Has the Bitcoin experiment run its course?
According to Mike Hearn, who claims to be one of the founding developers, the answer is yes.
He cites technical problems, the block is too small, transactions take too long, and no one can agree on what can be do to resolve these issues.
Rumours abound that Bitcoin Foundation is in trouble, several million dollars reported unaccountable. And why were they spending money lobbying?
Mike Hearn also bangs on about investment. What investment? Investment in time for development, investment in the computers to run the currency, that is investment, investment in bitcoins as a tradable commodity is not investment, that is speculation, one of the root causes of the problems with bitcoin.
Mike Hearn fails to see the wood for the trees, and does not address the fundamentals that are wrong.
For a currency to be viable as a currency, it has to meet two criteria:
- store of value
- unit of exchange
Bitcoin fails miserable on both counts. It is extremely volatile due to the activities of spivs and speculators and you will be hard pressed to find anywhere to spend bitcoins.
If a euro can buy a loaf of bread today, I need to be able to buy a loaf of bread tomorrow, the next day, the next week, the next month. I also need a baker who accepts my euro.
Bitcoin has grown too fast. Parasitical add ons have jumped onto the Bitcoin bandwagon, spivs, speculators and other low life have crawled out of the woodwork.
Can we trust any of the exchanges, a bitcoin wallet? How do I know a bitcoin wallet does not have a hole in the bottom out of which my bitcoins fall?
Consider one aspect of Bitcoin, public key cryptography. To implement, need secure public key encryption algorithms. Then have to implement with code. Checking the code is ok on paper, is a necessary but not sufficient condition. Does it self-check? How is it implemented in the real world, on a computer? It is executed in memory, that memory maybe is swapped out onto disc. What steps are taken to wipe all those traces?
Bitcoin, by design, may self-regulate. This is not true of any of the add ons. All need government regulation, as would require for any other financial services or the banking sector.
Early adopters were quite literally able to mint millions (mine in the Bitcoin jargon). They could do so with relatively little computing power, a laptop, a games console, maybe even a smartphone (though a smartphones then lacked the power of a smartphone today).
Today, need massive computing power, restricted to the rich. Mike Hearn refers to two people in China. Maybe it would be better to refer to two entities. If they have this amount of computing power, maybe government agencies.
Large computing power has large energy requirements.
This skews Bitcoin to benefit the rich, is at odds with the early egalitarian claims for Bitcoin.
It is not as some have claimed, cannot have a trusted system. Bitcoin is a trusted system, the add ons are not as outside of the blockchain and cannot be trusted.
Gold is of value because it is easily convertible to dollars. Not as people falsely assume, because dollars can easily be converted to gold. Every tried lugging around an ingot of gold, buying a loaf of bread by shaving off a few slivers?
A currency can be whatever we decide. It is society that determines its value and utility.
On a remote Pacific Island are large stone rings with holes through the middle called yaps. Some lie at the bottom of the sea. Everyone knows their value, who owns them. The stones never move, only the ownership changes, the accounting is maintained orally.
Bitcoin was an interesting proof of concept, but little more. It is useless as a currency. The best that can be said of Bitcoin is that it functions as a quick and dirty method to transfer out of a currency, across borders and into another currency. Its hopes of becoming an internet currency have not succeeded.
Faircoin, which can be seen as BitCoin 2.0, attempts to address some of the problems associated with bitcoin.