Is Bitcoin the only cryptocurrency you need?

Is Bitcoin the only cryptocurrency you need? - downloadThe cryptocurrency world is now inundated with new altcoins, with Shiba Inu (quotation SHIB) which is the latest to receive a huge wave of attraction among retail traders. However, that craze could fade away.

As new coins come out, the huge movements of brilliant new altcoins can be tempting. But unless you're really deeply involved in the world of cryptocurrencies and don't know a lot about the technology and potential real-world use cases, I'd be wary of investing in any long-term cryptocurrency other than Bitcoin.

The Taproot update and why it matters

While many investors view bitcoin as a potential store of value and payment network, the rival currency Ethereum was designed more specifically for decentralized finance (DeFi) applications, such as smart contracts. In fact, Shiba Inu is a token built on the Ethereum blockchain. Ethereum's status as a go-to platform for DeFi applications is what gives it much of its value.

However, a new Bitcoin update called Taproot now also offers advanced DeFi features for Bitcoin. Just activated this month, Taproot allows you to register multiple cryptographic signatures as a single signature on the Bitcoin blockchain. While it may seem like a small change, the new innovation will greatly improve the ability to register smart contracts on the Bitcoin blockchain. Taproot also allows for greater privacy for such transactions, allowing the parties making the transaction to send only crucial information to the blockchain without revealing all identifiers.

This essentially means that Bitcoin can now be used for DeFi applications, filling a current hole in its functionality and making it more competitive with Ethereum.

Don't you think Taproot is a big deal? 

Jack Dorsey, CEO of Twitter and Square, yes. It released a white paper for a new Bitcoin-based DeFi application on November 19, shortly after activating the Taproot update. The paper outlines plans for a decentralized Bitcoin exchange at Square called tbDEX. Although the document has been hinted at for a long time, it was only released after Taproot was activated.

Jack Dorsey is a bitcoin enthusiast and believes that Bitcoin will become the "native currency of the Internet". There are no two Internet, so there must be two cryptocurrencies that can be used all over the world? And as a general hedge of currency inflation, speculators have traditionally speculated on gold, perhaps silver, but not on other commodities that have their own supply demand dynamics.

Even famed hedge fund manager Bill Miller agrees that Bitcoin's first mover status and large buy-in by large financial institutions give it an edge that's hard to beat. As is the case with many Internet companies, once a network reaches run-off speed in terms of acceptance, the effects of the network generally make it a situation where the winner takes all or the winner takes most. In other words, once bitcoin has been institutionalized and widely accepted as a viable asset class, another digital asset should be significantly better than Bitcoin to replace it.

A solid ally

Dorsey and Miller are united in their “Bitcoin only” perspective by MicroStrategy CEO Michael Saylor. Saylor bought Bitcoin with MicroStrategy's corporate cash as quickly as possible, a risky strategy that essentially turns the software company into a leveraged Bitcoin fund, with a small software business aside.

In a recent interview, Saylor expressed his prediction that the world's sovereign currencies could consolidate, just as all European currencies have consolidated into the euro. And if there are only a few regional government-backed currencies for the world, there may only be room for a universally accepted digital alternative, which is likely Bitcoin.

Going back to Miller, he said in a recent interview: “There are 10.000 various tokens and things floating around out there. The chances that more than a handful of them are worth it are very, very small. Bitcoin, Ethereum and a few others are probably going to be around for a while. "

So Miller's list of winning cryptocurrencies may be even smaller, leaving Bitcoin as perhaps the last remaining cryptocurrency. For new investors interested in cryptocurrencies, I still think it's important to make Bitcoin the largest position in any cryptocurrency basket, especially those with a long-term perspective.