As much as Bitcoin has done to advance cryptocurrency, it still has many limitations. The top limitation is the high level of volatility, and what that does to the ecosystem. High volatility assets are not practical for non-speculators to hold. If anyone wishes to do business using Bitcoin, but can’t handle the volatility, they naturally want to withdraw their money to fiat currency.
The problem with converting money into fiat currency is twofold. First, it puts downward pressure on the price of Bitcoin and reduces the demand for the coin. But second (and more importantly) it forces users to compromise their anonymity by leaving the ecosystem.
BitShares Presents a Solution
BitShares was invented to solve these exact problems. Formerly known as ProtoShares, BitShares ICO’ed in 2015 as an “industrial grade crypto-equity”. The network runs on a peer-to-peer distributed ledger using a “Delegated Proof of Stake” (DPoS) algorithm.
The DPoS algorithm specifies that there will be 101 “delegates” who take turns verifying blocks and being compensated for it. Delegates are distributed around the world which results in far more decentralization than Bitcoin has. Additionally, BitShares has a way to hold block producers accountable while owners of Bitcoin do not.
Pegging to Real-Life Assets
What this is means is that it has several cryptocurrencies that are pegged to the value of real-life assets. This allows for users to hold their cryptocurrency funds into “BitAssets” like USD, EUR, CNY, gold or silver without converting those funds to fiat currency. Fiat assets are typically less volatile than crypto assets, and BitAssets allow users to stay in crypto while still having minimal volatility.
The market-pegged “smart currencies” create a natural demand for the native currency, call BitShares (BTS). Businesses will be more likely to hold onto the currency rather than selling it like they would Bitcoin. Additionally, the security costs and transaction times are much lower than Bitcoin, which puts it at as advantage for merchants who prioritize those aspects.
BTS derives its value from the demand for BitShares’ products and services, which creates strong tokenomics. Although it shouldn’t be viewed as a competitor to Bitcoin (since it does much more than that in terms of counterparty risk management), it does have many benefits over Bitcoin. None of this is to say that BTS is not volatile, but there are more stable options that can only be purchased using BTS.
The Investment Opportunity
Holding onto BitShares itself gives exposure to the growth potential of this new facet of the financial services industry. Currently ranked as 45th in terms of market capitalization, this is far less of a risk than many altcoins. BTS can be considered more of a long-term investment, as there has been minimal movement over the last month (as shown in the chart below). Ever since the price dropped down around 1000 satoshis in November, it has been hovering.
The move here might be to slowly accumulate it by putting in lower bids. This isn’t a position to rush, but it is a good time to take advantage of the low it is at, especially if you are willing to be more patient.
Disclaimer: The author owns Bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock.