Bitcoin can be challenging to understand for anyone outside the exciting and complex world of cryptocurrency, leading many to simply assume that cryptocurrency is a fad on its way to fading out. But unlike actual fads, like Beanie Babies, cryptocurrency has stuck around and has only taken a more prominent role in society’s financial dealings.
The naysayers have indeed begun to temper their denials, as Bitcoin and other cryptocurrencies are showing no signs of slowing down. Bitcoin prices have now grown to thousands of dollars for a single token. Newcomers are starting to become believers as well, dumping their money into Bitcoin in hopes of driving the price up even higher.
Economic inventors with an old-school mentality might simply dismiss Bitcoin’s perpetual growth as just an economic bubble that will burst sometime soon. But their reasoning is off not in the conclusion, but the causes of why they believe Bitcoin will ultimately fail. The reasons, it turns out, run far deeper. Of course, no one can know what will happen in the future to Bitcoin, much like they cannot know this about any other speculative asset. But when looking at the big picture, signs of Bitcoin’s future do start to look bleaker.
10 realistic Reasons That Bitcoin Will Fail:
1. Blockchain Does Not Need Bitcoin
Bitcoin’s most valuable contribution to the crypto world has been its introduction of blockchain technology which dramatically bolsters the expediency, security, and privacy of financial transactions. Any two parties can use Bitcoin to exchange funds without a middleman involved, with everyone’s identities encrypted to a lengthy alphanumeric string referred to as the “wallet.”
Blockchain is disruptive in terms of technology, with the potential of being as revolutionary as the internet was once it was made available to the public. Right now, blockchain is still in its developmental phase, much like the US was during the Wild West era. But it is important to remember that just because Bitcoin introduced blockchain tech, doesn’t mean that blockchain needs Bitcoin to exist. To pull the internet comparisons a bit more, one website going offline does not stop the entirety of the internet from existing.
Most people don’t even know what the first website that existed was. In fact, it was a blank page with the words “World Wide Web” and a text of links. This fantastically unimpressive entity would evolve and grow into the juggernaut that is the present-day internet. Much like other far more robust and impressive websites have taken the place of the original, many blockchains have developed vastly improving upon Bitcoin’s original model. Ethereum and Ripple are just two examples of prominent cryptocurrencies that are already available and making big waves on the market.
2. The “Big Brother” Factor
One of Bitcoin’s biggest upsides is that it is designed for nearly unmitigated privacy, but that great feature has a dark aspect to it. It doesn’t just allow honest, hard-working investors to conduct transactions of financial activity, but gives a forum to do the same for bad actors and criminals on the Dark Web. Few examples were more illustrative of this than the case of Silk Road, a digital pathway used by criminals the anonymously solicit money for purposes of drug trafficking.
One thing some Americans feel is appealing about Bitcoin is that since the cryptocurrency is not tied to the government or the financial sector, they do not need to pay taxes on it to the IRS. This is still a crime known as tax evasion. In 2013, close to half of all Bitcoin supply (44%) belonged to those who identified as Libertarian, though today’s market has far more players, reducing the Libertarian percentage significantly. These investors are not trying to start a revolution, they are just hoping to get into the Bitcoin game to get rich.
Bitcoin users with the above mentality fail to realize that while their identities are protected through the string in the public ledger, their transactions and receipts are not entirely anonymous. Bitcoin purchases and sales occur on crypto exchanges like Coinbase. To join, however, new users are required to upload a selfie, along with the front and back of a photo ID to prove they are who they claim to be.
Even the terms of Coinbase’s user agreement state that the information will be kept on record for up to five years, and should it be queried via a subpoena, the user’s name, phone number, address, and any other relevant information would be supplied to law enforcement.
The FBI has not only been very direct about the fact that they closely monitor Bitcoin activity, but they have also gone further to say that their methods of identifying those leveraging it for illegal purposes have vastly improved. They are, of course, fully aware that not everyone who uses Bitcoin has criminal intent. There is even an educational material public dossier that they work from to help them be clear on things they are looking into.
Hackers might be great at hiding their online activity, but casual users may think they have a lot more privacy with Bitcoin than they really do. In essence, the only way to conduct financial transactions to be fully untraceable in this day and age is via cash-only exchanges.
3. No Real Leadership
Bitcoin’s origins are known to have started with the mysterious Satoshi Nakamoto, but while many have sought to find out Satoshi’s identity, no one has actually been able to figure it out or confirm it. When Bitcoin first started, Satoshi gave coders a roadmap to the coders who were able to craft the platform whenever they had questions. But once Satoshi became a target of global investigations, he disappeared altogether. Authorities all over the globe raided the homes of suspected Satoshis, but despite their best efforts, the identity of the mysterious Bitcoin originator continued.
With no leadership at its head, miners and crypto coders must come to a consensus on decisions about the currency. However, the community cannot settle on even the smallest decisions, leaving there no formal business plan to map out Bitcoin’s future. Even communities on Reddit split off into separate Bitcoin groups, seeking the exist within their exclusive echo chambers that placated their own opinions about Bitcoin.
This isn’t the case with other cryptocurrencies. They have leaders at their helm. Ethereum has boy-genius creator Vitalik Buterin. Ripples have Harvard grad, Brad Garlinghouse. Both met with the Federal Reserve and central banks in October 2017. Bitcoin did not have a seat at the table for the meetings because they don’t have a representative face for its form of digital currency.
4. Laws And Regulations
China declared that creating an Initial Coin Offering, more commonly known as an “ICO” was illegal starting in October 2017. This came in the wake of many start-ups learning to use blockchain to mine their own spin-off crypto coins to raise funds. The problem was that the coins were fraudulent in many cases, with several fake coin companies ripping off desperate investors who were trying to get extra money from their ICOs.
New York laws require any business that intended to accept Bitcoin as a payment form to register with a “BitLicence” which is a bound agreement that they will comply with all US tax codes and regulations.
The application is an extensive 500 pages of paperwork that requires a team of lawyers to decipher and costs $5,000 to submit. With those conditions, most businesses figure they are better off not spending the time, money, or effort to accept Bitcoin. That means that only very few businesses will actually use Bitcoin as a currency.
Additionally, the IRS released a set of guidelines in 2014 for anyone profiting from digital currency, noting that there are tax-paying expectations much like investors who put their money into stocks and bonds.
Bitcoin came out of a revolutionary idea, and if the revolutionaries stick to their original idea, they won’t listen to the IRS. But if that happens, people will start being prosecuted for tax evasion, which will have a cyclical effect of putting an even brighter spotlight on Bitcoin users. At some point, there will be no choice but to comply.
5. Use Cases
In California’s Silicon Valley, many small businesses now accept Bitcoin, but the same doesn’t hold true for larger corporations who continue to only accept credit cards and cash. Unfortunately for Bitcoin, growing its prominence without selling and buying things from large companies will preclude them from actually having much of an impact on the financial realm.
As stated earlier, blockchain will still exist even if Bitcoin drops off the map. According to the Journal of Government Financial Management, blockchain tech can truly enhance current financial systems, but more successful use cases need to be provided first. At this time, Ripple is the only digital currency that is cooperatively working with the US Federal Reserve, proving that it can work with big corporations, credit card companies, and banks. They will even soon be processing American Express transactions.
This leads to the XRP (Ripple’s crypto coin) to be doing better. In fact, as of this writing, the possible use cases for the blockchain are happening for Ripple instead of Bitcoin. Ripple was even announced to run Bill Gates’s project to alleviate poverty in developing nations in 2017. In the past, it was Bitcoin that was promoted to help with this effort.
6. Problems With Time And Mining
The longer that Bitcoin continues to stick around, the harder it becomes to create new Bitcoins, or to “mine” them. Without miners to produce new coins, the Bitcoin network is not sustainable. Why are there a dwindling number of miners? It comes down to the exuberant cost of being one. In fact, average people have long since been priced out of mining, for the most part, retaining control of mining almost exclusively in giant Chinese warehouses.
The cost of electricity to run the computing machinery for the mining ends up costing more than the worth of the digital currency being mined, making the entire effort counterproductive.
The longevity of Bitcoin also negatively impacts the length of the mining process, since the blockchain needs to base the mining on all of the previous blocks, meaning it has to go through a lot of data.
At the time of writing, the official Bitcoin mining time is 1 hour, but that is the absolute best-case estimate and operating under ideal conditions with professional machines. Because it takes 15 transactions about a second to process, the full set takes about six hours at peak times of activity during the day. There is no improvement in sight, and it is far more likely to get worse as time goes on.
The situation is quite different for Ripple’s coin XRP. Not only does it process 1,500 transactions per second, but Ripple also has the infrastructure and technology in place to assure that the process will never become slower.
In the digital age, people expect near-instantaneous results, so the world is not in a place where they realistically adapt to the slowing down of a blockchain such as the one operating Bitcoin transactions. The number of users who will opt for the slower option, even with a higher currency price value will be significantly low.
7. A State Of Uncertainty, Fear, And Doubt
The current state of the Bitcoin market is one of extreme volatility. Bitcoin’s value can be swayed quickly in other directions, merely from the cryptocurrency being talked about in the news. This subjects the crypto community that has been dubbed the “FUD” effect, otherwise known as the “fear, uncertainty, and doubt” phenomenon.
When people begin to consider that this digital currency could potentially be rendered illegal in their country, be compromised by a virus, or be hacked, not to mention any system-related issue that could cripple it, the concern becomes very real, and it will cause panic that inevitably trigger quick sales. This could send Bitcoin into a plummeting crash, much like it would a stock market.
For those that think this is too far-fetched, they need to look as far back as the Great Depression or as recently as the 2008 recession to see that historically speaking, hesitation of faith can trigger a quick economic collapse. After all, what exactly do investors have to count on to assure them of Bitcoin’s value safety? Not much it would seem. Indeed, most people who have hung on to Bitcoin for a while have seen the profitability grow, but it cannot be perpetual, and one day, it will almost certainly take a downward plunge.
8. What Is The “Real” Bitcoin?
As noted earlier, the originator of Bitcoin, the mysterious Satoshi Nakamoto has vanished and so have the published opinions about Bitcoin he/she used to provide. Coders are just working with the original documentation he left behind in the Bitcoin White Paper. The problem is that 10 different people can interpret the remaining documentation in ten different ways.
Therefore, Satoshi’s words are going to lack context and won’t be very useful for contemporary challenges. With that in mind, many believe that Bitcoin will inevitably have most of its investors desert it, moving their cryptocurrency to another, more reliable platform.
Developers, knowing of this possibility, have created a “hard fork” solution. Bitcoin Cash is an example of such a “hard fork,” and while it will inevitably continue to have some of the old problems adapted from the original Bitcoin source, other “hard forks” or copies of the original with tweaks and modifications, will result. In fact, Bitcoin Gold has already been made a reality as another fork of Bitcoin Cash. Originally, this plan, dubbed SetWit2x, resulted in a sharp spike in Bitcoin’s original price and was therefore called off.
Satoshi Nakamoto owns billions of dollars in Bitcoin, but he has made his cut-off from the project crystal clear. Perhaps he is somewhere on a private island enjoying his funds while coders continue to argue over which digital coin gets to be called the “real Bitcoin.”
9. Bitcoin Is Loathed By The One Percenters
There is very little love for Bitcoin by heads of major corporations. In fact, the rich in general seem to have a sour taste from this cryptocurrency form. JP Morgan Chase CEO Jamie Dimon has called Bitcoin a sham and a fraud, declaring that it is doomed to fail, even if at one point every Bitcoin is worth $100,000.
Some of the most powerful people in the world come out annually to the Toronto-hosted banking convention known as SIBOS (Swift International Banking Operations Seminar), run by SWIFT (Society for Worldwide Interbank Financial Telecommunication), a major company currently in charge of how the world uses banking transfers. Bitcoin has rendered its technology, which moves quadrillions of dollars worth of transactions, outdated.
So banks are moving billions annually with technology that has been dwarfed in safety and efficacy by blockchain tech, and SWIFT does not like having its toes stepped on.
Their CEO Gottfried Libbrandy said at the October 2017 SIBOS that their company was trying to develop technology that would enhance the speed, anonymity, and security of banking transactions. In other words, they want to generate their own blockchain, but he admitted it would take them years to get such blockchain tech off the ground.
Ripple, an alternate cryptocurrency saw right through the posturing. So confident was Ripple’s stance, that they would easily overtake SWIFT’s efforts, that they boldly scheduled their own currency conference, SWELL, at the same time and in the same location as SIBO. This bold move paid off, as they secured hundreds of new banking partners eager to work with their blockchain technology. This had once again left the 1% fuming at crypto’s act of coming in and taking over.
10. Bitcoin Is The Arbitor Of Things To Come…To An End?
Bitcoin’s most ardent supporters are revolutionaries, who hope that people will abandon traditional banks and move to use Bitcoin for general banking needs and transactions in the future. When Michale Lewis was looking to write his follow-up to Moneyball, he talked to the Bitcoin rebels in Silicon Valley. He was floored as he sat with these supposed revolutionaries as they lit up joints and talked about their future ideas. He walked away feeling far less hopeful about cryptocurrency and Bitcoin, in particular, choosing to abandon the idea for his planned book.
Why did he feel this way? Well, in order for the plan of the people he spoke with to work, that plan being that people abandon traditional banking and move to Bitcoin, the world’s economy would need to suffer an unmitigated collapse. If that occurred, people would be left without jobs, lose their homes, and quite possibly their lives. Luckily, revolutionaries actively pushing for that type of drastic collapse are few and far between.
In another, somewhat tangential example, Vice News reported that they spoke to a member of the vigilante hacker group Anonymous, who informed them that the group lost members largely to having their organization rife with distrust. Some revolutionaries talk a big game but never follow through, others don’t have the know-how to execute anything. Mostly, the ideas pitched for such a revolution are just young people writing about how they think the world can change, never actually presenting methods by which to achieve it.
If Anonymous can crumble, Bitcoin is nowhere near safe either. And even if Bitcoin could instantaneously change everything, would it really blow up the economic world to achieve its planned goals?
Bitcoin Will Fail: Conclusion
In conclusion, while there are valid concerns surrounding the future of Bitcoin, it is important to understand all sides of the story. The top 10 reasons for Bitcoin’s potential failure should be weighed against the potential benefits and innovations that it brings to the financial world. We encourage readers to explore more by reading the next article, “TOP 10 Most Shocking Facts About Bitcoin You Didn’t Know“, to gain a more well-rounded understanding of this complex and ever-evolving topic.
Frequently asked questions:
Why i bought bitcoin for my child?
I bought Bitcoin for my child as a long-term investment. I believe in the potential of cryptocurrency to grow in value and provide financial security in the future. Plus, it also serves as an opportunity for my child to learn about money management and technology at an early age.
How much is .03 bitcoin?
in 2021, .03 Bitcoin is approximately $2,400 (subject to frequent fluctuations in the market). This value may change over time and it’s important to stay updated with the latest exchange rate.