Sirwin
Sirwin

BTC is Anti-Money - I Challenge Anybody to Deny!!

By TheScholar | Day-Trading Cryptos | 2 Feb 2021


Hi guys,

One of the most important characteristics of any currency is being fungible. This means that if you have a dollar, it will be the same as any other dollar in the world.

Now, there are two types of currency used by people (there are other types used by the banking system). These are coins and banknotes. There are some differences between coins and banknotes.

If you have a coin, and I have a coin of the same denomination, we basically have the same purchasing power in our hands. There is no difference whatsoever between our coins.

When it comes to banknotes however, There is a small twist. If you have a dollar banknote and I have a dollar banknote, we can swap them and we don't lose any of the purchasing powers of those dollar banknotes. We can use these dollar banknotes in the US or China or on the moon. There will be no difference between my dollar and yours in terms of purchasing power. The only difference between my dollar and your dollar is the serial number written on every banknote and specific to that banknote, but that serial number does not affect the value of the dollar banknote. This is not to say that it can't be tracked. Actually, banks do keep record of the serial numbers on every banknote, and if a bank gets raided for example, the banknotes stolen could eventually be tracked down if required, through banknote scan systems.

The 1 million dollar question is: Does Bitcoin lack the same fungibility that characterizes currency? ie. If you have a BTC and I have a BTC, and we swap them, does any of us lose value because of this swap?

The simple answer is:

Yes. One or the two of us will lose purchasing power. Actually, every single time a BTC transaction happens, there will be loss of value of the purchasing power of that BTC, even though BTC price in the market didn't change at all. That's an inherent characteristic of BTC.

The detailed answer is:

Every BTC is made up of 100,000,000 satoshis. Let's start with a whole Bitcoin that was just freshly mined and we were the first to have it after it was mined into existence. The satoshis that make up our BTC are almost the same and none of them has any history from the time of coming to existence (virgin satoshis). Imagine now that we go into a Starbucks to buy a coffee with our fresh BTC. Let's say the price of the coffee is 25,000 satoshi for that coffee. These 25,000 satoshis now went into a transaction and each of these satoshis would be "stamped/labeled" as used to purchase a coffee. These 25,000 satoshis will forever have that transaction hash written within their code. Now, imagine Starbucks transferred the BTC to one of their employees as salary. That's another transaction forever written on the satoshis code that were sent to the employee. That employee uses those satoshis to buy groceries. Another transaction is forever written on satoshis code. This continues to happen whenever a new transaction is done with each of these satoshis. After a while, some of the satoshis that we have will have gone through so many transactions and their codes now have a lot of history with them.

Now, did the use of a satoshi in different transactions create loss of value of that satoshi? Yes, why? Because now, in order to confirm the next transaction this satoshi is going through on the BTC blockchain, the whole history of that satoshi will need to be hashed. The more transactions and history of each satoshi, the more hashing is required to mine it into the next black. Sadly, this comes with higher fees (more hashing = higher transaction fees)

So, after few years of now, using BTC as money (which by definition, it's not), every new transaction will have higher transaction fee. This will continue until the transaction fees of BTC transactions will be more than the value of all BTCs available in the world. This means that BTC in the future will become Anti-Money.

The case of the user who incured more than $80,000 in transaction fees when he tried to send $1 of BTC is just an extreme example of how accumulation of micropayments can end up causing you to lose money when using BTC as transaction currency.  The speculation on how that happened was fun to read. It is not difficult to understand the reality of what happened if you know how BTC really works. All explanations provided in the article were dead wrong. This user collected his BTC in micropayments, and this made the fees go astronomically high. I include a link to this case below.

Another issue is, if a satoshi was used in an illegal transaction, that transaction will forever be linked to that satoshi, and if, for any reason, a government or community decided the illegality of using BTC that was used to support illegal transactions, you can be questioned or even jailed because you own a crime tool. 

Is there a chance that we fix these problem?

Sadly, no. These two problems will eventually prevent BTC from ever becoming useful currency.

Can we fix these problems in the future?

Well, to fix these problems, we have the change the fundamental code of the BTC Blockchain and how transactions are processed and how hashing and mining is done, which means, we end up changing the very nature of BTC, and it's much better to create a new currency rather than changing one that has a dead end.

 

This might be sad news for all the BTC maximalists and supporters. but if you add to that the environmental disaster of excessive electricity need for BTC to work, the above is what reality dictates, the END of BTC on the long run.

 

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TheScholar
TheScholar

With passion for science and technology, I strive to help others to gain another perspective.


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