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Before I start I want to say I do think Bitcoin is useful and will be around in the future. I have mined, bought, sold, and still hold some of the cryptocurrency. But the idea that it will replace the currencies of the world is just not possible and let me tell you why.
- Bitcoin being worth so much makes it too difficult to break into small transactions. At 50,000 per Bitcoin if you wanted to purchase an item that is $10 it would cost .0002 bitcoin not to mention transfer costs. As Bitcoin is a fluid in it's value these small transactions are nearly impossible to price.
- Slow transaction speeds. With the network confirmations taking minutes instead of seconds there is a lot of risk waiting for a transaction to pass if the person is walking out of the store with an item. No one wants to wait for a transaction to pass if that could be 10-40 minutes.
- It can't handle the transaction volume. There are thousands of transactions per second in the world and the Bitcoin network is not designed to clear them as last I checked it could handle approximately 1000 transactions per minute not the 20,000+ per second it would need to really be the currency of the world.
- It is deflationary. This can be a major asset in a lot of ways but for a currency this is a negative as it convinces people to hold and wait as the value will continue to increase. This is not a good way to have a currency as economies work only when individuals keep spending and moving money around.
Now with it not being a currency what is Bitcoin? I think there are two things it will become and this will be important going forward.
- Inflation protected asset similar to gold. This is really what I think Bitcoin will be is something that increases in value and becomes a place to park funds that are separate from the funds that countries can print preventing the balance from being eaten away. I think the wealthy along with companies will eventually realize this and put more funds into Bitcoin.
- Transferring money between currencies. This will just happen as the wealthy park more assets in Bitcoin they will realize how quickly the can move assets around the world to currencies they need to purchase whatever they want. Need Euros no reason to use the bank if you have Bitcoin. Need Yen no problem. Yes I understand banks will bend over backwards to help someone who is wealthy but I think the majority of people could benefit from this with how high fees are to change currencies. Then you also have the fact that Banks are closed frequently and this would mean you don't need to wait.
So in my mind Bitcoin is here to stay but my original thought in 2011 that it would replace dollars or any currency have changed in my mind to a storage of wealth and quick transfers.
All thoughts in this are my own and they could be right or wrong so think for yourself if you want to purchase any cryptocurrencies.
