Some bitcoin enthusiasts have contemplated why the world would need altcoins in the first place. Considering most altcoins want to copy bitcoin but add a slightly different twist, there is little intrinsic value in most of these projects. That being said, there are a few good reasons why altcoins are needed, though, as they can help improve bitcoin over time.
While regulation is a positive thing for bitcoin as a whole, some people feel it should be avoided at all costs. Altcoins prove to be an “annoyance” to regulators in a peculiar way. With so many cryptocurrencies in existence, it is evident regulators can’t “kill off” digital currencies even if they tried. It is not the most powerful use case for altcoins, yet it provides somewhat of an advantage.
Traders will gladly agree there is no point in putting all of one’s eggs in the same basket. The same principle applies to cryptocurrency trading. While bitcoin has the largest appeal of them all, diversifying one’s portfolio can easily be done with altcoins. While altcoins are leaning on bitcoin to generate market traction, it does create new investment opportunities for cryptocurrency traders.
Moreover, it reduces the number of bitcoins available for purchase on the market, as investors convert small portions of their portfolio to altcoins. Since there are fewer bitcoins on the open market, the price will – normally speaking – go up as time progresses. More scarcity for an already scarce asset is never a bad thing.
Even though some people may feel bitcoin is fine the way it is right now, that is not necessarily the case. Bitcoin, just like any other financial asset, needs competition to bring its A-Game. Altcoins provide a bit of competition in this regard, albeit no alternative cryptocurrency has successfully posed a legitimate threat to bitcoin yet. Without altcoins, bitcoin would look very different from how we know it today.
While there is a lot of active development in the bitcoin world, new features are always welcome. There is no point in relying on the same group of developers to bring new features to the table all the time. Altcoin developers sometimes come up with a new perspective that is later on introduced in the bitcoin source code. Not all features found in altcoins end up being used to strengthen the bitcoin source code, though.
Regardless of how people want to look at it, altcoins provide an intriguing testbed for future potential bitcoin features and changes. Although bitcoin has its own testnet, some of the more “controversial decisions” are better off when tested on a specific crypto first. Right now, Litecoin is experimenting with Segregated Witness. Depending on how that situation plays out, it may bolster SegWit support for bitcoin as well.
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