Clones of Bitcoin has BTC's flaws. This idea Weiss Rating tries to provide in its new research.
Weiss notes that bitcoin was conceived as the basis of a fundamentally new financial system, over which no centralized structure would have control. Nevertheless, as the development of the crypto currency, its shortcomings become more and more obvious. They flow, according to the rating agency, from the "disadvantageous position of the pioneer" bitcoin.
As is often the case with the first iteration of any new technology, it is slow, expensive and has fatal design problems that are not easily overcome.
These are main BTC disadvantages:
- There is no easy way to upgrade Bitcoin’s protocol (software code).
- Transactions take up to an hour to confirm.
- Another major design flaw is lack of “settlement finality,” meaning that a transaction is never truly closed in an accounting sense.
- Bitcoin has a limited supply.
- Bitcoin cannot be used as a real currency.
- Bitcoin mining (based on Proof-of-Work) is very centralized, with just a handful of miners controlling the majority of the hash power.
- Bitcoin mining requires the consumption of ever-increasing amounts of electricity.
Here’s Bitcoin’s strength, its first-mover advantage: Despite all its deficiencies, Bitcoin can boast one thing that no other cryptocurrency in the world has: global brand recognition. Most people around the world have heard of Bitcoin; they know what it is.
Unfortunately, trying to solve one or two problems, copies of bitcoin still inherit its fundamental weaknesses: low speed, inability to scale, high costs, energy inefficiency, lack of privacy, etc.
Weiss recognizes that Bitcoin Cash, for example, is 8 times faster than the original bitcoin. Bitcoin Gold is more decentralized from the position of mining. But this is hardly enough.
This are the problems of "BTC Copycats":
- The Bitcoin copycats still use deflationary models.
- They still rely on unsustainable electricity consumption for securing their networks.
- They still rely on a fee structure that gives too much power to the miners, often creating conflicts of interest between them and the end-users.
- They’re still plagued by the difficulty of upgrading the protocol.