“There is absolutely a reason to have bitcoin on one hand, and to have an asset to track the dollar on the other. One of them provides more stability in terms of value, and one of them has this huge network effect”.
If the only barrier to NuBits adoption is overcoming a “network effect”, we’re in great shape. There seems to be a myth that Bitcoin has achieved an insurmountable critical mass based on its achievements so far. That’s a flawed way of thinking about blockchain technology. Network effects are possible with physical goods (like iPhones, or video game systems) when the value of owning that particular good is enhanced simply by others owning it. For example, if ten of your friends own a Playstation and only one of your friends owns an XBox, you may gain more utility by purchasing a Playstation because you will be able to play with your friends, trade games, discuss gaming experiences, etc, even if an XBox would be a superior individual choice.
With Bitcoin very little of that additional utility is present. There are services like ShapeShift Lens that allow other currencies like NuBits to be accepted everywhere that Bitcoin is. As well, there are almost no switching costs between different digital currencies - aside from an exchange trading fee in some cases - to move to better products. In short, my utility from using Bitcoin is not enhanced to any great degree by others using Bitcoin. With my previous example, if Playstation games could be played on an XBox and vice versa, neither system would gain a network effect on the basis of existing user adoption. The winning game system would be the one with the best secondary attributes (cost and controller design for example). The winning attributes for digital currencies will eventually be price stability (where NBT is superior to BTC) and transaction costs (where PoS is superior to PoW).
The network effect exists for Bitcoin in relation to its forks and clones, but does not exist in relation to improved designs like NuBits. The network effect would only persist should Bitcoin decide to adopt improvements like Nu’s separation of fungible units, which seems unlikely given the current misalignment of incentives between miners and users. And in that sense, Nu has a structural competitive advantage over Bitcoin.
