Bitcoin and the problems no one wants to talk about

When humans first landed on the moon, people said that we would have base on the moon by 1980/90 or 2000. What really happened is history.

I remember about 6 -7 years ago, when I first heard/read about cryptocurrencies. Bitcoin, or cryptocurrencies in general, did not have all the lustre that they have today. Back then, the discussions that surrounded these "coins" was more about how it could be used in different ways, rather than about the money that was there to be made from them.

Indeed, there were miners who had huge rigs to make money, but the craze wasn't like today when everybody wants to make some quick bucks by riding the train.

In this current stampede of coins though, I feel that people are either uninformed or purposely quiet about all the shortcomings and issues that cryptocurrencies have, especially the most valued one, Bitcoin. In this post, I will point to some of the major issues that I have noticed, and which every crypto enthusiast should be aware of.

Scalability

One of the main aims of cryptocurrencies is to be usable by masses.

What use would be a currency if only a handful could use it?

But bitcoin doesn't deliver well in this aspect.
The way bitcoin works, is that for every transaction, someone else needs to verify it. And this takes power, in fact, a lot of it. As of now, Bitcoin has fewer miners compared to people using it. Which means too many transactions/miner. This has resulted into slow transactions and costly transaction fees.

Bitcoin isn't something you'd use to buy a banana.

Note that out of 7 billion people out there, very few use bitcoin. If it were to scale to even 10% of world's population, then the transaction fee would be so high and the time taken to process it so large, that you'd only use it when buying a luxury yacht.

Now, of course, there are solutions on this, but the core issue is in the design itself. Bitcoin, with its proof of work algorithm, isn't suited for mass adoption. Others like IOTA, are the coins which treat the problem, and not the symptoms.

Privacy vs Trust

Another issue with Bitcoin is that privacy isn't an inherent feature of it. The only way it provides privacy, if any, is by disassociating your wallet with the real you. While this may sound good enough, it's not. If you wish to be private, you need to make sure your account isn't traced back to you. But on the other hand, if you want to make any transactions, you need to associate your wallet with you, so that people could pay you.

One workaround that people came up with for this was to create a virtual identity, disassociated with their real self. But this creates trust issues.

If I don't know who you are, or if you really are what you say and not a Nigerian prince, how should I trust you?

Safety Nets

The regular rectangular piece of paper we call "cash", is protected with tons of mechanisms. Take the example of US Dollar. Similar to Bitcoin, the piece of paper doesn't have any inherent value of itself. Yet, millions of people not only in the US but in all parts of the world happily accept it. Why? Because of this,

A strong military and a strong economy ensure me that the note/bill I'm accepting isn't going to be worthless tomorrow. That isn't the case with bitcoin, at least yet. The heavy fluctuation that it suffers shows how volatile it is, and that it isn't going to be accepted by John the fisherman, not yet.

Conclusion

1. Bitcoin isn't the coin of future. IOTA? Maybe. Bitcoin? Not at all...
2. Inform yourself.
3. Overcome the hype, see through the fog.
4. As with anything, do because you love, and not for the money.

All images are public domain