Old and New Problems Bitcoin is trying to solve
- Transaction Fees – the considerable uptick in transaction volume combined with the number of transactions in a block has created a bottleneck – and recently, for a transaction to be confirmed in any reasonable amount of time, fees have skyrocketed
- Distributed, Decentralized Network – Because processing the transactions requires so much computing power, solving the blocks first has become too difficult for individual miners to be particularly profitable. Thus mining pools were born, where pools of miners work on blocks, which increases the probability that at least one processor in the pool will solve the next block. While this hasn’t lead to any single pool controlling more than 50% of the processing power, it is possible that some covert force is running more than one mining pool.
- Anonymity and Transparency – If no one ever learns the identity of the owner of the wallet, Bitcoin is anonymous. However, this is difficult to do. There is plenty of metadata vacuumed up by all kinds of entities (NSA and GCHQ, local police, ISPs, your neighbour who hacked your WiFi). True privacy and anonymity are extremely difficult to maintain these days, and the transparency of Bitcoin makes eternal anonymity virtually impossible.
- Simplified Money Transfers – Now, with the rising Bitcoin fees, there is an opportunity for companies like Transferwise and Revolut to capture customers solely concerned with borderless payment transfer. Not only do these services offer lower fees, they offer currency exchange on their platform. Bitcoin is itself a currency, and therefore one must convert a fiat into BTC, transfer BTC, then convert that BTC into the local fiat currency.
Bitcoin is a great testing ground, but it is not a production currency.
… Blockchain technology is here to stay. Blockchain has plenty of uses outside cryptos (smart contracts embedded in Ethereum are one such example), but Bitcoin probably won’t be the reigning technology in the future. It’s overvalued with a limited chance of success, most likely be replaced by a better cryptocurrency.
Eulogy made by Ruzbeh Bacha