Fidelity Discusses Future of Crypto Ecosystem, Says Bitcoin As A Superior Form of Money

Fidelity Digital Assets has published a report about why bitcoin is a superior form of money. It discusses the future of the digital asset ecosystem and compares bitcoin to newer, smaller cryptocurrencies.  

The report titled “Bitcoin First: Why investors need to think about bitcoin independently of other digital assets” was published this week.  

The report addressed investors’ concerns, including whether competitors’ creative destruction will victimize bitcoin or if the crypto “offers the same upside or reward as some of the newer and smaller digital assets.”  

Report authors Chris Kuiper and Jack Neureuter explained: “Most investors use a technology investing framework to analyze bitcoin, leading to the conclusion that bitcoin as a first-mover technology will easily be superseded or will have lower returns”.  

Bitcoin is the most secure and decentralized network, but it is not the most scalable at the native network level. They explained that this has led to an explosion of the digital asset ecosystem.  

Next, the report discusses two dominant narratives about how the digital asset ecosystem might develop in the future.  

There is a “multichain world.” The authors describe: “Despite the existence of multiple winning chains, Bitcoin is likely the best equipped to fulfil the role of the ecosystem’s non-sovereign monetary good with less competition than other digital assets trying to fulfil alternative uses.”  

“The winner-takes-all or world’s most powerful narrative” is the second paradigm. Bitcoin is arguably the most decentralized and immutable blockchain in existence, making it a prime candidate to be one of, or perhaps the sole winner if this situation were to be played out.  

After examining various aspects of Bitcoin, including its network, “enforced scarcity”, the Lindy Effect, the blocksize war, the Lightning Network, and Ethereum, the authors concluded that bitcoin is unique as a monetary good a breakthrough in technology. Bitcoin was not developed as superior payment technology.  

Accordingly, the Fidelity report argues that investors should consider bitcoin first to gain a deeper understanding of digital assets and consider bitcoin before any other digital assets.  

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