WARNING: Bitcoin is doomed for failure
We all get excited when new technology arrives on our doorstep.
But, not all new digital platforms will end up surviving.
Take Bitcoin for example, the media describes Bitcoin as the currency of the future...
I think not! It's a currency destined for disaster.
You see, Bitcoin is a digital currency (Cryptocurrency). The transactions take place between users, directly via a computer or smartphone. It's independent of any central authority
I believe the problems with this virtual currency will outweigh the benefits it provides in the end.
But, I want you to consider all the information before jumping into this investment.
So why do I say Bitcoin is doomed for failure?
Well, let's take a look at…
Five reasons why Bitcoin’s future hangs in the wind
#1: No guarantee of future existence
At the moment Bitcoin lacks any complete structure.
But there are two questions we need to ask…
· Is Bitcoin accepted everywhere as a form of payment for goods and services?
· Is Bitcoin stable enough to be a reliable investment?
The answer to both is no!
I think Bitcoin needs to gain much more popularity for it to serve as a medium of exchange. But if that doesn’t happen, users may lose interest.
Also, if a large group of investors decide to abandon Bitcoins and leave the system, its valuation will decrease greatly which’ll immensely hurt users who have a large amount of wealth invested in Bitcoins
And, at the end of the day Bitcoin supply will stop when the total number reaches 21 billion coins.
A process generating them, called mining block chains, is a function of a very complex algorithm. This algorithm makes it more difficult to create or "mine" another Bitcoin after the previous bitcoin. This means that the rate of supply of bitcoin globally will decline until the total is reached.
#2: Volatile price movements
This is one of its biggest flaws. The value of Bitcoins skyrocketed in the last 18 months because wealthy criminals were purchasing Bitcoins in large volumes.
Here are a few notable price changes in 2013/2014:
· November - It hit the $1150 mark
· December - Fell to $600, rebounded to $1,000 and fell again to the $500 range. By the end of the month it was stable in $650–$800 range.
· January - Price jumped to $1000 temporarily and then settled in the $800-$900 range for the rest of the month.
In November 2014, it now sits in the $390 range.
Those are just a few examples of how volatile Bitcoin can be…
#3: No recovery safety tool
If a hard drive crashes or a virus corrupts the data, this may corrupt your wallet. Consequently your Bitcoins have essentially been "lost". There’s nothing you can do to recover it.
This can bankrupt a wealthy Bitcoin investor within seconds with no way of recovery.
#4: No physical form
Since you can’t walk into a store and buy something, it’s unusable in the real world. You have to convert it to an actual currency.
Although, a proposal was on the table relating to cards with the Bitcoin wallet information stored in them. There was no agreement on a placing a particular system.
If a system does develop, there’ll be competing systems to come with it. Users would find it impractical to support all Bitcoin cards, and would have to convert Bitcoins anyway.
Unless a world-wide system is proposed and implemented, Bitcoin won’t turn into a "credit/debit card".
#5: Anonymity encourages criminal activity
This feature of Bitcoin encourages criminal activity.
People can buy and sell illegal items with significantly less risk. It also facilitates fraud and money laundering activities.
This makes Bitcoin the ideal currency for drug smugglers, terrorists and tax evaders.
This may bring unwanted attention from governments that could outlaw Bitcoin or at least heavily regulate it.
Now, look at what damage criminals can achieve…
Bitcoin exchanges are vulnerable to cybercrime
1. Poloniex – In March 2014, hackers stole 12.3% of the exchanges Bitcoins worth $50 000.
2. Flexcoin – Was forced to shut down after thieves stole $600 000 (896btc) On 2 March 2014.
3. Mt. Gox – In February 2014, a Japan based company and the third largest Bitcoin exchange filed for bankruptcy. Hackers stole about $500 million in Bitcoins stored on their site.
In addition, between September and mid-January, hackers directly attacked users. By using a virus called Pony Botnet hackers stole…
· 85 virtual wallets worth $200 000 in cryptocurrency.
· Two million credentials – For Facebook, Google, Yahoo, Twitter, Linkedin and payment processor ADP.
I must admit the idea of Bitcoin fascinates me. And I do believe it could transform the way we buy and sell goods and services.
But, until Bitcoin tackles all the problems it faces, I think its future lies in murky water. And I don’t want you to swim with its uncertainty.
Always remember, knowledge brings wealth.