I have several thoughts regarding the Currency Phenomenon. I am interested in hearing anyone's responses.
1. As the cost of processing bitcoin transactions (mining) continues to increase over time, once the cost becomes prohibitively expensive, who will process the transactions? Why would anyone be willing to spend their money on hardware & electricity with no return on their investment? And when nobody is willing to do it anymore, won't the currencies collapse?
That is where the talks for a new algorithm comes to play. When the time comes that a single transaction costs $100, wouldn't it be feasible and most importantly economical to just remove the miners and look for better alternatives in processing transactions instead?
2. There is an interview on YouTube where a guy says that bitcoin has value, because people spend money to create it by mining it. This is a fallacy. Spending money to produce something does not automatically give it value. Many useless, worthless things are created every year that nobody wants. All of those things cost money to make.
Exactly, just like the government spends money on creating fiat doesn't necessarily mean that fiat has value because it costs to make them. The thing is, bitcoin has value because a lot of people agrees that it is priced X in their own currencies. It's a subconscious agreement from all the people which makes an item worth something.
3. Some people believe that cryptocurrencies will completely replace physical currency, that cash will be obsolete. I feel that would be a dangerous situation. Once all money becomes digital, the power grid will become the number 1 target for terrorists. Also, as fossil fuel reserves are depleted, the cost of electricity will rise significantly. There is still no way to generate the amount of electricity the world needs by alternative means. Nobody is sure if it can be done.
Replacing cash with bitcoin isn't going to happen. Bitcoin doesn't meet all of what fiat can do.
4. Many people seem to think that bitcoin is somehow inherently democratic, but I think the opposite is true. Clearly, those with the most money are able to mine bitcoins much more rapidly.
I am interested in your thoughts...
Mining has become centralized since the advent of ASIC miners. Only rich ass dudes with the fat bank account can buy these big boys and hash bitcoins for a living, which somehow makes the "decentralized" nature of bitcoin untrue.