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November 20, 2018

First Bitcoin cracking may signal for some deficiencies

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Bitcoin crackingThe very popular nowadays Bitcoin is gaining new speed and grew significantly during the last days. Since the beginning of the year, the crypto-currency expanded by more than 10 times, which is significant even for the best growing startups. But Bitcoin is not a startup and has long history behind, which underlines the success as much more valuable. The mania for virtual currencies supported seriously the technology markets, as many small and big manufacturers reported growing orders of components related with crypto-mining.

Every day we see many new gadgets, which help you to mind during heating your home. Even, some days ago there was a rumors that old Russian nuclear reactors will be transformed to crypto-mining plants. In advertising, the high rates websites and journal asks their customers to run script and mine for them. And all this mania spreads rapidly, which seriously expanded the crypto-currency. Now Bitcoin conquered 12,000 EUR and its market capitalization is rapidly growing.

However, we saw the first cracking in the idea, which signals for many deficiencies. The transactions are getting slower. This is due to technology of the Bitcoin. The Bitcoin blockchain have small size of the block, so the number of transaction, which can be done, fails to meet the demand. This requires higher taxes if you want to have transaction faster, or increases significantly waiting time. Such idea eliminates the possibility of micro-transactions, as the taxes are higher than their value. So Bitcoin cannot be used for payment, or it will get much more expensive then your Visa or MasterCard.

The problem is solved in forks Bitcoin Cash and Bitcoin Gold, but one was seriously compromised with additional taxes within the code, while other is strictly following the mothership.

And if you cannot use Bitcoin for payments and micro-transactions, then why you need it? The idea of the blockchain technology was decentralization of the currency, anonymity and establishing the new generation of virtual money. Obviously the second idea failed, as practically it is not used for trading. Maybe, some big transactions related to organized crimes and capital flights.

But without being used for trading, Bitcoin fails to meet the decentralization purpose, as all the digital currency is transferred to cash. So on input and output of the cash flow, each transaction is monitored by the banks. This leads also to failure in meeting the anonymity of transactions. So the question remains open: “Why all we need this Bitcoin?”.

Obviously many people believe in an empty idea, because with exchange rate growth it turned into normal commercial bank, generating revenues for the big players. Of course, there are many small players, who had luck in the beginning and mined thousands of Bitcoins, which are now selling for big cash. And higher price raises higher interest and the bubble grows. But when it will brakes, we will see.

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