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bitcoin in chains

The Long Slow Suicide of Bitcoin and the Future of Cryptocurrency (Part 1)

By Aaron221 | EXIT HOLD | 24 Feb 2021


I think it's safe to say that after the recent bull run on Bitcoin, we can say without much hyperbole that the crypto space's most relevant coin is dead. Oh sure, it's worth tens of thousands of dollars. More importantly, I think that as adoption continues into the mainstream, it will in all likelihood see its oft-predicted loftiest of lofty heights. But Bitcoin as we know it is dead. 

Of course, I don't mean that literally. On the contrary. But as a currency, Bitcoin is dead. Whatever advantages it previously had as a currency have been rendered moot as the 1% leverages their massive wealth to dominate the space. And certainly, it should have been seen as an inevitability. Money follows money.

So if Bitcoin is dead, why has the price tripled compared to its previous highs? Well, at this point, when people refer to Bitcoin as "digital gold", we should consider that quite literally. Because while gold has its place in the economy, its purpose - much like with Bitcoin - has changed. Bitcoin is no longer the currency of the masses. We should consider it along the same lines as gold or weed stocks - an investment vehicle.

Now, some people may not like to hear this but with Bitcoin's growth, we have run into issues that are fundamental to its usage as a currency. And they are issues that don't weigh as heavily if we consider it as an investment vehicle instead. And they are primarily three issues that most people who buy into the currency have brought up, but simply have not fully addressed. And those issues are of fees, transaction time and exchange. 

Of these three, fees are the most prescient issue in my mind. Because we are at a point where Bitcoin has become so valuable that simply the cost of moving Bitcoin from one wallet to another have become so exorbitant as to render it a bitter pill to swallow when transacting. And for use on a daily basis, it simply does not make sense to utilize Bitcoin as a method of purchasing goods and services. Even its value has become an issue where we even fear to spend Bitcoin lest we lose out on its potential future value.

For the layman, it simply does not make sense to spend Bitcoin to buy groceries. It has no practical use as a means of exchange. That isn't to say Bitcoin doesn't have value, but not in the sense we have known it as. And it would be foolish for us to continue believing that it does. Which is why investment in Bitcoin makes perfect sense whereas its daily usage, perhaps less so. Hence why I personally equate it to carrying around a sack of gold bricks. Sure, you may be theoretically rich, but will the yacht dealership accept your gold bricks? Can you walk into a Subway and get yourself a 12 inch Meatball Marinara with a fistful of doubloons? No. They'd look at you like you were crazy.

Admittedly, gold has its own issues with regards to its place economically but the point stands. It retains purpose within the economy even if that purpose has changed practically over time. And much like with gold, the man in the street is not buying Bitcoin because they necessarily want to spend it. They see potential future value and that is ultimately a good thing.

So practicality is crucial when considering the implementation of a new means of financial transaction. Because, you aren't just competing against other cryptocurrencies. You have to consider existing means of financial transaction - something the crypto space has only begun to consider. Even comparing to my own personal banking fees, Bitcoin does not compare. I pay a flat fee per month and am permitted a theoretical unlimited number of transactions, no matter where I want to spend money.

This is not to say that my bank is better than Bitcoin. But the value of Bitcoin has risen so much that fees which were once measured in fractions of pennies have now likely caused even the most ardent Bitcoin loyalists to consider whether it's worth even spending their money on a purchase.

Now, of course, Bitcoin is not the only cryptocurrency that is dealing with this issue. Ethereum in particular has been plagued with the same issues. While the Ethereum team is attempting to rectify those with Ethereum 2.0, it renders these extremely high value cryptocurrencies victims of their own successes. Too expensive to use and too valuable for anybody to want to use them.

So what do we do? Is this even a problem as cryptocurrency adoption continues to grow or is this the endgame for all highly valued assets? I will attempt to discuss these and other questions in a follow up post. 

 

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