Hello,
I have been thinking a lot about BTC, how nice and beautiful it can be, but I came to the conclusion that it reached its maximum spreading. Here is why.
PreludeI know that a lot of bitcoiners think that banks = evil, and that they should not make money. I am not gonna discuss that matter here ; even if I do not understand why private companies (banks) are less legitimate to make profits than companies selling water when people can't stop drinking water, or companies that have to employ young children 12 hours per day in China to manufacture products. I will only focus about bitcoin and fiat currencies.
Why do people use bitcoins?I can see only 5 main reasons that make people using bitcoins:
- for buying stuff online (but only occasionally).
- for buying illegal things online (drugs).
- money laundering.
- for investing, and making some profit.
- eventually, as a safe haven like gold.
1) Buying products onlineThe first use of bitcoins is to buy stuff online. You can go
here,
here for digital goods or
here for computer hardware for example. You can also go to
bitmit to buy some other stuff, or different online shops that accept bitcoins.
The number of shops that accepts bitcoin might increase in the future, but it will be used only
occasionally.
The first reason is a
trust matter. When you send bitcoins to a seller, you have no idea if he will ever deliver you the products (ask
BFL). You can use an escrow but (1) it is a hassle and (2) you have no more clue that the escrow is more trustworthy that the seller. So basically you are sending money, hoping to receive the product, without any guaranty. When you pay with fiat money, you can easily charge back, or get refunded in case of a problem...
The second reason is about
the price. What is the point of buying something, if you can have it cheaper somewhere else? There is 2 ways of getting bitcoins: mining or buying. Mining will be hardly profitable, and if you have to buy bitcoins with fiat, pay the exchanges fees, and then pay the bitcoins fees, you will end up with paying an higher price rather than paying with a Credit Card...
Therefore, it will mainly stay at a smaller scale, like now, with occasional transactions, and for cheap stuff, or when anonymity matters.
2) Buying illegal stuff onlineI will develop a lot this part, but if you want to buy drugs, you can go to silk road. Of course, it is only a small aspect of the bitcoin economy, but at least this part will remain.
3) Money launderingI am not gonna explain much about it as well... But bitcoin can be used to do that.
4) InvestingWhen media spoke about bitcoins earlier this year, a lot of people wanted to invest in bitcoins to make money. Still, some of them are using this
sub-forum to speculate about bitcoin price and make some profit. At the end of the day, they do not care about bitcoins, and they only want to make some dollars.
https://bitcointalk.org/index.php?topic=288699.msg3092674#msg3092674Bitcoin is a waste of time.
It is only good for turning $ into more $.
Nobody is really interested in Bitcoins, everybody is only interested in making more $ through Bitcoin.
5) Asset?I do not know if people are doing that, but eventually bitcoin can become like gold an asset that people buy thinking that the value will remain constant or increase in the future (hoarding? Not sure if that is the correct term).
Why bitcoin is popular for scammers?Bitcoin transactions are irreversible. If you send 1 btc to an address, you can never get it back, if the owner does not want to. There is no regulation, no police ... That's why it is a scammer paradise. You can see people giving IDs (fake or not), and scamming for less than 10 dollars
here.
If you manage to get some bitcoins, you are free to do anything with it. Nodoby knows who you are, and you can spend them as you like. That's why a lot of wallets got hacked, or mt.gox accounts. Even with SMS double authentification, you can find in the forum people crying and complaining about compromised accounts.
Bitcoin-central got hacked twice, and instawallet is still struggling to refund compromised accounts,
5 months later.
Why bitcoin can not extend more?There are
4 6 7 main reasons:
- what I just said before (about scammers). Bitcoins is unsafe for customers, because transactions are irreversible.
- because it is not convenient to use.
- because the fees are too high
- because confirmations are too slow.
- because the value is changing too quickly.
- because people don't trust it.
- block size.
5 reasons to use bitcoins, but only the first one is interesting to increase the spread of bitcoins. Buying drugs, money laundering, investing and hoarding are just anecdotic. The main thing that could extend bitcoin is the ability
to buy more legal things online (point 1)... But it should not be able to exceed current stage.
1) ScamsBitcoins is not safe for customers. If your wallet is hacked, noone will never give you back your fund. You can't file a complaint and upload evidence. You are fucked up. Therefore, it will never be reach a massive adoption, if it does not become safer. And it can not become safer because of what it is: irreversible transactions.
2) Not convenient to useWhen I first downloaded the client, I knew nothing about IT, computers, and crypto. I installed the software, and I read some stuff on internet. I found it really difficult to learn about, and I stopped reading quite quickly because I understood nothing.
It is not user friendly. When I use my phone, I am not Einstein, I know nothing about telecommunication, modulation, demodulation and so on, but it is really easy to use.
I tried to download the blockchain. It took ages. I gave up.I searched more, and register on an online wallet (blockchain.info).
But who will do that? Any new user, will just give you and forget about it. If you open the software and find it difficult to use, lousy, you won't bother persevere.
3) Fees are too highBitcoins fees will become higher and higher. Block rewards will decrease, so the miners will have to increase the fees if they want some incentive to keep the things running. For a customers point of view, Credit Card are free of charge, and can even make you save some money (cash back).
Anyway, you have to buy bitcoins one way or an other: by investing in a mining equipment, or buy buying it directly. So, you have to pay some fees in order to convert fiat -> btc. You can get paid by bitcoins, but it is unlikely to happen due to the high volatily of the price.
Then, when you make a bitcoin transaction you have to pay for the network fees, and often for the websites/sellers fees... So, at the end of the day, you pay more than if you did not buy bitcoin. You gain in anonymity, but you pay more. And for legal purposes, it is bad.
4) Confirmations are too slowAn other problem is that confirmations are too slow.
Credit Cards take up to 180 days to proceed but they confirm within seconds.
Bitcoin transactions need at least 1 confirmation to proceed (because of double spent). And up to 2 - 6 confirmations to proceed. So, it is much faster to proceed but much longer to confirm. Problem is that only confirmation is important: it is the time you wait before leaving the supermarket.
And it won't be possible to wait a couple of hours or days with your bags at Walmart, before the transaction is confirmed...
5) Price volatilityWith 10k bitcoins in 2010 you could buy a pizza. Now, in 2013, you can buy a house, a car, and a kidney.
With 10k usd in 2010 you could buy a car. You still can buy a car now with the same amount of money.
It is compulsory for a merchant, to have a price stability. If you can buy 1 products or 3 with the same amount of money depending on the day of the month, you rely too much on the current price, and you can't run a decent business. Imagine that you get paid a car just before mt.gox lags and crash: you would have lost more than half of the price of the car....
Bitcoin price will always be volatile because of the tiny market, and it is not going to implement a stable economy out of it.
6) TrustDid you ever try to speak to anyone who does not know anything about bitcoin? What did they say?
"- I don't trust it, it's a crap".
If people don't trust something, they will not use it. Why would they trust bitcoins if they can lose it all anytime?
Why would they trust bitcoins if the value can change so quickly?
Why would they trust bitcoins if it is not backed by any government in the world? By nothing at all? And can be attacked/abandonned/cracked anytime.
They simply won't. And they do.
7) Block sizeThe current block size limit is 1 MB, about 2000 transactions maximum can be recorded in each block.
Imagine that miners want 50 btc / block like before, it means that every transaction should have at least a 0.025 btc fee. Assuming that btc price rises and reach a value between 500$ and 1,000$ it will cost between 12 and 25$ per transaction.
The second problem is simple: 2 000 transactions / block means 200 transactions / min maximum. This is not enough for the whole world.
ConclusionSome improvements can be make in order to create some tool more user-friendly.
It is also possible to fix some issues with the confirmations.
But some intrinsic aspects of bitcoins make it not possible to be used widely like USD or EUR:
- transaction are irreversible (good for scammers - trust problems with sellers).
- fees will grow higher and higher, and you can't do anything but buy btc. So, why not just buy it with fiat?
But it does not mean that bitcoin will disappear. It does not mean that it will be worth nothing in 2015.
It will be used, like it is now. Maybe by more people in the future. The price might increases if people thinks that it is a safe asset, and that its value might increase in the future. The number of shops accepting bitcoins might even increase. But we will never go to the next step.
BTC is not going to replace fiat.
BTC is not going to rule the world.
BTC was not intended to.
