a.k.a. How will bitcoin 2.0 be different?
I figure I'd pile on the mound of bitcoin threads with my own.
The idea of a P2P global anonymous cryptographic currency intrigues the hell out of me, but the more I examine and study bitcoins the more clearly I see that it is doomed to fail. It has lots of wonderful aspects, primarily that the encryption framework appears to be rock solid. But while it may be technologically sound, it seems to be economically half-baked (unless, of course, the primary intent was solely enrichment and wealth storage).
The fixed growth rate and predetermined 21MM BTC cap are not characteristics of successful exchanged-based currencies.... more like a value-based commodity or wealth storage mechanism. That is, imho bitcoins are little more than Gold 2.0 and will always suffer from over-speculation and not enough exchange. As pointed out by others, deflation is a massive problem for a currency intended to be used for daily exchanges. Bitcoin 2.0 will need to encourage exchange way moreso than the current implementation in order to have any realistic staying power. Also, it will need to dynamically adapt to the marketplace to foster sustainable and mild inflation rather than be artificially scarce and monotonically deflated. The current bitcoin seems to provide little incentive for exchanges, except to circumvent other well-established exchange methods.
My question for the experts is how should bitcoin 2.0 be designed to achieve what the current bitcoin will never: a viable crytpo-currency that encourages exchanges. KNOWN PROBLEMS Technological
1. Slow Transaction Verification.
It takes 10+ minutes to verify a transaction, which isn't conductive to POS transactions.
2. Not User-Friendly.
Only tech-geeks understand bitcoins and bitcoin interfaces thus far.
3. Wallets and transactions vulnerable to hacks.
If your private key is intercepted or stolen, you have no recourse. Your bitcoins vanish into the cyber black hole of anonymity. Economic
1. Artificially scarce supply equates to perpetual deflation.
It is disputed whether deflation is a "good" or "bad" thing. I'm not an expert on macroeconomics, but on it's face, constant deflation caused by increasing numbers of bitcoin adopters would not promote use of bitcoin for commerce as a currency. Rather, it would promote hoarding and speculating as a commodity.
2. Extreme Volatility.
Bitcoin value must stabilize in order to instill the public's confidence. It sorta gets a pass for still being very new, but steady progress must be made on this front. Market manipulation of the bitcoin is ridiculously OOC.
3. Risk of Government Intervention.
What happens when America decides to regulate bitcoins, or pull the plug on bitcoins altogether? What if the EU, Japan, China, and Russia all joined in this effort?
4. Bitcoin "banks" are unregulated and uninsured.
If you trust a 3rd party to safeguard your bitcoins, you have no recourse when your bitcoins are stolen from the 3rd party.
This post was edited on 4/4 at 12:06 pm