While Bitcoin is promising in its features and purpose, there are many issues with its proposed future use as a worldwide currency. Namely, transaction and confirmation speed, uncontrollable supply, rate of adoption, and lack of true decentralization, are some of the biggest blockades to a Bitcoin dominance in worldwide transactions. With all of that being said, there are still valid uses for Bitcoin as the world’s most valuable and recognized cryptocurrency. Bitcoin is likely to be around for a long, long time.
Bitcoin has a very slow transaction speed when looking at other available transaction speeds of other technologies. Now, granted, Bitcoin is much faster for confirming transactions and amounts available than checks or money orders. However, MasterCard and Visa are multitudes faster at processing billions of transactions a day across the world. There are serious concerns around whether the infrastructure and miners for Bitcoin could ever handle the volume that is necessary to run true modern-day economies.
Another problem on the transaction speed side is that traditional players in the financial services space are starting to both experiment with and implement blockchain tools. Bitcoin, as the first mover, exposed a lot of the potential problems with blockchain while allowing others to capitalize. The transaction speed was initially created as slow on purpose in order to create disincentives for people who were trying to fraud others.
One of the main problems with Bitcoin, is that while the ledger of transactions is public, no one knows how much of the currency is in circulation. Just as an example, the creator(s) of Bitcoin, “Satoshi Nakamoto”, currently have one million Bitcoins that have never been moved from the ledger. There is roughly 17 million Bitcoins in total supply. This means that five percent of Bitcoin is not in circulation. Also, there are countless stories of people losing their passwords or “keys” as they are known. Because there is a limited amount of Bitcoin that can ever be in supply, there becomes a question of how it can last from a practical standpoint if people continue to lose their keys. Estimates put the total amount of Bitcoin missing from the twenty-five percent to forty-five percent range. Bitcoin, unlike normal currencies cannot be replaced due to the code that it runs on. The uncontrollable supply keeps it from being manipulated, but it also keeps it from being replaced if it is lost.
For Bitcoin to become a mass-used currency, it has to be adopted. Due to trust problems and the issues mentioned above, it will be hard to convince masses of humanity to use Bitcoin. Most people are still trying to grapple with the purpose of the currency and what it is actually considered from a foundational standpoint. This is one of the issues that can be improved through communication and awareness, but nonetheless is still a long way from being a solved problem. Also, people who communicate about Bitcoin need to speak in mainstream language and not try to use over-the-top technical language unless the audience permits it. Using this mainstream language in order to have clear conversation would help the adoption of Bitcoin.
Even though Bitcoin was intended to be a decentralized currency where the users make up the system, third-party exchanges are still required to get Bitcoin and transact with it. This will probably always occur because most people will not be able to transact directly on the Bitcoin network itself. One of the main aspirations for Bitcoin is that people would be able to transact directly with other people without institutions, but still have the trust necessary. If this main feature is missing, coupled with slower transaction speeds, convincing the masses will be difficult if not impossible.
Also, the hacking of third-party exchanges has been an issue. To date, users of different exchanges have lost hundreds of millions of dollars from the exchanges being hacked. Now, as an important note, the Bitcoin network itself has never been hacked and there is a good chance it never will due to the level of encryption it contains.
With all of the problems mentioned above, there are still large, valuable use cases that Bitcoin, in its current state, can have in the world. The first usage case is in fallen governments or countries (ex. Venezuela) where the currency is not stable. In these situations, Bitcoin can create a (more) stable way for people to transact instead of having to either barter or use other currencies such as the U.S. Dollar which may not be as readily available that may be easily stolen. This is one valuable use in unstable countries, but what about stable countries?
In other areas around the world, Bitcoin still can serve multiple purposes. Bitcoin can still be both a store of value and a cash-like equivalent to transact in large amounts of money. As a store of value, the stable increase of total Bitcoin supply keeps the amount constant and from inflation going through the roof. Bitcoin likely will do better than gold or similar in trend depending on its adoption. This store of value component also allows Bitcoin to be moved across borders easily as well.
Bitcoin has many flaws that have been mentioned above. However, there are still viable cases on how Bitcoin can be a productive, long-lasting asset to anyone. Those interested in participating in the Bitcoin market should seek professional advice on both the investing and tax side before getting involved. Bitcoin is likely going to be around for a long-time and is not just a current phenomenon.