No emerging SC market will have higher liquidity than the BTC markets. If there is little friction to converting BTC <> SC, then the preferable way will be to convert and sell on the BTCUSD markets, and this can only be done so many times. And of course, converting BTC > SC would serve to make Bitcoin more scarce.
are you so sure?A SC with the transaction volume of visa would be way more valuable than Bitcoin today.
Lets also entertain the idea that the Bitcoin block reward has diminished to 1.5BTC per block and the high volume tx fees happen on a SC, mining efforts will go where the money is, which chain would be more secure?
The higher liquidity of the SC would make Bitcoin irrelevant.
Why I see this as the ultimate outcome is precisely because of the peg. Every failed attempt to superseded Bitcoins liquidity results in no risk or loss in Bitcoin, but when one is successful it sucks the value right out of Bitcoin.
The real threat is for every 1 person who believes in a fixed money supply there are 10,000 who think the money supply should have a mild inflation. They are the ones on the fiat demand side of the SC and bitcoiners are the ones arbing untill the other chain is the more valuable.
So what I see happening (and I'm hoping someone will give me a rational answer that proves this understanding false - excluding the ass holes who pm me calling me stupid and my understanding BS) is; an inflationary SC could come along - all those central bankers who say we like Bitcoin the blockchain just not the currency, have a 10,000 to 1 advantage when it comes to shifting value.
In effect SC are the enabling technology to use the blockchain to back other assets, that's all fine as long as those assets never become more valuable than Bitcoin. But why create them if you are not wanting them to be more valuable than Bitcoin. What happens if the SC assets become more valuable than Bitcoin the 1:1 peg becomes irrelevant, and no one goes back into Bitcoin.
The net effect is one has used the Bitcoin blockchain to create inflation.