Is Bitcoin Flawed?
Economists are beginning to wonder: is Bitcoin flawed as a currency?
Bitcoin is the first real cryptocurrency to be widely recognized and used by mainstream companies. It's the "first" in many situations, including the first cryptocurrency to really be observed and traded like stocks or ETFs.
As one of the first cryptocurrencies out there, Bitcoin has paved the way for a multitude of other currencies used on the Dark Web. With all the success it's had, it's hard to imagine that this private blockchain currency could ever fall.
However, as use and notoriety continues to grow, many economists are wondering, "Is Bitcoin flawed?" Here's why many economists and cryptocurrency groups are beginning to hesitate when it comes to investing in the ever-popular Bitcoin.
Is Bitcoin flawed on a fundamental level? Yes.
Prior to Bitcoin, there has never been a currency that was used without any government backing or guarantee. The creator of Bitcoin, Satoshi Nakamoto, was open about the fact that Bitcoin was a prototype — in other words, this wasn't supposed to be the final product.
With a typical prototype, you end up using the product, finding the flaws in it, and improving it so that you have a better product. Bitcoin is still a prototype, and the fact is that there are serious issues that need to be ironed out in order for the currency to be stable.
So, is Bitcoin flawed on a fundamental level? Yes, primarily because it's still a prototype — and experts have been beginning to find the holes in Bitcoin's "flawless" plan.
The set number of Bitcoins means that it's a fixed economy.
With regular currency, there will be a need for more money as the economy grows. More people means that more money will be needed to be made, specifically because of the law of supply and demand.
Having a limited amount of Bitcoin means that the value of the money will go sky-high and will become unattainable for many.
Moreover, this flaw also turns Bitcoin into a speculative fund. Speculation has, historically, been linked with major market crashes and "bubbles."
The same pattern always happens with speculation. While some will be living the lavish life with Bitcoin, others will just sit on the coins without spending them. If too many speculators exist, that makes the value of the stock plummet. This is what caused the Great Depression to occur, and it's likely that it will eventually happen with Bitcoin as well.
Is Bitcoin flawed on an investment level? Absolutely.
The fact is that Bitcoin has been flawed due to its set market cap — and the truth is that the speculation alone has already been wreaking havoc on its values already. Bitcoin is notoriously volatile as a currency.
This makes it a dangerous longterm investment, and even short-term investors are beginning to find themselves harmed by the sheer volatility of the "stock" that Bitcoin has. When you combine that with a lack of government backing, it's easy to see why economists are beginning to believe Bitcoin will upend itself in the future.
But, the actual investment in coins isn't the only issue on deck. Rather, Bitcoin's mining process also has major flaws that are already beginning to reveal themselves en masse.
Bitcoin mining is the process of authenticating Bitcoin transactions in exchange for more Bitcoins. The rate of payment for each authentication has been getting halved every couple of years — all based on the number of transactions.
On the surface, this doesn't seem to be that much of an issue. However, the problem is that the effort it takes to authenticate a transaction has gotten larger, the equipment investment you need to make to start has skyrocketed, and this form of income is no longer feasible for small groups or individuals.
Simply put, authenticating Bitcoin transactions is no longer a lucrative business idea for most people. This also means that bigger businesses that want to give it a shot may end up deciding against it due to the lower profit margins.
Less incentive for authentication groups means that it no longer will be worth it to authenticate transactions... which in turn could wreck Bitcoin as a currency.
Is Bitcoin flawed in terms of security? Yes — in more ways than one.
The vast majority of people use Bitcoin as a way to stay anonymous online, and that's actually a pretty bad way to go about things.
It's worth pointing out that Bitcoin isn't always as anonymous as people hope it to be. There have been a number of moments where Bitcoin has proven itself to be a flawed currency in terms of security, including its role in the discovery of Silk Road 2.0's IP address.
Even Snowden admitted that Bitcoin has its flaws that could be exploited on both the transaction and blockchain ends. So, it's very possible to be "found out" if you're using Bitcoins for illicit transactions if technology gets good enough for that purpose.
That being said, it's also flawed on the end of mainstream use as well. How is Bitcoin flawed for mainstream use? Well, it's simple. A lot of people want to track all their mainstream transactions, especially for things like rent. Bitcoin is designed to be untraceable, which means that it can't be used like that without serious coding being done.
Realistically, the question shouldn't be "Is Bitcoin flawed?" It should be, "When will people realize that Bitcoin is flawed?"
Clearly, Bitcoin is going to have a lot of problems in the future — problems that most people will not expect to see. If you're wondering how is Bitcoin flawed but successful, you don't have to wonder too much. It's the fact that people aren't wise to the flaws, or are actively ignoring the warning signs.
How long will it take before most people begin asking if Bitcoin and other cryptocurrencies are sustainable remains to be seen, but don't be shocked when it happens... because it will happen.
About the Creator
Cato Conroy is a Manhattan-based writer who yearns for a better world. He loves to write about politics, news reports, and interesting innovations that will impact the way we live.
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