Bitcoin has certainly made leaps and bounds since it was created a decade ago. Yet, the cryptocurrency still has a long way to go before it enjoys mass adoption as the principle method of payment. In this article, 4 experts discuss the problems with Bitcoin that are slowing down its growth.
Until The Regulators And Congress Forge Fair Policy, The Progress Of Decentralization Will Be Hindered
“Bitcoin is the people’s declaration of monetary independence. It’s forcing central banks and big finance to evolve or become irrelevant. Years on, the government, from the IRS to the SEC, doesn’t know how to respond to this disruptive technology. In the meantime, the combination of onerous and unclear regulations is driving talent and capital abroad. One example is the double taxation on crypto following the end of the 1031 like-kind tax exemption in 2017. So America is falling fast behind. Until the regulators and Congress listen to the industry and forge fair policy, the progress of decentralization will be hindered, and we will be less competitive. They should embrace and facilitate the inevitable, and work with the industry to find ways to both protect consumers and harness blockchain technology.”
Bitcoin’s Biggest Problem Is Its Volatility
“The biggest problem with bitcoin is its volatility, which is why I launched Equilibrium – a stablecoin based on EOS — EOSDT. Our customers are Bitcoin refugees – exactly the type of people who want to have digital assets but also want financial stability. Launched in April 2019, my firm, Equilibrium, has collateralized 2.7 million EOS, valued at roughly $15 million, making it the biggest EOS-based DApp in terms of EOS balance. Since launch, my customers have generated over 5.5 million EOSDT stablecoins and accrued 0.3 percent in profits for their collateral so far.”
Alex Melikhov, CEO and Founder, Equilibrium
Its Scaling Capability Was Crippled With A Tiny Block Size And Its Protocol Was Hijacked
“What people think is Bitcoin – Bitcoin Core (BTC) – has not worked because its scaling capability was crippled with a tiny block size and its protocol was hijacked away from Satoshi Nakamoto’s vision of a peer-to-peer electronic cash system. An electronic cash system requires fast transactions, low fees, and reduced intermediaries. Satoshi always envisioned Bitcoin’s blockchain could scale to bigger capacity than payment networks like Visa. But early in BTC’s life, a 1MB block cap was installed as a temporary measure to protect the network from attack in early days. For their own ulterior purposes, the Bitcoin Core development group (which now controls the BTC protocol) hijacked the project and kept the 1MB block cap as permanent, rather than temporary. 1MB blocks only allow an average of 3 transactions per second, and can never rival the Visa network which averages 2000 transaction per second, and 56,000 transactions per second at peak periods.
With tiny 1MB blocks, the BTC network often runs into congestion, with transactions sometimes waiting hours to be confirmed. This causes transaction fees to skyrocket; in January 2018, it cost $20-40 to send a single BTC transaction. Today, BTC transaction fees are about $4; that’s still far too high for a daily payment system. And BTC’s effort to create off-chain payment channels, through the Lightning Network, is not yet working.”
Jimmy Nguyen, President, Bitcoin Association
The General Populous Is Reluctant To Invest In Something It Has Yet To Comprehend
“Alternative investments continue to attract investors and portfolio managers as they diversify into multi-family properties and 403(b) investments. Bitcoin will experience growth within the decade as more people understand its utility and those who do not, retire from the finance world. Traditional banking entities view Bitcoin as a threat; the cryptocurrency is a direct competitor and diverts investment money away from their often high-risk products, such as money market accounts. Bitcoin has to be championed by savvy investors who can communicate the advantages of this diversified asset. The general populous is reluctant to invest in something it has yet to comprehend.”
Kat Stepanski, Founder, Elastic Limits Media
The Technology Mystique
“Cryptocurrencies such as Bitcoin have captured the public’s imagination and investors’ fancy as a new pathway to wealth. Bitcoins traded as high as $4,000 in the last week of August, but as recently as 2010 you could have purchased a Bitcoin for a few pennies.
Part of Bitcoin’s mystique is its high technology, high security, and the massive computing power required to mine (or create)another Bitcoin. We might think of Bitcoin as a type of artificial currency, an imaginary currency, or even a counterfeit currency, but, of course, it goes by the moniker “cryptocurrency.”
The brilliance of Bitcoin is actually the blockchain technology that underlies the currency. It is among the most secure online technologies available; it is virtually impossible to hack, manipulate, or thwart. In addition to artificial currencies, block-chain technology offers great promise as an extremely secure system for online interchanges and transactions. The technology that underlies Bitcoin and other cryptocurrencies is part of the allure, the rationale, and the story. The technology mystique tends to make cryptocurrencies seem like something completely new, something legitimate, and something we should take seriously.”
Jerry W. Thomas, President and CEO, Decision Analyst Inc.
Despite the fact that Bitcoin is now 10 years old, and its price is increasing, the cryptocurrency (as with all cryptos, for that matter) has faced numerous problems that have impeded mainstream adoption. Although, the problems and challenges discussed in this article aren’t the only reasons for a lack of mass adoption. Ultimately, however, these problems can be overcome. Yet, it remains to be seen when the general public is paying for goods and services with Bitcoin on a regular basis, as the preferred form of currency.