There are many limitations of Bitcoin. But we did not bog our minds to go into the details of these limitations. To understand the rise of cryptocurrency, we will have to first go through the timeline of its development. Then look at the limitations one by one.
Timeline of prices of Bitcoin
The timeline of development revolves around “Bitcoin” because this is the only cryptocurrency that dominates the crypto market.
- In 2009 the paper for the first decentralized cryptocurrency was published by the pseudonym Satoshi Nakamoto known as Bitcoin
- The price of a Bitcoin on 25th November 2015 was USD 327
- The price of a Bitcoin on15th December 2015 was USD 19,750
- Bitcoin on 2nd September 2021 was USD 49,548
- Bitcoin on 24th November 2022 is USD 16,656
Human’s Financial Evolution
In Sapiens – A brief history of Mankind, Yuval Noah Harari emphasizes the ability of Homo Sapiens to cooperate in large groups. This ability helped us in our survival, and formation of religion, nation, ethnicity, etc. The ability to cooperate led us to reason, discussion & develop rules for everyone. The main logic was the enforcement of laws by arriving at a common consensus. Therefore the problem in the world is not the enactment of laws but the enforcement of laws.
- Mutual Cooperation
- Common Identity
- Power sharing mechanism
- Creation of Institution
- Laws to govern Institutions
Let us look at some of the most valuable things for human beings without which they cannot survive.
- Air
- Water
- Food
- Shelter
- Clothing
- Health
- Education
- Love
- Dignity
- Protection of Fundamental Rights
- Travelling etc
To experience all of the above, we need Money, except for free air. I am writing this article from India, and therefore, I will sight some examples from my own life experiences.
The advent of cryptocurrencies has had no impact on the way I transact. Moreover, the appearance of Google Pay and Amazon Pay on the digital payments front has made my life much easier. This statement might not apply to everyone.
Popularity of Cryptocurrency
There are two main reasons for the popularity of cryptos. The first reason is intrinsic, to the underlying technology of blockchain and cryptography. The second reason is tax evasion, trust issues with the government, and hiding assets.
Blockchain – Tracing the origin of data. Cryptography – Encrypting the messages. These technologies have their own sets of shortcomings.
Is Bitcoin an investment Asset?
Whether Bitcoin is investment grade or not, legitimate or not, is a question of debate. But the logic we must thoroughly assess is that a virtual asset is pegged just against electricity.
The elusive promises of Bitcoin
- Anonymity – Privacy of transaction
- Wealth Protection
- Tax saving
- Fast Transaction
- Security of Payment
- Limited in number – Scarcity
There is no doubt that the world needs an independent financial system, which is not in control of the governments. As can be seen from the humanitarian crisis unfolding in bankrupt governments and Afghanistan. The ability of a universal financial system can bypass governments and wars.
A few statistics about Bitcoins and other alternative coins, there are about 6391 coins listed on the website of the coin market cap. The total market capitalization of these coins is 2.34 Trillion USD. However, the dominant cryptocurrency is Bitcoin.
The problems associated with the issuing authority. The sudden resurgence of cryptocurrencies has baffled governments and financial institutions whether to accept them or declare them null and void.
Why people are buying cryptocurrencies?
The hype created by marketing cryptocurrencies as the currency of the internet is one of the prominent reasons for a surge in buying. The other reasons might be diversification of assets, fear of missing out, the privacy of financial data, tax evasion, etc
Why people should stay away from cryptocurrencies?
The cryptocurrencies are privately managed and therefore a form of private contract. Hence legal enforcement becomes a challenge for governments. The conditions of private contracts like digital contracts are updated very often in a short period which complicates the entire situation.
Any change in the rate of supply like the releasing of bitcoins or other cryptocurrencies as the number of transactions increases solely rests in the hands of the issuers like private players. It is in the interest of private players as investors and crypto users will lose in this game.