The real nature of Bitcoin
Scam? Revolutionary System? Bubble?
Looking back on 2017 and its many controversial discussions, we could probably pick bitcoin as the winner. The king of cryptocurrency has been on a rollercoaster for more than a year, raising from $900 to $19,000 then falling to $8,000 (at the time of writing). Along with his leader, all the cryptocurrency space had a huge boost of investments and approaching the end of the year we were close to a market cap of $650 billions.
The digital currency, bitcoin, was born in 2009 from the hands of Satoshi Nakamoto — a still unknown developer. It’s based on blockchain technology — a digital ledger in which transactions made in cryptocurrency are recorded chronologically and publicly — and there’s a limited amount of 21 million bitcoin. (Currently there’s 16.7 million in circulation.)
Bitcoin and many emerging cryptocurrencies main feature is the decentralized system where transactions run over and are verified by all the computers involved in the network. This means that no middleman is required, whereas with regular currency you would need a bank to verify any digital transaction. Being the complete opposite here, cryptocurrency transactions are also recorded in a public ledger that is non-editable and encrypted to give privacy.
Thanks to the terrifying growth rate occurred earlier this year, tons of new investors entered the market bullish attracted by ‘easy earnings’ and caused a media exposition that defined bitcoin as a mainstream topic. The wave of publicity turned bitcoin into a ‘public issue’, as financial experts and many people all over the world began to cry foul. Arguments varied from the old ‘it’s just a scam’ to ‘bitcoin is the next dot.com bubble’ —a fairly new massive bubble ready to pop and hurt a recovering economy again.
It has to be said that the concerns aren’t false. Right now, the digital asset does not have a lot of real world applications due to many problems including scalability, high exchange fees and the lack of places where to spend it all slow down its main purpose. Instead of growing as a normal coin holding value, bitcoin comes with a huge speculation on its price.
Effectively, bitcoin might end up as a bubble and it does have many problems to solve, but the disrupting potential to change the future relies in its technology, not in the coin itself.
The progress is unstoppable. We have already seen it many times throughout history with new technologies. They always took replaced what preceded them, just like how cryptocurrencies are trying to overtake the banking system.
Simply put, blockchain solves many current finance problems. It provides freedom, privacy, fast transactions, cuts fees, transparency and allows people to make online transactions who have not had a chance to set up a bank account.
Bitcoin is leading the way for this change, but other cryptocurrencies are developing better features than the ‘original’; Monero has a better privacy, Litecoin is faster, Ethereum implements smart contracts and Iota claims to have a technology with the potential to overtake blockchain. These are the most known ‘rivals’ to Bitcoin — the list of all cryptocurrencies is a lot longer.
As mentioned, bitcoin is paving the way and even if its bubble may burst, the need for a free economy system is where many other companies will participate in.