Bitcoin was a great king, we should now kill it
My apologies for the provocative title, let me briefly present to you some of my untidy ideas concerning Bitcoin and the future of the blockchain. I would be super happy if we could have a discussion as a community about this.
No one can deny the importance that bitcoin has had for the crypto world, it has been the father, the flag bearer, and the responsible for the publicity the whole cryptospace had in the most recent years.
Now the crypto world is blossoming by giving birth to projects that surpass bitcoin's concept and applications, but the risk for such project to live under Bitcoin’s shade is huge. The market of alts is still extremely correlated to the mood of bitcoin and some situations are grotesque. The recent hype-sell-off cycles due to Bitcoin’s forks can be justified by the incentive to make some easy and quick bucks from the coin coming out of the fork, but such swings destabilize the general market bringing crazy levels of volatility and uncertainty that is not healthy for the cryptospace nor for the credibility of such market. Some coins coming out of the forks are already valued billions without having released a full description of their code and the way they operate yet. Moreover, altcoins are often impacted by the moods of Bitcoin even if they have nothing to do with it besides sharing its own nature, namely being cryptocurrencies. I do not want to play the part of the alts advocate, most of them are pure crap indeed and will fail in less than 2 years time. But this should not prevent us from creating the space for new gems with solid technology and great use cases to emerge and push the blockchain to new heights.
We should notice that Bitcoin has a very limited use cases as a currency.
The first use case is as a medium of exchange.
History has shown that when 2 currencies are allowed to coexist and compete inside a region, people tend to hold on to the strong appreciating one and use the weak one for trading, doing business and pay for their expenses. The weak currency is subject to inflation its value is quite stable if not declining during the long run. Think of the damage a few percentage points of deflation can bring to an economy (see last 2 decades of Japan) you can then imagine how the economy would look like if bitcoin is used as the main currency. Spending one bitcoin today to purchase something means to pay the price tag plus all the cash flow that bitcoin would have generated for you in the future (it does not generate cash flows per se but it appreciates substantially). To give you a day to day example, if tomorrow you are forced to pay all your bills in bitcoin, would you be happy? I would rather keep using my fiat currency and store my bitcoins. I hear a lot of people complaining that merchants are not accepting bitcoin as widely as they expected, but the issue is not that they do not want to be paid in bitcoin but rather that no one capable of reasoning rationally would pay his bills in bitcoin today while getting paid for his work in fiat currencies. The only way for a crypto to be used in place of the fiat currencies we are using today is to be designed to keep prices reasonably stable in the long run.
The second use case is store of value. Bitcoin is the new digital gold. Is it really? this remains to be seen but one feature we must notice is that gold has showed for many centuries to be inversely correlated to the economic situation. When things get messy or catastrophic the price of gold raises, when things run smoothly gold prices fall. Can we say the same for bitcoin? Imagine that in the next financial crisis the stocks indexes fall 30-40% in a matter of weeks, would bitcoin price double in such situation or collapse with the financial markets? This is not a trivial question to ask yourself especially if you are looking for a store of value. Diversification makes sense if things are not directly correlated to the assets whose fall you want to save value from.
Bitcoin should be kept as a flag that unites the crypto world together, as a reminder of all the great accomplishments achieved so far, as the first prototype that showed how decentralization could not only be theoretically possible, but practically achievable. It is now the time to elect the new kings, based on real life applications, to let them break free, coins that with more sophisticated capabilities will bring the blockchain to new heights.
Nice post, I agree with most of your points.
You should try to break up some of your paragraphs abit more. They are quite hard to read on the steemit format if they are too large.
Feel free to check out my recent post https://steemit.com/bitcoin/@keepcalmandhodl/what-are-cryptocurrencies-that-can-survive
Thanks! I will follow your advice.
I think you should look at the volatility of gold after Nixon took the US off the gold standard. It looked a lot like BTC. Also, you mentioned gold over centuries...not one of those centuries was spent in the digital world. Most is leaving the physical and entering this realm. There was a time when aluminum was more valuable than gold.
I agree about the currency but not for the reason you mentioned. As big money enters and the market size of BTC grows, the volatility will die down. However, there is still the issue of slow transaction time and the cost. It really isnt feasible for a $2 cup of coffee.
Ultimately, the Wall Street trillions are going to roll into the crypto world and bitcoin, because of its liquidity, will get a lot of it. Bitcoin will only continue to grow and attract developers because that is where the money is going.
Dear Taskmaster,
I am not saying BTC will not see capital inflows I am saying that when there is panic the stock market crashes and gold raises, this is a behavior bitcoin still has to show if we want to compare it to gold as a reserve of value. And I am not sure bitcoin will always be there, if people think about it rationally they might move their money in better cryptos once they emerge.