Is Bitcoin’s Promise Waning Away?

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What is the current scenario in Bitcoin mining?

Bitcoin as a transforming global currency system, the venture capitalists talk about it rendering the governments powerless to police monetary transactions. But now the cryptocurrency seems to be fighting for survival.

It came to light when an influential Bitcoin developer Mike Hearn, took the courage to declare the cryptocurrency a failure by disclosing that he had sold all of his Bitcoin. As the price fell 10% in a single day, it meant a sad result for those who lost money on it. 

With great potential, Bitcoin is now damaged beyond repair and replacement is what is badly needed. Most currency and transaction systems are opaque inefficient, expensive which is a truth. 

To consider the example of Venezuela, the citizens wish to buy anything on supermarket shelves while waiting all day as hyperinflation causes a lot of paper currencies in the pocket to lose significant value every day.

As the migrant workers there send money back to their families, in places like Mexico, India, and Arica, money transfer companies gauge them to pay as much as 5%-12% in fees. Payment processors even in the US and credit card companies collect merchant fees of 1-2.5 % of value for every transaction burdening the economy.

Bitcoin All Set To Revolutionize The Current State

It was aimed that Bitcoin would change this, but it was born with serious flaws. Being unregulated and providing anonymity, it has rapidly become a haven for anti-social elements like drug dealers and anarchists. With wild price fluctuations, that allow crazy speculation, the majority of the Bitcoin owned by a small group, is promoting it and compared to the Ponzi scheme. 

With severe security vulnerabilities, exchanges built on top of it led to venture capitalists being carried away. 

By purchasing considerable coinage several of them began to hype it as a powerful disruption underpinning all manner of financial innovation ranging from mobile banking to borderless instant money transfers, pouring millions of dollars into Bitcoin startups hoping to reap even greater fortunes.

As Bitcoin was not ready for prime time, Hearn’s criticism laid bare the reality which was a list of negatives both long and frightening.

How Is The Chinese Miners Faring?

While controlling 50% of currency creation, Chinese Bitcoin miners are connected to the rest of the Bitcoin ecosystem through the Great Firewall Of China. As it slows down the entire system, as Hearn explained, it is the equivalent of a bad hotel Wifi connection. It also helps in giving the People’s Army a strategic vantage point over a global currency.

With Bitcoin distributed network processing only a handful of transactions, per second, it is sure to cause unpredictable transaction resolution time and much other behavior that one does not want as part of a monetary system. Sometimes Bitcoin fees at peak time exceed credit card fees, for example.

Adding to all these negatives, the Bitcoin community appears to be engaged in the open civil war, with members censoring debates and attacking each other’s servers. Along with a tiny committee comprising of five core developers, the controls of the Bitcoin codebase becomes the star chamber guiding the future of the Bitcoin.

Even though it has been a severe blow to the reputation, and the wallets of VCs, some of them are yet staunchly defending the Bitcoin.

How Will Blockchain Influence The Bitcoin?

As Bitcoin needs to be scrapped, and take advantage of innovations, behind the technology, it underlies Bitcoin: the blockchain. Spotted as a transparent ledger of transactions, this blockchain that is concurrently hosted on different computers around the world allows the creation of digital currencies and virtual banks. 

When implemented correctly, it will prove to be a better transactional and verification model presently used for the global financial system as well as other types of activities like voting, public registries, the provenance of works of art and real estate transfers. 

We have learned a lot about how digital communities shouldn’t operate from the failures of Bitcoin. We have watched how the ledger systems are hijacked. With great wastage in the mining system that we have seen, it consumes gigawatt-hours of electricity and has already spawned giant server farms in China solely to the crunch numbers to mine Bitcoin. 

Concluding Thoughts 

Learning from successful open-source tech projects like that of Linux Foundation has largely proven worth as a neutral body that governs all manner of open-source projects while it grows bigger or small groups to be managed weakly. It is necessary to rethink aspects of blockchain along the lines that Hearn and Bitcoin loyalists have suggested. 

Bearing in mind is this that makes some venture capitalists Bitcoin zealots: pure greed. The reason that is clearest to Bitcoin’s failure is that it is intended as a level playing field with a more efficient transaction system, thereby making the Bitcoin system deteriorated into a fight that is between interested parties over quite a big pool of money. 

Though a noble experiment, in the beginning, Bitcoin now is a distraction. It is high time we built more rational, transparent, robust, accountable systems of governance paving the way to a more prosperous future for everyone.