Bitcoin Skepticism

To see this story in a wider context go to debatehub.org

Note for this article I am addressing the various coins not the back-end blockchain technology. This is a important distinction.

I don’t understand the bitcoin hate. It may be in a bubble but just because an asset is in a bubble does not mean that it is illegitimate. But what would make it legitimate or illegitimate?

A legitimate asset would need at the minimum these qualities:

  • It would have to be global.
  • It would need to be convertible to other assets.
  • It would have to be useful for businesses.
  • There would have to be settled legal precedence and regulation around it’s use.
  • Institutions would need to be actively using it.

So lets look at these one by one.

Global

No doubt bitcoin is global. If you look at Coin Dance there is a breakdown by country and it looks like volume is increasing globally.

Convertible to other assets

This is definitely true. It is convertible to currency. There are a ton of exchanges for bitcoin and some on-line stores accept it. This brings me to the next point…

It would have to be useful for businesses.

Right now there is an experiment going on were businesses are offering ICO’s as opposed to IPO’s to fund themselves. This is a gray area in that it has not been regulated yet. Also it is not clear how the market will handle the diversity of coin.

The bigger problem is time it takes to settle transactions. In this day and age consumers are used to instant settlement. If you view bitcoin as a investment vehicle or a place to store value then it is not a big deal that settlement an take an hour or longer. If you want to use bitcoin as money then this could be more of a problem. To give you an idea the problems here is a excerpt from the Coinbase support page:

Common causes of unconfirmed transactions

Sending a very small amount with insufficient fees
All bitcoin transactions require a miner fee to be confirmed by the bitcoin network. When sending bitcoin you will be prompted to add a miner fee to make sure the transaction gets confirmed. If an insufficient fee is included, your transaction may never confirm.

A double-spend of the same coins
Under normal conditions this should not occur with transactions generated by Coinbase (our backend systems are designed to prevent this), but in general if two transactions try to spend the same coins, one of them will never be confirmed by the network.

Trying to spend unconfirmed coins
If you are trying to spend coins that appear as pending in your account, your transaction will not be generated until these coins confirm.

The network is experiencing high volume
Sometimes there is a high volume of digital currency being sent globally, and there are more transactions than there is space available in each new block to include the transaction.

Kind of scary for the average small business or consumer. I’m sure in the long run services will pop-up to handle this.

There would have to be settled legal precedence and regulation around it’s use.

This is what we are all waiting for and the biggest bottleneck. China recently had a crackdown on local exchanges. I think the U.S. needs to weigh in on this. Once this happens there is a pent up flood of interest.

Institutions would need to be actively using it.

Institutions are naturally conservative and they seem to be waiting on the sidelines. Some seem to be backing ripple right now because it seems safer and institutions travel in heard anyway.

Let me be clear regardless of what governments decide coin is here to stay. If governments crack down then it will simply affect the scale and volume. The coins have already proved useful. The question is will they be blessed in the short term. In the long term they are here to stay.

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