Any new, disruptive technology will have its fair share of detractors doing their best to limit its potential.
The idea that people would need their own personal computer for work seemed ludicrous 50 years ago. Why would anyone need a device for making automated calculations? Today, though, it is almost impossible to function in modern life without using a PC.
The automated teller machine, or ATM, was thought to be a needless apparatus by many when it came out. Who would need access to money outside of bank hours? Now, more people use ATMs than go and queue in branches.
Bitcoin is a new concept edging its way into the mainstream, thus, it is not immune to negativity and unfavorable public perception. It is undeniable that the digital currency has its enemies, either real people or perceived notions. So what are some of the biggest problems it faces right now?
The centralization of bitcoin
The idea of mining, for many who first come across the concept of bitcoin, seems bizarre. When broken down into a peer-to-peer way of confirming transactions, however, it makes a lot of sense.
It made a lot more sense, though, when any bitcoin node, on any computer, had a chance to confirm transactions and thus be rewarded a block. But that doesn’t happen anymore.
Although bitcoin was built with good intentions in mind, altruistic systems are often exploited. And this is what has happened to the bitcoin network.
The problem is that there is little incentive to run a node anymore. That’s because powerful machines built specifically for bitcoin’s SHA-256 proof-of-work algorithm have changed its decentralized and more open nature.
This has, in effect, concentrated bitcoin’s confirmation power, leaving it in the hands of only those who can afford thousands of dollars of ASIC hardware.
Bitcoin largely solves the double-spending issue. Despite that, remarkable technical achievement, it doesn’t cater for mistakes, theft and fraud quite so well.
The anonymous digital currency has sometimes attracted the wrong types of people – those looking to prey on others who fall under the spell of a never-ending upward trend for bitcoin’s price.
Whether it’s illegal online marketplaces, pump-and-dump schemes or shady crypto exchanges, they all create a black cloud over the industry. And, every time there is another bitcoin robbery or scam, it draws attention from the mainstream.
When leaders in the bitcoin industry are discouraged over their inability to be banked in the US, bad actors are the ones who should be blamed.
The bad actor problem creates a consumer protection issue for bitcoin. When people learn about bitcoin and are lured to products and services that do not follow best practices, as opaque as they may be in this industry, that’s a problem.
As a result, some countries are simply playing safe and pushing bitcoin away from their banking systems.
According to CoinDesk’s 2014 Q1 State of Bitcoin Report, 12% of the 73 countries that have taken some regulatory action on bitcoin can be considered hostile or contentious.
A number of countries taking a stance against digital currencies appear to be more reactionary in their behaviour than seems justified.
One example is India, where a bitcoin exchange in that country was raided earlier this year, causing some bitcoin businesses to cease operating.
In China, the major operators there are talking about upcoming periods of hardship as the government cracks down on bitcoin activities.
Furthermore, amid rumors of a ban on virtual currencies in Russia, organizers recently felt impelled to cancelled a bitcoin conference that was planned to be held there.
These actions perhaps reflect more about the banking systems of those countries than anything a government official says. It reveals that many financial systems don’t want to compete with bitcoin; they would rather regulate it out of existence.
A patchwork of reactionary regulatory policies helps no one. This is especially true since international borders simply cannot restrict bitcoin, the decentralized nature of which makes it impossible to ban.
A better approach could be a wait-and-see attitude towards this new technology, since its advantages could end up befitting everyone. Countries currently taking this kind of approach include Canada and Israel.
Poor mobile platform support
Although this has not deterred some developers from creating mobile applications for bitcoin, it’s harming the ecosystem.
These larger technology companies do not want to compete with bitcoin. So they do the same thing as restrictive governments and use their power to regulate it out of existence – within their ecosystem, anyway.
Bitcoin is excellent as a method of remote payment. It could be a competitive credit card alternative – especially in remote transactions with mobile or wearable devices. And this is a much better way to receive and send payments instead of using of QR codes.
Using Bluetooth Low Energy, Near field communication (NFC) or some other wireless technology could change the way people make payments.
However, with billions of dollars relying on the outcome, the major players in the technology industry will do their best to restrict innovations that they do not control.
Given all of the above issues, it's not incredibly obvious why the average person would want to use bitcoin. Sure, there are many theoretical benefits to using a distributed currency.
What is the value, though, to the everyday person who just wants to ensure that money is in the bank?
One issue is that banks often overstepped boundaries and the global economic situation has brought hardship for many since 2008. The appearance of bitcoin on the scene represents something new and offers hope to people jaded by traditional financial institutions.
and Bitreserve are both bitcoin startups that have recently unveiled plans to bring the digital currency to the masses. They plan to do so by bringing the technology's benefits to the consumer market by not exposing user to the bitcoin 'layer' it still depends upon.
Many startups in the bitcoin space tout the 'wow' factor of bitcoin. Yet negative events over the past year have left consumer sentiment less positive than the industry hoped for and this, in turn, has caused tension with policymakers.
In the end, it is possible the best way to get bitcoin's benefits into the hands of people might be to not talk about it at all.
Evil eye image via Shutterstock
CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk offers all employees above a certain salary threshold, including journalists, stock options in the Bullish group as part of their compensation.