As bitcoin passed the barrier of $10.000 yesterday, I’d say it’s important to think about the future of bitcoin and cryptocurrencies. In this article I will focus on some of the current uses of bitcoin, the downsides of bitcoin, and what kind of coin we would need in the future.
I would say that bitcoin-users can roughly be divided into two categories:
- People who value the blockchain technology and like the idea a currency without centralised governance (idealism)
- People who are interested in making a money (speculation)
Or maybe there is a third category:
- People who use bitcoin to buy things
Though I would argue that this third category is, besides the darkweb use and such, a lot smaller than the other two.
Now, what is interesting, is that we have seen a new technology arise, namely blockchain. A technology that allows to do transactions that are safe and secure without a third party such as a bank.
In the beginning there has been a lot of scepsis. I was also doubting whether this technology was safe, whether the code was correct and working. When I was at a talk about cryptocurrencies back in April we talked about the hardfork of ethereum, that took place because of problems on the blockchain. I though, well, that doesn’t sound very trustworthy, a currency that has its problems here and there, and feels like it is still in beta-mode.
Though, as time went on, prices got up, more people got interested, and the possibilities of the blockchain became more apparent. It is really possible to make transactions that are safe, and no bank is needed! Wow. Not only does that mean that a whole banking sector could become obsolete, it also means that people who had no access to banks could make transactions with anyone in the world.
That is true. In theory. But there are some downsides as well.
As time went by bitcoin became huge. The blockchain is big (144gb in november 2017). Transactions are expensive and relatively slow. Depending on the time period usually $1 tot $3 of fees per transaction. That is not a lot for a big transaction across the globe, but to buy something in your local supermarket that is just ridiculous.
Besides that the energy cost of bitcoin is steeply increasing. To verify the transactions and to keep the coin running, ‘mining’ is needed. Because the calculation for all those transactions increased and required more computing power over time, each transaction actually require a huge amount of electricity. As the Guardian reported on november 27, the electricity to keep the mining of bitcoin going now requires the same amount of electricity that is used by a country such as Ireland.
That is astonishing. In a world that is increasingly warming up, where fossil fuels are polluting our living environment, absolutely the last thing we would want is another things that require exorbitant amounts of electricity.
Besides that the transaction time is relatively slow. There are coins that validate a transactions within seconds, but bitcoin takes around 10 minutes, which is pretty long for something digital.
Now, the future?
Bitcoin is a great start, I would say. Blockchain technology allows for many amazing applications. But what we need is a coin that is more mature, more solid.
A coin that:
- Doesn’t require so much energy to mine
- Is faster than bitcoin
- Has less transaction fees
In my opinion either bitcoin needs to improve drastically — another hard fork that would be probably.
Or we need a coin that is solid and efficient that could replace bitcoin as a major crypto coin.
Of course there can be multiple coins, but I think that in the end we need one or a few coins that are practical to use. Is it going to be Bitcoin, or will Litecoin evolve, or Dash, or something new?
Time will tell, but interesting times are ahead for sure!