Bitcoin has several key problems.
This is a fast and fast and loose summary of a discussion I held elsewhere:
1.) It does not have a military supporting it.
2.) Its “proof-of-work” algorithm is a proxy for energy cost. It’s a 1st order or 2nd order derivative instrument of energy cost. This drives up energy usage and costs and means it’s forever chasing CPUs that can compute this mostly useless thing generating heat. It’s an environmental disaster. It’s an algorithm that also favors energy pirates and state energy projects; it’s no longer an actual distributed engine of finance
3.) It doesn’t work at relativistic distances. The moon is ~1.5 seconds away, but Mars and the Asteroid belt are 20–30min away, and Jupiter is 52min away. From what I understand about *bitcoin* specifically, the algorithm will fork blocks if the transaction is longer than a minute or two and won’t be able to merge the blocks if it’s around 30min or more.
4.) It’s not good at derivative fiscal instruments. Ethereum is better at this, but it still misses a good number of necessary fiscal derivatives for a “full market.”
5.) It’s a great asset for people to break sanctions, removing many non-violent acts of censure between federal governments. Digital coins add to the doomsday clock as it moves military leverage higher up in the stratagem.
6.) It’s unforgiving, and as such, the structures it creates might bake in structural classism and racism or disproportionally affect fringe or edge groups. Digital contracts will not work as well for people a few standard deviations from the center, and when that ‘edge case’ is later considered, there may be no way to undo the problem. Currently, we have the court systems, and public policy and opinions can change, so something is done now, but then ‘executed’ 10, 20, 50, or 100 years from now can be changed in the courts if the morals of the situation change. Digital crypto derivatives may not be forgiving to the few experiencing problems at first.
I honestly think any digital currency that fixes any one or two of these things will replace bitcoin, so if you think of bitcoin compared to gold, gold has intrinsic value that has stood the test of time for several millennia. When you consider its problems, Bitcoin will not be as fiscally durable as gold.
I could envision something I call a ‘q-coin’ that uses quantum cryptography to eliminate the energy cost to perform a ‘proof of stake’ or ‘proof of work’ for a transaction. This would work at relativistic distances, be energy efficient, and wouldn’t centralize block processing governments or macro corporations/ orgs.
Either Ethereum or “what’s next” will figure out Smart Contracts and allow for a ‘complete fiscal derivative’ market. This will take time, but I believe it’s a matter of time, either years or decades, but not centuries.
Governments will support digital currencies when they have the ability to cause inflation and create more coins. Using inflationary measures is the only way some fiscal policies work; for instance, UBI requires printing money to work ( BI doesn’t, but UBI does ). Constrained money supplied can constrict governments and force them to fail. I know anarchists are fond of this, but peace-loving people are not fond of governments collapsing every 20–40 years during a recession. Fiat currencies have provided a lot of pricing stability and state stability.
I don’t choose to abstain from bitcoin because I’m afraid to price and model the asset. I stay out of it because I’m long-term thinking, and I avoid day trading, pyramid schemes, and fads. Bitcoin is a 100% irrational market that drives irrational unsafe behavior!
