The future of Bitcoin
Updated: Oct 29, 2019
I became interested in Bitcoin about 2 years ago. I'm not interested in the price of bitcoin. I got interested in Bitcoin because it was interesting technology and it had the potential to do much good. The idea of providing a stable currency in countries like Venezuela and the like had great appeal, and use of Bitcoin for crime seemed to have abated.
So where are we now? Bitcoin has spawned hundreds of imitators, so called alt-coins. Some are clearly attempts to get-rich-quick, others have specific purposes such as enhanced privacy. I will generally not talk about coins that are not outside the top 10 by capitalisation.
Two World Views
There are two basic ways to view the purpose of cryptocurrencies: digital gold or digital cash.
Digital gold sees cryptocurrency as a store of value.
Digital cash see cryptocurrency as predominantly as electronic cash used to buy and sell things.
The two views of cryptocurrency create different demands on the underlying technology. Bitcoin is known for low transaction throughput (3-4 transactions per second) and high fees, but since Bitcoin see itself as digital gold, that does not matter. Bitcoin SV, probably the only cryptocurrency of note pursuing the digital cash vision, needs to be able to provide high throughput and low costs. Just to compete with Visa or Mastercard, Bitcoin SV needs to be able to process at least 50,000 transactions per second. To really pursue the digital cash dream, Bitcoin SV will probably have to process millions of transactions per second.
So which world view will win?
Both. Each world view creates its own market. If you want to speculate or retreat to an alternative asset class during a recession, then one of the digital gold coins is for you. Bitcoin (BTC) is the clear front-runner in this market and almost certain to remain so. On the other hand, if you want to buy stuff then a digital cash coin is for you. At the time of writing, only one coin, Bitcoin SV (BSV), is a serious contender for a digital currency, and it still falls short on a number of measures.
The digital cash, or electronic cash, market is a tough one. Any cryptocurrency will be up against non-cryptocurrency alternatives such as PayPal, Alipay, M-Pesa, Visa, MasterCard and even Western Union. It is not particularly clear what advantages cryptocurrencies have over their competitors. A farmer in Zambia or a factory worker in Shanghai doesn't really care whether the computers behind his transactions are running block-chains or not, and neither does a shopper in Oxford Street.
The digital cash market is high risk, however it potentially dwarfs the size of the digital gold market. It is well worth companies like nChain pursuing their vision.
Talking amongst themselves
How well is the crypto communities addressing these isssues?
Too much of the discussion surrounding crypto involves technology decisions and unrealistic assertions about how crypto operates.
Lack of Focus