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3 Reasons Privacy Coins Are Unlikely to Overtake Bitcoin - Coinjournal

When people give reasons for various altcoins’ inability to overtake bitcoin as the dominant digital asset in the world, the conversation sometimes doesn’t move far past the network effects surrounding the world’s most dominant crypto asset. However, there are other reasons, sometimes related to bitcoin’s strong network effects, to look at when discussing specific categories of altcoins. Here are three reasons it’s unlikely that a privacy coin will be able to overtake bitcoin.

Moving In and Out of Monero

The main selling point of any privacy-focused altcoin is obviously the ability to transact on a more opaque blockchain. While the transaction data is still public, it’s much more difficult to understand the details behind each transaction on these types of networks.

Put another way: There isn’t much of a need to hold a privacy coin. The privacy-related features of the coin can be attained by buying the coin and then sending it to someone else.

Because of this appcoin nature of privacy coins, many users prefer to, for example, hold bitcoin and switch into monero only when they need to make a transaction. There are even services specifically built around this functionality. This temporary use of the privacy coin does not have much long-term effect on the price or market cap of the coin.

Bitcoin is more liquid (more buyers and sellers) and less volatile, which makes it a more preferable coin to hold for most users, as the market indicates.

Dream Marketplace, which is currently the most popular darknet market (according to DeepDotWeb), currently only accepts bitcoin and BCH. In this way, monero is effectively an appcoin for tumbling bitcoin. Having said that, real data in this regard is difficult to come by due to the pseudonymous (and sometimes anonymous) nature of darknet markets and forums.

In December 2016, a spokesperson for AlphaBay, which was the largest darknet market at the time, told Bitcoin Magazine that moner...

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