction times.
“Bitcoin might not replace all of the existing systems, but it adds a new layer of value – similar to how we still have regular postal mail and fixed-line telephones, even though we have Facebook, Skype, and Gmail,” said Luno. “Other currencies will probably play a different, more focused role and people may use Bitcoin to store or switch between these other currencies. Something like a global reserve digital currency – not unlike the US dollar.”
Bitcoin has had a controversial year, with multiple attempts to solve its scaling problem which resulted in forked chains like Bitcoin Cash. As it stands, Bitcoin is relatively slow and expensive to send currency over, but remains the most popular cryptocurrency in the world.
Luno recently added support for Ethereum on its platform, allowing users to purchase and sell Ether for rand.
This marks the first additional cryptocurrency the exchange has fully supported, following the launch of its Bitcoin services. Luno said it carefully considers which cryptocurrencies to support, and is often disappointed by many crypto tokens. “While all of this means that we’re not necessarily Bitcoin maximalists at heart, it also doesn’t mean that we’ll blindly support any digital currency that comes across our way,” said Luno.
The cryptocurrency ecosystem may end up comprising a harmonious collection of specialised tokens, including different coins for quick transactions, tokens for voting and decentralised management, Ether for virtual machine computation, and Bitcoin for long-term value storage.