Today I want to discuss some things on Bitcoin. This morning I saw a post on Publish0x and some reactions to the post (it was a post on a review of the Binance card). They were discussing Bitcoin and that it has no future, technology is outdated, what happens if all the Bitcoins are mined, etc. I see more and more people claiming that Bitcoin will not be around for long, but this is far from reality in my opinion. Hopefully in this article, I can swipe away some doubts people have.
What happens if all the Bitcoins are mined ?
In theory the last Bitcoin will be mined around the year 2140, which is still very far away. For now it seems clear to people (I use the term people for a lack of a better term) that you can mine it and earn rewards. However once the last Bitcoin is mined, it seems that some do not understand what will happen. Miners turn of their machines and Bitcoin dies ? No of course Bitcoin will not die.
What will happen is as follows : The miners will be transaction validators and they will earn their bread by doing so. This seems weird for now, but one has to look in the far future for it (year 2140 right ?). Bitcoin is a future currency and these things take a lot of time to develop. Humanity swapped goats for bags of rice, created coins, created papers as money and right now we are moving towards digital currencies. All these developments took a lot of time and it was not done in 10 years or even 20 years. It is maybe hard to fathom, but in the far future Bitcoin could well be used as a world currency and you would see a sh*tload of transactions per day. These transactions need to be validated and the validators will receive transaction fees for it. Since there will be so many transactions the fees can stay low and the validators will earn a comfortable live with it. It would not serve the purpose of Bitcoin to higher the transaction fees all the time in the future.
Right now Bitcoin is slow, and I understand that people have doubts regarding this, but do you honestly believe it is going to stay like that ? Do you think that hedge fund managers are entering Bitcoin for fun ? Publicly traded companies are putting cash reserves in Bitcoin, rather than keeping it in Dollars. Do you think they wish to drain away their money ? Why are they putting it in Bitcoin, rather than in other Altcoins (I like Altcoins a lot and I am invested in them, but Bitcoin is still number one) ? I cannot answer these questions for them, but I assume they see Bitcoin as a viable option in the future and they think it will rise in value obviously. I for one am convinced we will see a solution in the transaction speed of Bitcoin in the near future (couple of years from now).
Can it get widely adopted as a currency in the future ?
The answer is yes ! Right now I believe we are in a stage of proving that it is a “store of value”. It serves Bitcoin better to be a store of value right now, rather than to be a currency to buy goods with. If you want a widely adopted digital currency in the future that is decentralized, you need to build trust first. Trust takes a long time to build, which means it needs to prove itself as a store of value, before it can really become a currency to transact in. Once people realize that Bitcoin is there to stay around and that it has proven itself as a store of value, little by little you will see a transformation towards transacting in it. You will earn your salary in Bitcoin and you can spend it anywhere in the world. It will be more easy to part with Bitcoin, since you will receive it as well.
Right now it seems (to me at least) that we are holding on to it, because we think it will rise a lot in value in the future. Why would I want to buy a pizza or a coffee with my sats (Satoshis), if it will do a 10x in the future ? We need to go through this stage first, before it will get easier to transact in it. Once Bitcoin will show a lot less volatility and becomes more stable (boring, I know, but reality), it will have reached a fair value and thus we will see a transformation towards transacting in it and slowly it will turn into an adopted currency.
Scarcity and fixed supply
There are people that have a hard time grasping a fixed supply and how it should work as a currency, because of this fixed supply. There will not be enough Bitcoins around for everyone right ? Well this is not true in my opinion. You do not have to own 1 Bitcoin or 100 Bitcoins. You can be very happy with only 0,1 BTC or even 0,01 BTC. If you have money to invest in Bitcoin and you can leave it there for 10/20 years, you will see that it will hold quite some value in the future. It will hold value, because of the scarcity and fixed supply. This is math and human behavior of wanting something that is scarce. If Bitcoin can proof itself to be a viable solution to our current money system, you will see a lot more demand than supply. Value will soar and 1 BTC could well be reaching 1 million Dollars in the far future (2040/2050). Having only 0,01 or 0,1 BTC does not look so bad anymore does it ?
Another point is that we would be looking at sats as well. If you are going to buy a coffee with your Bitcoin, you would pay a certain amount of sats. 1 BTC is 100 million Satoshis. You can compare it to 1$ is 100 cents. 1 sat is 0,00000001 BTC. This is complicated, because who is going to calculate every time in these amounts of decimals ? The truth is that at some point in time, you are no longer thinking in fiat currencies, but only in BTC and sats. I can tell you this, because I lived in the Netherlands when I was young and we changed from the “Gulden” to the Euro back around 1999/2000. In the beginning I was thinking how much it was every time in terms of “Guldens”, but after a while it completely disappeared. This is as well a matter of “trust”.
Last but not least fixed supply is better than an unfixed supply. A lot of Altcoins have an unfixed supply and this defies the purpose of us wanting to change the world currencies we have today. Printing money we do not like, but when Altcoins are increasing their supply we look the other way ? Bitcoin does not have this problem because it is really fixed and there is no company or CEO behind it. Proof of work often gets criticism, but proof of stake is no better for me. Obviously we all like to receive some rewards, but in the long run this is not an option The reason is that they will have to increase their supply to keep on rewarding you. Right now they will give you a nice story that they burn tokens as well, but in the long run they either have to create more tokens, or they will have to lower and lower the rewards you will receive and thus this will be no longer an interesting option.
Security of the network
One of the most important things for a cryptocurrency is the security of the network. Bitcoin is number one in this and only recently the hashrate once again created all-time highs. Even after the halvening, people are still jumping on the train to get rewarded for mining it. The higher the hashrate, the more secure the network is against 51% attacks. It gets more and more costly to create a 51% attack on Bitcoin and it will at some point no longer be viable to even try it, since it will cost simply to much money. This is exactly what is needed for a widely adopted cryptocurrency and to build “trust”.
Every now and then you will see posts pop-up about Bitcoin being hacked. The fact is, that this has nothing to do with Bitcoin itself or its security. This is often due to a mistake by the person transacting it towards a wrong wallet address, or because of a malware/virus. This is why it is by the way so important to keep your private keys safe and put for example your Bitcoin on a Trezor or a Ledger wallet.
Are cryptocurrencies really decentralized ? We can always ask this question. Bitcoin does not behave like a company and does not have a CFO or a CEO. A lot of Altcoins do have this and it automatically creates centralization, rather you like it or not. This does not take away the fact that some Altcoins are really interesting and will rise a lot in value, but it does once again take away the purpose of creating a cryptocurrency in the first place. Namely to get rid of centralized bodies. Hopefully we will see some noble projects out there that only have the interest of you in its heart, but I honestly doubt that. At the end companies are mostly created for one purpose and that is to fill the pocket of the owner(s)/shareholder(s) as much as possible.
I hope that it clarified some things about Bitcoin and the perception that a lot of people seem to have. Obviously Bitcoin needs to improve some things, like transaction speed for example, but there is a lot of time left to do this.
It would be nice to see some discussions in the reactions and please give me as well some criticism on Bitcoin if they are justified. I am here to learn as well and maybe my view on Bitcoin is flawed.