Two Reasons Why I Struggle with Bitcoin and Cryptocurrencies

Two Reasons Why I Struggle with Bitcoin and Cryptocurrencies

I struggle with Bitcoin and its amalgam of crypto-incarnates. Yet, it is important to note that I am fan of blockchain which powers these digital currencies. Here are the two core reasons why I have struggled with Bitcoin as a currency:

  • Limited Economic Value as Currency: These currencies do not fix any major friction in the real broad economy. Unless for some shadow activities, I do not just understand why someone would prefer Bitcoin over Pounds, U.S. dollars and Yen on the streets of London, New York and Tokyo respectively. Sure, Bitcoin could find value in Zimbabwe and Venezuela, but those alone are not going to create alpha for anyone that wants to live on crypto. Those are secondary economies and cannot transmute to define the world. How would a man that wants to buy a real estate choose Bitcoin, to be outside the control of government, when he needs government to protect the investment? People, nothing is broken in the world currency, and Bitcoin cannot fix anything. Yes, it seems we have a solution for a problem that does exist at scale.
  • Lack of Maturity: Bitcoin and variations are like software. They would keep evolving. Ether is already better than Bitcoin as it makes it easier to build on top of Ethereum. What would happen in 25 years when newer versions of these cryptocurrencies emerge? Would the ones of today be relevant? This is a risk since anyone can wake up any day and launch his own currency. Possibly, Bitcoin within 25 years would become a primitive crypto as newer and better variations which would attract new users would emerge. That unbounded supply would diminish the cryptocurrencies of today. Sure, they could make all upward compatible but that does not take away the risk of most migrating to a new currency entirely. Can you move your Myspace page to Facebook?

Notwithstanding my concerns on the usage as currencies, I do believe they offer benefits as store of value. People can believe whatever they want. People put trust on gold, snakes, mountains, dollars and Naira. So, there is no reason why we should exclude Bitcoin. A product is useful for whatever customers use it for. So, storing wealth could work for Bitcoin and variants, but becoming a currency is hard for me to see. Yet, even in storing that value, the lack of maturity could be a displacement risk where your “money software” is no more upward compatible.

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