Will Scalability Kill Bitcoin as an Actual Currency?
Bitcoin has always claimed that it wants to be the world’s first mainstream cryptocurrency and in recent years has made great efforts to try and reach new audiences and new markets. Bitcoin ATMs are now in existence, retailers and shops all over the world now accept Bitcoin (though they are few and far between) and ecommerce has also moved toward accepting Bitcoin.
Problems That Won’t Go Away
But no matter how much progress Bitcoin makes, it keeps running into the same old problems that it can’t free itself of. No matter how innovative the solution, inevitably, the same problems arise. The big problems are that it is still remarkably slow for transactions to be processed and even though the Lightning Network and other platforms aim to remove this, they do so by potentially compromising user security.
Another issue is that Bitcoin isn’t cheap to use which makes it unattractive for small transactions. Of course, there are forks that have aimed to remove costly transaction fees and Bitcoin has even implemented updates to try and counter this, but the fact remains, it is not cheap to buy and sell with Bitcoin.
The last big problem that Bitcoin can’t shake off is how dreadfully poor it is as an actual currency. It is no wonder many people see Bitcoin as an investment, as a commodity, as something to own and save for a rainy day. Because it acts like a commodity rather than a currency.
Commodities tend to have a supply limit, which Bitcoin does. Whereas real currencies have no limit and governments can print currency as they see fit to match the economy and inflation rates. Bitcoin finds itself in a position whereby if it ever was the main global currency, if the economy needed easing with a burst of new currency, Bitcoin couldn’t do it – because it doesn’t have that function.
Another problem is the more Bitcoin becomes traded as it stands, the more it becomes expensive to transact on which is a horrendous scalability issue to have.
There are many cryptocurrencies that are scalable, able to be introduced and restricted as necessary for fiscal policy and cost next to nothing to transact with in no time at all. Ripple (XRP) immediately springs to mind.
In actual real-world terms, Bitcoin is in a big and dangerous position, because unless it radically changes it will only be used as a collectible and in years to come, people might trade it like they would antiques.
At the moment it sits on top of the pile, but its value is artificially inflated because the original Bitcoin developer is said to be sitting on a huge stockpile. A stockpile that if he were to sell at once would see Bitcoin’s value plummet to next to nothing. A stockpile that he knows he can’t sell unless he does it in tiny increments over a long-time frame, by which point other cryptocurrencies will have overtaken Bitcoin anyway.
Maybe this is the wakeup call that Bitcoin needs, because users shouldn’t have to compromise to use the currency and it shouldn’t be a trade-off between secure transactions and speed. Or maybe, Bitcoin isn’t serious about being a mainstream currency, and developers are happy instead to milk it for all its worth as an artificially inflated commodity.
We will find out in the next few years.