Some challenges and obstacles are widely known and are talked about fairly frequently, but there are also those that are of ethical, social, technical, and political importance, and bitcoin is facing those challenges right now. Bitcoin, along with several other cryptocurrencies, are facing multiple challenges and hurdles. Third, many aspects of bitcoin are fundamentally new, do not fall under existing regulations, and thus present challenges. Another significant issue facing bitcoin users is a lack of privacy. [Sources: 1, 5, 6]
This is a pretty big problem for bitcoin users, as Bitcoin is a great payment method which allows fast and simple transactions. The biggest problem the bitcoin network faces is the lengthy time it takes the system to process bitcoin transactions. The amount of transactions the Bitcoin network1 can process per second is small, and fees are expensive (currently 2.5 USD - 4 USD per transaction; Avoca 2021). It has been widely known for years that the Bitcoin network has contributed to criminal activities, providing an avenue to conduct illegal payments. [Sources: 5, 6]
Transaction fees are used both as protection from users sending transactions that overburden the Bitcoin network, and a way of paying miners for the work they do helping secure the network. Bitcoin miners do this work because they are able to make a profit from the transaction fees paid by users to process transactions faster, as well as from new Bitcoins issued according to a fixed formula. However, unlike gold mining, Bitcoin mining provides a reward in return for providing a utility needed to run a secure payment network. Each transaction is recorded in a distributed public ledger, that is, on a blockchain, which allows users to move away from bitcoin toward other cryptocurrencies. [Sources: 4, 6]
One popular technique is using tumbler services, or mix, that takes Bitcoins from many users, routes them along complex financing paths, and re-distributes them in such a way that they are no longer easily traceable back to any particular source. As Bitcoin has grown in popularity, fraudsters have created fake exchanges to steal the money. Some governments are concerned the cryptocurrency can be used to bypass capital controls, could be used to launder funds, or make illicit purchases, and can pose risks for investors. [Sources: 0, 1, 7]
In short, if you use Bitcoin, you are entrusting your money to a complicated system that you do not understand, to people that you know nothing about, and to an environment in which you have limited legal recourse. If this or other cryptos were to gain widespread adoption, existing banking systems might be rendered irrelevant. Worse, in terms of money, each time you buy something with Bitcoin, that is potentially a taxable event. [Sources: 3, 7]
From an environmental standpoint, bitcoin - representing over 40% of current market capitalization in cryptocurrencies - would still be using a verification process that requires enough energy to power an average American house for two months. The greater computing power, and the faster the verification process, the safer bitcoins system will become. [Sources: 2, 5]
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