Opinion: How bitcoin has turned into a broken Cup and can it be fixed
The cryptanalyst John Block criticizes the idea of bitcoin as a store of value, drawing attention to the fact that he has always been and remains primarily a digital money, and comes to a somewhat ambiguous conclusion (which may not coincide with the position of the editorial Board Coinspot). Original article published on Medium.
A Cup is useful when we drink from it, and do not keep in the closet. Bike useful when we go on it, and do not keep in the garage. Of course, we can say that a bike or Cup — useful items, even if they are not used, because they retain their usefulness for the case when it becomes necessary.
Broken Cup or a broken bike cease to be useful because their value comes from their functionality. What loses its functionality, lose value. Broken Cup can be useful for the artist, but the rest of the broken items do not particularly need. People even pay for something that someone took out the trash!
How does this relate to bitcoin? Beginners are often faced with the opinion of “bitcoin experts” such as Samson, MOU, Tone and Weiss Seinfeld Ammos, insisting that the original intended usefulness of bitcoin as a decentralized payment system is no longer relevant. This attitude has stifled the spread of bitcoin and has led to the emergence of a new “antiproteinase” movement, which promotes a few points:
White paper is outdated. Since then things have changed. Newton’s laws too old, and since then much has changed. However, they are still in force, because scientific breakthroughs over time, not lose its relevance.
White paper — not the Bible, but Satoshi is not God. A substitution of concepts. People refer to the white paper because of the elegant solutions in it, not because I think its author is infallible.
Satoshi didn’t know how this system will evolve, and doesn’t know what bitcoin will become in the future. Satoshi was not a psychic, but your work and posts on the forums he has represented bitcoin as a money and payment system. He never talked about bitcoin as a means of savings. He also noted that the bitcoin payment network can overtake Visa and that mining will naturally move to specialized “server farm”. He clearly saw the future development of the system.
We don’t need to store each payment for the coffee in the blockchain. The blockchain is a “level of regulation” but consumers will use a Lightning Network for transactions. Cryptocurrency is here; if bitcoin can not compete, it will be superseded by other systems that can process payments for coffee. The fact that you are using the Lightning Network, only confirms that the payment function of demand.
Bitcoins do not have to be a good payment system, because it is primarily a store of value, a digital gold. Visa and MasterCard work better as a payment system, and you can even get cashback 3%! 2 billion people live outside the banking system and can’t use PayPal or credit cards, so bitcoin may become a useful alternative in the market of international payments. It’s funny that some “bitcoin maximalists” promote centralized companies dealing with credit cards.
This article focuses on the myth of bitcoin as a means of saving and how blind those who support it. Gold is considered to be useful as a means of savings because people believe that when the time comes for its actual use (e.g. sale or exchange), there is someone who will buy it (and this, incidentally, is not the easiest process). Gold is useful as a store of value because it is universal and is considered valuable worldwide. Gold has value, can be an asset, but is not money.
Bitcoin is the other. It was conceived, implemented and presented to the public as a new form of money. Its only function was to satisfy users ‘ needs in the best way of transferring value from one person to another. He was (and still is) revolutionary, because for the first time in human history people were able to transmit almost any number of values at any distance without borders, the involvement of intermediaries and regulators.
Cash is considered as something very useful. It is possible to spend in virtually any shop or sell to any person you encounter in everyday life. Very few will pass a hundred dollar bill and not raise it. Cash giperplazia because, like bitcoin (unlike previous attempts of electronic money), it can be transferred to any person in any amount, without any control. Satoshi Nakamoto overcame the gap between cash and electronic money, creating the world’s first form of electronic money which had similar properties with cash. But this system has surpassed cash, because she did not have many of the disadvantages of physical money. Bitcoins do not break, burn, fake, forgotten in a basement with rats, they weigh nothing and take no space. To carry $100,000 in cash across the border is difficult and risky — remember mnemonic phrase and carry $100,000 in my head it is really and safely.
Even more revolutionary is that bitcoin eliminates the properties of gold that make it inconvenient, and takes the best like cash and gold, reducing them to the purest essence.
As a Cup in the cupboard and the bike in the garage, cash in your wallet or under the mattress remain valuable because they very likely will be useful in the moment when you want to use them.
At the end of 2017, bitcoin has become “too popular”, and the developers of Bitcoin Core has refused to scale the system for the influx of new users. The average fee has soared to more than $50 per transaction, and average waiting time of confirmation increased from ten minutes to several days. Then it was cheaper and faster to use the old payment systems. Has been violated the value that was originally proposed bitcoin, so the myth about savings began to be taken seriously.
This myth was promoted by Bitcoin Core developers and their supporters; according to them, bitcoin was never meant to be money, and the payments were a byproduct of its primary value as a means of savings. This statement is similar to the fact that the movement is a secondary function of the bike, which is primarily scrap metal.
At the end of 2017, the bitcoin was really unsuitable for payments. But it was not useful for bicton as a means of savings, because it could not guarantee its transfer to the exchange at the right time. Even more undermining a reputation of “savings” was the fact that the people who bought bitcoin at $20 000 (because they said it was a good means of savings), since then lost about 70% of its value.
I’ve heard the counterarguments: “the Fee was high, because Roger and Cihan spammed the net! SegWit and packaging transactions solved the problem, bitcoin is useful again!” It is very far from the truth. SegWit never had more than 40% support (even at 100% support, it would ensure that the increase in throughput is only 40%), and most transactions were not packaged. The only reason bitcoin has again proved useful, in that the network utilization has declined sharply to about half the daily volume of transactions in 2017. Nonetheless, the Commission remains high enough to exclude most cases of everyday use (payments up to $100 and microtransactions).
The only remaining usefulness of bitcoin lies in its use as a speculative toy. You can easily pay $1 fee if you use bitcoin only for input to the crypto currency exchange and withdrawal. The Commission of $1 means that nobody is going to pay them for coffee, small shopping online or use as money in countries suffering from hyperinflation.
Bitcoin can be forgotten, but a revolutionary electronic cash system created by Satoshi Nakamoto, remains. In August 2017, when the developers of Bitcoin Core has demonstrated undue stubbornness, a group of early supporters of bitcoin has listened to the community and held a fork of bitcoin, creating a parallel network that continues to function as a useful form of money, Bitcoin Cash.
The value of bitcoin (and its ability to be a store of value) is inseparable from its utility as a form of money and the ability to use more and more number of people around the world.
See also: the many faces of bitcoin: How changing ideas about the main cryptocurrency