On Thursday, Bitcoin's value fluctuated by thousands of dollars within 24 hours. The Coinbase app — which lets you buy and sell cryptocurrencies, experienced system crashes and errors due to the high user traffic.
This is not how Bitcoin was supposed to work.
The Bitcoin economy which is worth $276 billion is antithetical to the premise of Bitcoin.
Let’s rewind to the start of Bitcoin, The first stop for anyone seriously interested in Bitcoin is the Bitcoin white paper. It is the canonical document written by Bitcoin’s pseudonymous creator, Satoshi Nakamoto, in 2008. “I've been working on a new electronic cash system that's fully peer-to-peer, with no trusted third party,” Nakamoto wrote when he posted the proposal to a cryptocurrency mailing list. This sentence describes everything Bitcoin was intended to be, and the qualities that first got people excited about it, the key terms being “cash,” “peer-to-peer,” and “no trusted third party.”
In Nakamoto’s words - Bitcoin, at its core, was supposed to be a way to pay for goods and services online, Bitcoin would replace existing systems for “commerce on the internet.” In the early days Bitcoin evangelists, tried to use it for everything from salaries to pizzas. This was in the spirit of Nakamoto’s proposal, but the network effects were not there. There simply weren’t enough merchants accepting Bitcoin, or enough customers holding the currency.
After nearly nine years in existence, the closest thing to the kind of Bitcoin-powered payments Nakamoto envisioned, is on dark-web markets such as Valhalla. Bitcoin is the default currency on the dark web — but the speculators driving the current bubble are making it difficult to use Bitcoin for actual transactions. What about Bitcoin as a peer-to-peer network with no trusted third parties.
But only the earliest, most dedicated Bitcoin users adopted this system; almost immediately, middlemen starting showing up. In October 2009, New Liberty Standard published a Bitcoin exchange rate based on the cost of electricity for a computer to mine Bitcoin, which established that one U.S. dollar was worth 1,309.03 BTC. In February 2010, The Bitcoin Market, the first of many Bitcoin exchanges, popped up. The notorious Mt. Gox exchange was established later that year. Even the dark-web markets, home to the purest use of Bitcoin, were middlemen, delivering messages between buyers and sellers and serving as an escrow service.
Let’s rewind to the start of Bitcoin, The first stop for anyone seriously interested in Bitcoin is the Bitcoin white paper. It is the canonical document written by Bitcoin’s pseudonymous creator, Satoshi Nakamoto, in 2008. “I've been working on a new electronic cash system that's fully peer-to-peer, with no trusted third party,” Nakamoto wrote when he posted the proposal to a cryptocurrency mailing list. This sentence describes everything Bitcoin was intended to be, and the qualities that first got people excited about it, the key terms being “cash,” “peer-to-peer,” and “no trusted third party.”
In Nakamoto’s words - Bitcoin, at its core, was supposed to be a way to pay for goods and services online, Bitcoin would replace existing systems for “commerce on the internet.” In the early days Bitcoin evangelists, tried to use it for everything from salaries to pizzas. This was in the spirit of Nakamoto’s proposal, but the network effects were not there. There simply weren’t enough merchants accepting Bitcoin, or enough customers holding the currency.
After nearly nine years in existence, the closest thing to the kind of Bitcoin-powered payments Nakamoto envisioned, is on dark-web markets such as Valhalla. Bitcoin is the default currency on the dark web — but the speculators driving the current bubble are making it difficult to use Bitcoin for actual transactions. What about Bitcoin as a peer-to-peer network with no trusted third parties.
But only the earliest, most dedicated Bitcoin users adopted this system; almost immediately, middlemen starting showing up. In October 2009, New Liberty Standard published a Bitcoin exchange rate based on the cost of electricity for a computer to mine Bitcoin, which established that one U.S. dollar was worth 1,309.03 BTC. In February 2010, The Bitcoin Market, the first of many Bitcoin exchanges, popped up. The notorious Mt. Gox exchange was established later that year. Even the dark-web markets, home to the purest use of Bitcoin, were middlemen, delivering messages between buyers and sellers and serving as an escrow service.
Bitcoin was designed so that users had to take care of their private cryptographic keys for every address they used, and Nakamoto advised making a new address for every transaction. This proved too confusing and burdensome, so along came wallet services, which stored users’ Bitcoins like a bank account and substituted a password for the private key. There are many, types of middlemen in the Bitcoin system now, including sellers of Bitcoin-specific hardware and server farms that have monopolized the creation of new Bitcoins.
Bitcoin was supposed to disintermediate the finance industry — the system of banks and middlemen and transaction fees in which a single entity can hold your money hostage. Instead, it replicated this system and made it worse. Ordinary users all trust third parties to verify transactions and hold their money. The price is so volatile that no one wants to use Bitcoin for payments. And thanks to the current bubble, the electricity required to maintain the Bitcoin network is skyrocketing.
“Bitcoin was supposed to demonstrate the power of a truly free market,” the developer Adam Chalmers tweeted on Wednesday afternoon when the average price of Bitcoin was around $13,000. “Instead it's full of scams, rent-seekers, theft, useless for real purchases and accelerates climate change. Mission accomplished.”
Nakamoto was a libertarian who wanted to create a system for payments that would circumvent governments, bankers, and corporations. Instead, Bitcoin is now a get-rich-quick scheme that retains none of the exciting, anarchist features it proposed and has created a secondary economy with financial shenanigans that mirror the ones that led to the global financial crisis.
So guys, what do you think about Bitcoin and its future and the way it's used? Let us know in the comments below!
Posted by
Saraansh Soni
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