As it stands now, Bitcoin is king. The first, most valuable, and most used cryptocurrency is unquestionably the main event, accounting for 80% of the value of its field. All the rest of digital currency’s many members are easily available; however, this is only possible by passing through Bitcoin first. This, unfortunately, is a great liability, both for the individual cryptocurrency and for the technology as a whole. As many digital currencies as possible should be frequently traded for cash, for several important reasons.
Privacy and Financial Independence
The first great reason to buy and sell several different cryptocurrencies for cash is privacy. As the first of its kind, Bitcoin is both a large target and a relatively rudimentary concept with a very public blockchain, something that may not be a factor with further iterations of digital currency. As such, one’s funds in Bitcoin may be subject to an undesirable amount of scrutiny. Diversifying one’s digital currency portfolio makes sense. However, at the moment all pathways to cryptocurrency run through its greatest member. This means that whatever privacy vulnerabilities affect Bitcoin also affect the rest of the pack, since it is required to purchase all other digital cash.
By building a cash connection to other cryptocurrencies, rather than funneling everything through Bitcoin, a better chance of keeping one’s funds private is possible. Even if one’s Bitcoin activity is closely monitored, it is possible to find a degree of financial anonymity through buying other (possibly more secure) cryptocurrencies with cash.
There is a certain level of value perception that comes with the ability to buy and sell something for cash. Because of efforts such as meetups or Wall of Coins/LocalBitcoins, the idea of Bitcoin being worth cash is not so foreign among cryptocurrency aficionados. However, the same can’t be said for the rest of the currency spectrum. Even now you can see it: in any crypto-centric community you can arrange to sell Bitcoin for cash, or use it to reimburse a friend for gas money, etc. Ask to do that in Dogecoin or Ethereum Classic, and you will encounter much more difficulty.
The ability for someone to sell a commodity for their area’s primary money is a powerful psychological component to considering cryptocurrency as legitimate. The more cryptocurrencies are readily available for cash, the more that benefits the rest of them, including Bitcoin. The concept of digital, non-governmental currency is still foreign from the general public’s perception of legitimacy, with Bitcoin being the great fluke in the midst of a possibly temporary value boom. As a people that implicitly trusts the value and use of foreign fiat currencies because of their own, so will a people that trusts the concept of cryptocurrency be ready to use those including, and other than, Bitcoin.
Finally, establishing cash markets for other cryptocurrencies grants them more permanence and relevance. If everything revolves around Bitcoin, what if something happens to Bitcoin? If a single cryptocurrency serves as the gateway to the “real world” for all the others, any disturbance or fluctuations in that currency will sway the rest. If a single large Bitcoin exchange is hacked, or a major world government declares Bitcoin specifically to be illegal, or even if troubles in the first great cryptocurrency’s own development cause it to fall, all the rest will be significantly affected. If Bitcoin collapses, the rest of the cryptocurrency ecosystem goes with it, and the world of digital currency is forced to build liaisons with the real world from scratch.
Cryptocurrency benefits from diversity. As it stands, however, all of digital currency’s hopes and dreams must run through Bitcoin. By establishing cash markets for other currencies, the future of the whole lot grows stronger, including that of Bitcoin.