BitCoin is all over the news. People are making – and losing – fortunes with the currency, all while traditional channels suss out how it actually works. There’s a question of whether one is watching a real revolution in economics or whether this is a digital version of the Dutch Tulip Craze. The truth is, as ever, not that black and white. Understanding where BitCoin is going means understanding the underlying philosophies alongside its most common problems today. The answers might not be simple, but there is a good bit of data to sift through.
The Dream of a New Currency
A great deal of BitCoin’s promise is built on the promise of decentralization. With no single governmental entity controlling the currency, it feels like a more democratic version of commerce than anyone has experienced in the modern world. Transcending national borders, it’s theoretically the perfect currency for an economy that’s gone global. Coupled with the promise of the blockchain, the philosophy behind BitCoin is surprisingly easy to get behind.
Real-World Problems
BitCoin has a number of real-world problems that are impossible to ignore, especially among those who want to see the use of the cryptocurrency spread across the globe. It is expensive to use BitCoin due to high transaction fees, at least compared to traditional currencies, and the speed of transactions is incredibly slow compared to those processed by credit card companies. While there are solutions in the pipe, it’s too soon to tell when BitCoin will be able to handle more demand. In fact, it might be fair to say that BitCoin’s biggest problem is that it’s become too popular too quickly.
The Currency Conundrum
One of the biggest issues with BitCoin is actually a symptom of its runaway success. At the moment, BitCoin is a fantastic investment opportunity, albeit one that is bouncing back from a very volatile recent past. Because so many people expect the value of BitCoin to keep rising, it’s become increasingly difficult to use the cryptocurrency as an actual currency. Not only is there a very real possibility that the value will rise substantially between the time a transaction is made and the time it completes, but fewer investors are willing to part with their coins in hopes that holding onto them will lead to riches in the future.
The Competition Conundrum
BitCoin’s popularity has also brought with it a number of imitators. There are dozens, if not hundreds, of other crypto coins out there, some of which are making a run on BitCoin’s dominance. As it becomes harder to see BitCoin as anything other than a digital commodity, some individuals are moving towards using these alternate coins to make purchases online. While none of them have anything close to the market share of BitCoin, a widening market it makes it much less likely that BitCoin will ever become a global replacement currency. As it stands, it will continue to generate more competition for itself as it continues to thrive.
An Alternate Future
It’s hard to see a future without BitCoin, even if the problems listed above make it hard to see it as a global currency. What’s more likely than either is that BitCoin will continue to grow, eventually reaching a point of stabilization. Whether it continues as a currency or as some kind of digital commodity is hard guess at this point, but one can reasonably assume that the amount of money tied up in BitCoin will ensure that it doesn’t go anywhere quietly over the next few years.
Is BitCoin the currency of the future? Growing pains and its own success make it unlikely. That same success, though, makes it unlikely for BitCoin to become a fad. It’s an important and growing part of the economy now, though, and it must be taken seriously. Whatever the future holds, it’s certain that digital currencies will be part of it.
BitCoin CurrencypPhoto credit: zcopley on Visualhunt.com / CC BY-SA
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