Why Are There Controversies with Bitcoins?
In recent months, the prices of Bitcoin have recorded highs and led Galaxy Digital’s CEO to call the cryptocurrency a digital story of gold. The comparison is, however, defective.
While gold has repeatedly shown to be a stable form of money, at the end of the year Bitcoin’s price witnessed the greatest single crash in history. Cryptocurrencies like Bitcoin based in Blockchain are volatile and lack the components needed to scale them into global currency and payments platforms. It remains so as to ensure the way the blockchain is designed.
There is no essential regulatory guidance on Blockchain technology and therefore a number of risks to crypto holders are involved. Bitcoin was designed to be decentralized and transparent, but the core framework was expanded by updated features such as off-chain transactions—where deals are not publicly trackable and when transactions are completed, they are not actually transactions written to the public leader.
This lack of visibility in any financial environment is a problem and this is just one problem of cryptocurrencies like Bitcoin based in Blockchain. Blockchain has inherent in its framework instabilities: They cannot be fixed and ultimately lead to a poor store of money and savings. Moreover, increased use of cryptocurrencies such as Bitcoin from blockchain will only serve to exacerbate these problems. And when people use crypto, using blockchain as the distributed book of choice, these issues are growing and expose the end of their lives. These weak points will not be advertised exactly by crypto traders.
There are rapid and severe changes in the values of cryptocurrencies. The increase of price over the recent weeks has been not the start of an adjustment, probably triggered by a decline in the US dollar and by an apparent “safe haven” for investors during the pandemic of coronavirus.
It should be remembered that Bitcoin is volatile historically. This year, the price slid half-time between February and March before the price doubled between November and year-end. Only hours later, even after its January 3 record, its value dropped by nearly 15 per cent.
Since cryptocurrencies have no value, they are purely speculative. their value. Cryptocurrencies do not also serve any other purpose than a store of values, unlike other financial assets such as gold — which has other uses such as electronic device, medical equipment and jeweler. As a result, the price and the longevity of cryptocurrencies are not connected, so that the bubble around them can burst at any time.
The above-mentioned off-chain transactions are especially problematic for users of cryptocurrency, as they are not written to blockchain individually. That means people can buy and sell crypto coins without the broader consensus blockchain—mainly undermining the whole reason for using the technology.
Blockchain is intended as an environment without trust: every transaction requires consensus on the different nodes on the system, so it is almost impossible to manipulate any individual actor. However, off-line sales are dependent on the people who manage the transactions that open the door to foul play. Off-chain transactions have already been discovered before they have been written in the blockchain. Find out more at Bitcoin Power.
Bitcoin cannot be referred to by “digital gold” investors because it does not have the features to make it a good value store. Gold is intrinsically valuable and in a final supply: it is in existence in a fixed quantity and cannot be produced simply from the thin air. While Bitcoin may be considered to be finite because of its limited amount, the number of other cryptocurrencies that can be created is not limited. This ability to reproducing cryptocurrencies continually dilutes its value throughout time so that people never store their money safely.
Not for Mass
With the global expansion of blockchain-based cryptography, their speed and scale are obviously limited. In order to write transactions to a blockchain, it takes huge computer time and energy and, therefore, less than 10 transactions per second. Without reconstructing the original Blockchain technology framework, this slow speed cannot be improved. But even if successful, the increases would mean that the blockchain doesn’t have the same security or the same abilities as before and would be modifiable.