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Ask CryptoVantage: Is Bitcoin Just the Myspace of Crypto?
It is difficult to remember that there once existed a world pre-Facebook and Twitter. A world in which social media was still in its infancy and its main focus was entertainment and music. Myspace dominated this early social media era before the explosion in popularity and meteoric rise of other (arguably improved) social media platforms like Facebook. It was a classic first-mover advantage.
Bitcoin has followed a similar growth trajectory to Myspace despite being in a completely different industry. The first cryptocurrency, launched in 2009, introduced the world to blockchain technology. It has since exploded in popularity despite the launch of tens of thousands of new blockchain projects. Many new cryptocurrencies were launched as direct challengers to Bitcoin and aimed to improve upon the original blockchain. Yet, Bitcoin has outlasted and outperformed most to-date.
In this article, we will delve into whether or not Bitcoin will continue to follow a similar trend of Myspace and fall by the wayside, or if it will be able to maintain its dominance as the world’s preferred cryptocurrency.
The Rise and Fall of Myspace
So how does a social media Empire go from being the most dominant company in the space with over 115 million active users to averaging only 3.7 million monthly visits in 2022?
The short answer is that Myspace was in a hypergrowth industry that prioritized ad revenue over sustainability. News Corp acquired Myspace in 2005 for $580 million. This initial purchase proved successful, and Myspace continued to expand, eclipsing the 100 millionth Myspace account on August 9, 2006.
In 2007, Myspace was still growing, registering an average of 320,000 new users a day and becoming the most visited website in the United States.
Competition to MySpace
Below the surface, a new competitor had started to emerge. A little upstart social media platform from the dorms of Harvard University called Facebook. Ironically, Myspace had the opportunity to purchase Facebook in 2004 for $75 million and passed.
When News Corp acquired Myspace, its priority quickly switched from a user-focused social media platform to one that maximized ad revenue by clogging up users’ landing pages with suggested buys. At that time, Facebook was not beholden to advertisers and developed its business model around selling user data directly to advertisers.
Facebook’s strategy created a cleaner, and more approachable user experience focused on connecting users with each other over individual promotion. Users started flocking to Facebook, and the rest is history.
The Similarities Between Bitcoin and Myspace
The easy answer is that they were both, at one point, the most dominant operator in their respective industries. Bitcoin still maintains the title of dominating the cryptocurrency industry.
Myspace exploded in popularity to become the number one social media site globally, with over 115 million active users. Similarly, Bitcoin is the original cryptocurrency that introduced blockchain technology to the world and has as estimated 81 million+ unique Bitcoin wallet addresses.
Another similarity is that they both exist in a hypergrowth industry with constant competition. Other projects have tried to replicate Bitcoin’s success, similar to how Facebook emerged to challenge and dethrone Myspace.
Most of these direct challengers typically focus on increasing the volume of transactions per second, or block sizes to reduce the gas fees associated with moving crypto between accounts. Other projects provide users with a different value proposition through the use of smart contracts. Some altcoins are also 99.9% more energy efficient than Bitcoin.
To sum up the basic criticisms of Bitcoin:
- It’s slow
- Consumes a lot of energy
- Lacks the utility of smart contract blockchains (NFTs, DeFi etc.)
The Differences Between Bitcoin and Myspace
The first thing that should be understood is that Myspace and Bitcoin are vastly different industries. Comparing the two is like comparing apples to puppies. They are too different to make any form of meaningful comparison on a technical level.
Myspace is also a private company with a traditional hierarchical structure. It has a CEO and President who make executive decisions on the company’s direction. With Bitcoin, there is no centralized control and no CEO or president dictating the direction. Instead, validators and the proof-of-work consensus mechanism underpin the direction and implement any changes on the blockchain based on what the community agrees to.
Many of the features of Bitcoin that other cryptocurrencies try to “improve” upon are deliberately designed that way.
By having a slower blockchain that verifies blocks every 10 minutes and at a 1MB size, Bitcoin can maximize its security. In the blockchain trilemma, blockchains must choose to sacrifice one of the following: decentralization, security, or scalability.
Being an open-source software, anyone can download a copy of the bitcoin blockchain and become a validator. This level of decentralization leads to a high level of security, but the trade-off is in Bitcoin’s scalability. Other blockchains sacrifice their decentralization for scalability (proof-of-stake).
No crypto has really been able to replicate the decentralization offered by Bitcoin.
Conclusion: The Market Will Ultimately Decide
While it is still early to tell what will happen with Bitcoin over the long term, I believe it will follow a different fate than Myspace. The technologies that underpin each are too different to make that comparison.
Bitcoin’s “flaws” are actually its greatest strength, whereas Myspace became cumbersome, impersonal, and lost touch with its users. Bitcoin is supported by, and accountable to its user base. Bitcoin’s trade-off of scalability in favor of decentralization and security is also solvable through the addition of layer two protocols like the Lightning Network.
Yet, Myspace remains a healthy reminder to companies that even with market dominance, they are not immune to new challengers. Bitcoin will need to stay vigilant against internal and external challengers to ensure it maintains its dominance. One thing is certain – the market remains to be the biggest, and in some cases the sole deciding factor on the lifetime of a product.
