All right, I've got an honest question for you surf (but if you choose not to reply and bow out of the thread I understand).
You've stated that you believe Bitcoin should be people's primary crypto investment because:
A) it is the coin-of-reference in the crypto world. Eg. people buy Bitcoin with USD, and then trade Bitcoin for other alts.
B) even if Bitcoin is not the long-term cryptocurrency the transition would be gradual, and that people should re-evaluate as more information comes to light.
It seems to me that A is entirely for historical reasons and is becoming less relevant all the time, and that B is not necessarily true at all.
Bitcoin is the coin-of-reference because it was first and was always the "biggest" (in mindshare at least) even after others entered the market. So the banked exchanges allowed you to purchase Bitcoin, and the unbanked exchanges gave you the opportunity to trade all the others. However that's becoming less true as time goes on. Coinbase for example now allows you to directly purchase Bitcoin, Etherium, and Litecoin. I can't imagine that that list will ever shrink; it doesn't take much effort to continue allowing already-written code to run. And more options will be added.
It seems to me that Bitcoin has no use other than as a coin-of-reference at the moment. Very few actual purchases are transacted through Bitcoin, and the merchant support for alts will grow. There are already other coins that are faster and cheaper by design than Bitcoin could ever be. Merchants will never price things directly in Bitcoin because of its volatility.
It seems to me that Bitcoin is already useless and has no future, and the only thing preventing its plummet is the mob mentality agreeing that it's valuable. And one day that will probably change, and everyone will abandon Bitcoin and jump to the New Thing (and then probably eventually the one after that, and the one after that, etc). Maybe it will be Litecoin, or Bitcoin Cash, or Dogecoin (probably not, but I'm rooting for that little guy), or Ripple, or something as-yet undeveloped. But it should eventually happen.
And when it does, there's no reason to think that it would be (B) slow or gradual and allow people the opportunity to rebalance their "investments". Crypto crashes happen incredibly quickly. Selling everything in the middle of a panic crash is usually something everyone tells you is incredibly foolish. Except it's not in this case. A crash in Bitcoin while another stronger coin surges probably would be the trigger that changes the mob mentality. If that happens, and people collectively decide that Litecoin (or whatever) is the new Bitcoin, then not selling in the middle of the crash (assuming you can find anyone to buy at any price) would be the wrong choice and would leave you owning a lot of nothing, forever.
So I guess my question is, why am I wrong?
Excellent points Sherr!
On a periodic basis I re-evaluate if a bitcoin hold is still a logical proposition, I currently believe it is a profitable long term bet, but it is an admittedly risky one. Healthy amounts of doubt about one's positions lead to analytic revision of incoming data.
A) bitcoin as coin-of-reference: it is more than just mechanics and btc facilitating transactions to other coins.
crypto traders value their investments using bitcoin as their frame of reference. Entire crypto portfolios are valued by how much each alt is worth when it is converted to bitcoin, and when things get rough, or btc gets bullish that is what they do. The "shitcoin" speculation of obscure alts within the crypto community is entirely based around creating an increased amount of bitcoin for the speculator/ TA trader.
There are other coins such as Eth that seek to offer a different type of value which can and do exist in parallel with btc. They compete for investor money in the short term but occupy different tech territory in a longer timeline. BTC currently cannot execute smart contracts the way eth can(though this is purportedly in the works), and eth is centralized and mutable and much more suitable as a platform for decentralized app development and an overall platform for incorporating blockchain tech esp into the corporate realm, rather than a global financial instrument.
The value of a blockchain can be best understood through metcalfe's law - the value of a communications network is the square of the participants. This explains neatly (if imperfectly) why twitter is worth billions but the group chat with me and my aunt and grandma is worth nothing, other than to the 3 of us.
Market cap is misleading from this perspective. For example, bcash appears overvalued, it has a market cap 1/7th of btc.
Number of transactions per day is one gauge of the overall participation rate on a blockchain.
Bcash network averages roughly 20k transactions per day. Bitcoin averages roughly 200k transactions per day. Given a roughly equal number of users making transactions (which may be off by a moderate margin in either direction) Metcalfe's law indicates that this is not a 10 fold difference, rather an exponential difference in network utility. The price gap is only a factor of 7, while from a value standpoint bitcoin may provide 100x utility(give or take reasonable calculation errors) over bcash!
This is purely on the network value, ignoring the infrastructure advantage bitcoin has over bcash(I can buy plane tickets or book hotels or buy goods online with btc, or convert to USD at bitcoin atms through the US, while bcash is much more difficult to spend. BTC is also legal tender in Japan) or the scaling issues bcash has - if it averaged the same number of transactions per day as bitcoin the fees would be higher by a factor of 2-4x depending on assumptions used. Further this ignores the substantial developer community working on improving bitcoin protocols which is a large advantage over bcash's niche support.
Core features of bitcoins utility such as decentralization, immutability, and the game theory basis that maintains the integrity of the system originate from its design and utilization of Proof of Work.
The microsoft blockchain analysis cited earlier in the thread assessed that alternate blockchains to btc sacrificed either decentralization or immutability or both in order to obtain advantages in speed and efficiency. A SQL database on a server somewhere would vastly outperform bitcoin from a performance standpoint, but would have neither decentralization nor immutability and thus there would be no reason to trust it to authorize financial transactions.
Microsoft's conclusion was that second layer protocols to the bitcoin blockchain are the best solution for scaling without sacrificing the underlying fundamentals of btc and by and large the crypto community agrees.
B) We don't know whether a theoretical flip to another dominant coin would be gradual or not. If bitcoin were a valueless system that noone actually used then certainly the possibility for an extremely fast crash and replacement would be not just possible but probable. Due to metcalfe's law if participation rate on the blockchains are 0 then all their values are 0 so substituting one for another should be probable and statistically happen by chance regularly. That this has never happened or even come close certainly indicates that there are real humans obtaining real value and metcalfe's law has at least partial validity.
Humans are creatures of habit and as this entire crypto movement shows are slow to make change. All the users out there utilizing btc for various reasons would have to abandon it at once, in unison. That makes the "sudden plunge to 0" outcome less and less likely the more users are added to the base and the networks utility grows. It is not impossible or even improbable, so "don't invest money you can't afford to lose" must be paramount.
It is important to consider that it can be very true that you personally have no use for bitcoin in its current form, and at the same time be true that people in other circumstances consider it invaluable. And that in its future forms you may benefit from it substantially in either a passive or active capacity, or not, depending on its ultimate use cases. The likelihoods of those various scenarios are where buying bitcoin to hold long term come into play. Bitcoin's equilibrium value will depend directly on how many users it stabilizes at and only the future will tell what that is.
I will continue to keep tabs on the crypto space and will be prepared to move on from btc if or when such a time comes. I will also be prepared to take small portions of btc and allocate them to potential tech that offers paradigm-shift style upgrades over bitcoin in the rare event that they come along. I have only researched a couple dozen alts (there are 1500+) and acquired precious few.
As I proofread this post and review yours to make sure I responded to the important ideas you raised, it occurs to me that I may be Charlie Brown with the football here, and your entire post may have actually been an elaborate dismissal. Fingers crossed!