In 2009, Satoshi Nakamoto released a whitepaper and the open source implementation of a peer-to-peer electronic cash system, named Bitcoin. And this is the beginning of what some may refer as the revolution of the currency system.
I will not get into the technical details and theories of Bitcoin, but would rather talk about what I think Bitcoin means to the society. Maybe I’ll start by looking at few aspects:
Coverage
As of February 2020, it is estimated that there are 7 million active Bitcoin users. If compared to the total number of people connected to the Internet (about 5 billion), there are only about 0.14% of Internet users have Bitcoins. This figure is a far cry even compare to decent software or application.
This means that the hype that Bitcoin had created is further than those that actually use it. Most might had heard of it instead of using it. The estimated number of transactions daily is about 300k, which is also very small compare to the number of transactions made using other means of payment.
In short, the level of Bitcoin’s distribution and usage is probably less than it is anticipated.
Price
Due to how the consensus of Bitcoin is designed (Proof of Work), the energy consumption required to process a Bitcoin transaction is unacceptably high. The power consumption required for the calculations exceeded many countries’. Due to the nature of Bitcoin’s consensus is actually guess work and competition, most of the energy consumed is actually waste. This makes Bitcoin very not ecology friendly.
In other words, if Bitcoin is used in daily transactions of people’s life, it won’t be sustainable. This very ‘flaw’ prevents Bitcoin from any chance of wide-spread usage.
Timeliness
A Bitcoin block is created every 10 minutes on average. However it is also possible that a block to be invalidated due to split (racing condition where more than one party solved the PoW and leads the chain to more than one direction). This makes the Bitcoin community generally take 6 blocks are a good confirmation that a transaction is validated (or accepted) — about an hour.
Compare to any other payment methods, time needed for each transaction to be confirmed is too long. This is far from any acceptable level of speed, especially in this world which is getting less and less patient.
Recognition
Bitcoin is designed to be fully decentralized without any central authority. Due to this nature, some countries outright banned (whether explicitly or implicitly) its usage. Some countries warn user to be cautious, even from the free world leader (USA).
The legal status of Bitcoin as a valid asset is mostly questionable. While this may changed over time but there are still quite some challenges ahead.
Personal opinion
I personally do not take Bitcoin as a form of currency, at least not comparable with any fiat currencies. The term “mining” used on those involved in competing to solve each block is very accurately used, in my opinion. Like any precious metals, the value of Bitcoin is reflected by how hard it is to be “mined”. Because there is no central authority, its value is guaranteed and trusted.
Bitcoin, in my point of view, is a digital form of precious metals. Although nowadays currencies are no longer backed by gold, but Bitcoin will work almost equally well with gold if needed. Bitcoin will act reasonably well against currency devaluation, especially if viewed in the long term. It may be a good alternative of other precious metals during volatile times.
Not all cryptocurrencies are created equal. The trustworthiness in cryptocurrencies is not only determined by its consensus mechanism, but actually by how many of its users actually believe in its consensus. So far, Bitcoin had been quite well in this aspect, but it’s performance during absolutely risky times had not been tested.
And that’s my 2 cents, not in Bitcoin though…