Is Bitcoin Doomed to Fail

Bitcoin is the oldest, most popular, and most expensive iteration of the cryptocurrency and Blockchain experiment.

The ultimate goal of bitcoin is to deliver a system whereby people can transact freely with one another, without the involvement of any intermediary

Satoshi Nakamoto created Bitcoin to allow people to send and receive money directly in a faster, cheaper, and more secure way than the financial system we have today without involving any banks, credit card companies, or any other intermediary.

While we generally like innovations that offer us faster, cheaper, and more secure ways to do what we already do, this innovation might not succeed. Here's why.

Why could Bitcoin be doomed to fail?

The 1st reason lies in the 1st sentence of this article. It is the earliest iteration of the Blockchain experiment.

Can you remember the 1st generation version of any technology you currently use?

1st generation versions of every scientific or technological revolution often go obsolete. Because 1st versions form the foundation, set the bar for other versions to build upon and disrupt.

Bitcoin exists using a technology called Blockchain. Blockchain is the technology that allows Bitcoin to deliver on its promise of allowing people to transact in a faster, cheaper, and more secure way.

Think of Blockchain like the internet. We can send emails from one part of the world to another in seconds on the internet, but it could take weeks if we want to send money between the same locations.

Why?

Because banks (intermediaries) have to agree on how they would get the money from one location to another (settlement). But since Bitcoin exists fully on the Blockchain, there is no need for physical (or otherwise) movement of money for transactions to occur. Learn more about Blockchain in this article .

While Bitcoin offers a faster, cheaper, and more secure alternative to banks, other cryptocurrencies offer even faster, cheaper, more secure, and more innovative alternatives to Bitcoin.

And since 2010, the creator of Bitcoin, Satoshi, has largely stopped actively developing Bitcoin. So by version, Bitcoin is largely dated and is likely to be leapfrogged by other actively developing cryptocurrencies.

Aside from the "1st generation curse", what else could spell failure for the most popular cryptocurrency

Bitcoin was created to be money to be spent and not necessarily as an investment.

People are more enthusiastic about Bitcoin when it has risen to a new high than when more people accept Bitcoin as a means of exchange. People are more driven to own Bitcoin by the increase in its value than they are by the hopes of using Bitcoin to buy things.

This near-obsession over price levels and the volatility of Bitcoin price discourages merchants from using Bitcoin as a medium of exchange to conduct transactions.

If 1 bitcoin buys one Tesla today, but only half of one tomorrow, then it’s useless as a means of payment and store of value.

Should a currency be held as an investment?

No.

Because money is ultimately meant to be spent. If more people are keeping more money than they spend, then a new problem arises.

Bitcoin is deflationary

Deflation occurs when people hold on to their money because they believe the price of goods and services will keep falling in the future, and as fewer people buy goods and services, the price falls further, and the cycle continues.

You could also define deflation as the value of money rising so much relative to goods and services such that it is more valuable to keep your money than to spend it because the money will be worth more in the future.

If more people keep holding their dollars rather than spend them, it could lead to recession. Learn about how that happens in this article . So if Bitcoin replaces the dollar and the value keeps rising rapidly, it would be deflationary.

Money is meant to be spent. If a currency is more likely to be kept as an investment than spent, then it has failed as a currency.

Bitcoin is completely incapable of competing with well-established fiat currencies mainly because its owners prefer to hoard it rather than spend - Orge Castellano

What makes money, money?

Money is technically just a shared delusion. Anyone can create "money": as long as another person accepts it as a medium of exchange, it becomes money.

All other characteristics of money, such as store of value and a unit of account, largely influence its chances of acceptance as a medium of exchange.

If we all share the delusion that each shoe is worth 5 seashells and it'd likely still be worth about 5 seashells in the near future, then a shoe seller is likely to accept seashells as a medium of exchange for shoes.

So for money to be money, we all or enough of us (people in a country/state) need to share in the delusion that an item is worth something. If everyone just woke up and thought that money was worthless, it would just become a bunch of paper with a bunch of Easter eggs from the government that we used to use.

This brings us to the age-old problem for Bitcoin, mass adoption. For Bitcoin to actually be a currency, we need more people to agree that it is.

But here's where I somewhat disagree.

Does a decentralized currency really even need mass adoption (centralized acceptance)?

I don't think so.

Bitcoin works as-is.

BYSOL, a grassroots Belarusian human rights org, has moved more than $500k of value peer-to-peer to striking workers inside Belarus, in a way the regime cannot stop. Other examples include fundraising by activists in Nigeria, Hong Kong, and Russia. Popular activists or protestors normally get their bank accounts frozen by governments. Bitcoin offers them a way to get money outside the purview of their governments.

Other uses include savings expatriation by people fleeing Venezuela, remittances into Iran, and peer-to-peer transfers within China among people seeking to avoid state financial surveillance.

Could Bitcoin be enough as an alternative currency for individuals who need ways to access funds to defy problematic governments/institutions who would otherwise use their power to suppress them?

I think this is a good use case for it. And since it is currently the most popular cryptocurrency, it is a better option than any other crypto currently available.

So maybe Bitcoin doesn't become the global reserve currency, but can it be a/the global alternative currency for people who need alternatives outside of government regulations to use?

The bad side to this would be that criminals and terrorist organizations can also use it to steal, launder money, etc.

My response to this would be that the reality is that Bitcoin transactions and holdings can (and have) been traced back to real-world owners. Remember, the Bitcoin blockchain is a global ledger that anyone can see. So these people can be traced.

Well, if Bitcoin can be traced, that means people defying governments can be traced too, right?

Yes, and this is what brings us back to the 1st argument for why Bitcoin could fail. Bitcoin is primitive.

Privacy coins seek to address this. Even though bitcoin is pseudo-anonymous, transactions can be traced to wallet and IP addresses, and eventually, the participants behind these transactions.?Monero? and?Zcash? are two of the largest coins that seek to remain in compliance with anti-money laundering (and other) regulations while improving the privacy of crypto-asset transactions.

So to the question, Does a decentralized currency need centralized acceptance?

I don't think so. If countries get on the Bitcoin boat, they will want to regulate it. And as we've seen with Congress trying to regulate tech giants, governments don't really know/understand enough to properly regulate technological advancements in a way that is fair and works. If Bitcoin gets regulated, it fails because it'd just become yet another government currency.

Some countries are also utilizing Blockchain to create their own cryptocurrencies, so that is more likely to happen than jumping on the Bitcoin train.

Stablecoins might be better at the currency race, and crypto enthusiasts agree

The crypto asset exchange Binance reports ?that 87% of its trades are currently conducted in USD Tether, only 4% in BTC. And really, what is the appeal of tether? Its claim that every tether is backed by $1. (Although some reports show that this claim isn't even true).

Is it possible for tether to them leave the dollar behind and become the global reserve currency? Well, yes, Dollar did it to gold. So it's not something that hasn't happened before.

Even in the currency race, Bitcoin is currently failing.

What would the failure of Bitcoin look like?

It is unlikely that Bitcoin would go to zero anytime soon. A number of merchants now accept it as a means of exchange, and more are looking to accept it. And a good number of Bitcoin holders plan to keep it in the long run.

Failure of Bitcoin in this article means failure of it to meet its purpose.

Will the failure of Bitcoin be a bad thing?

Not really

The original use case for bitcoin might be lost, but the innovation it unleashed continues to push blockchain implementation forward.

Bitcoin itself is just a part of a much larger movement/conversation, Blockchain. Bitcoin is the earliest iteration of Blockchain's attempt at making a currency, so Bitcoin's failure would birth a version of a blockchain currency that can do what bitcoin aims to do, which will be a win. Bitcoin's failure could be a typical case of "we lost the battle but won the war."

It is also a positive because the more people are opposed to Bitcoin and point out its problems, the more companies and new cryptocurrencies rise to create options that solve those problems. Our rejection of Bitcoin will lead to the creation of a much better version. And since Bitcoin has gotten us interested or at least aware and curious about crypto, we are more likely to be predisposed to accepting that better version of cryptocurrency if and when it comes.

Bitcoin’s original use case may have fallen flat, but those stumbles opened the door to an entire ecosystem of innovative solutions, and that is a great thing