Bitcoin or cryptocurrencies, in general, are a decade old phenomenon that made huge headlines and became a conversation topic just a few years back due to the massive fluctuation in its value. According to Matthew Davies, the value of Bitcoin peaked around late 2017, when one BTC could fetch you around $20,000. However, after more than two years, the value lingers around $7,000 and seems to be on the path of decline. Here are a few reasons why Bitcoin is doomed to fail:
- Flawed Technology – Like money, Bitcoin doesn’t grow on trees. Miners legitimize, verify and support the Bitcoin network by adding new blocks of verified transactions to the ever-growing blockchain for a reward in the form of Bitcoin tokens. However, the supply of Bitcoin is limited to 21 million. That means as more Bitcoins are mined, complications in the network increase exponentially and new miners have fewer incentives to add their contribution.
Moreover, as 1MB of transactions or one block is verified the miner just gets eligible for earning Bitcoin without paying money. The miner isn’t guaranteed a payout. The most mind-boggling problem about this is that mining is the only way to issue new Bitcoins in circulation. However, if no new miners are going to verify transactions for the lack of incentive, the network is as good as dead.
- Requires tremendous resources – As months and years go by, Bitcoins become more difficult to mine. As mentioned earlier, without miners the network may as well not exist. Mining costs with current complications in the network are so high that a new guy can’t get into the business without a few thousand dollars of investment in rigs.
The cost of these mining rigs alone is sky high and the electricity costs are massive. Bitcoin mining warehouses in China shell out hundreds of thousands if not six figures for their energy bill.
- Government regulations – Bitcoin has been actively used by criminals and people with nefarious purposes for a long time. People have conducted transactions in Bitcoins for everything from drugs and stolen credit cards to weapons for terrorism and inhumane sex trafficking.
While there are people who use Bitcoins for honest financial transactions, it can’t be denied that a lot of people are also getting harmed. So, governments all around the world have passed regulations to ban or at least, limit the use of Bitcoins.
- Volatile market – Except for higher supernatural powers, no one can really predict the fluctuations in the value of Bitcoin. Tomorrow, one Bitcoin may fetch you a couple of thousand dollars more than what you would get today or decrease significantly in value. If Bitcoin makes it to the news, the value shows drastic fluctuations within hours.
Matthew Davies believes that while Bitcoin introduced the wonderful blockchain technology or at least popularized it, doom is the only path ahead for the cryptocurrency. Instead, you should place your bets on better alternatives like Ethereum and Ripple.