I’ve been interested in the technology and investing in Cryptocurrency since 2014, which was late on some parts, but early to the huge hype generated in 2017/2018.
The biggest thing here is that not enough people are learning about the technology involved, and it’s blindingly obvious.
What’s really happening right now in the crypto world is that protocols are being created. Much like the early days of the internet. We shouldn’t be thinking about these as currencies at all, but as new technical protocols that are being built to run financial or technological systems in the world to come.
If we think about this approach with Bitcoin in its current state, ceases to be relevant.
Take Visa for an example, just one payment company. Visa has run at peak 56,000 transactions a second. The average for Visa is 2,000 payments per second. Paypal is significantly lower at 115 transactions a second. Bitcoin’s current limit is 3 – 7 transactions a second.
There is just no possible way that with that limit it can scale. Bitcoin is sold as a fast and near free transaction network. But now because of the block sizes we’re looking at a $30 transaction fee and around an hour to two hours of time for a transaction to be confirmed. It’s currently much worse than the current banking system. Anyone who thinks Bitcoin is a currency currently is insane. Want to buy a $20 t-shirt? That’ll cost you $30 in fees. At best it’s a store of wealth, at worse, it’s just the first protocol invented that needed to be improved, and will fail.
Other crypto-currencies have tried to solve the problem, LiteCoin uses a block-time of 1 minute to expand to 56 transactions a second, and keep fees to the single $ range. This is much more in Paypal’s range of capability and looks interesting going forwards.
Then of course Ethereum which runs Ether as its currency. Ethereum is basically decentralized computing. Allowing developers to create decentralized applications. If anything is going to change the world, it’s this. Web 3.0 is coming. There is simply no doubt.
What we’re seeing at the moment is a lot of personal money being put into these markets without a thought or understand of the technology they are buying into. On the opposite side a lot of institutional money is being pumped in for day trading, institutional investors couldn’t care less about the technology, there’s a market and it’s volatile. When you day trade with a fund, and you’re good, you’re making money. The ones that will get hurt are the personal money.
We all need to be approaching this like technology investments, and not this ignorant, nieve currency mindset. Two or three of the 1200+ cryptocurrencies will become as important to the world as Amazon, Apple and Google did. But that doesn’t mean they are currently the most well known.
Our financial and technological systems will soon change forever, blockchain is already being adopted by Visa, IBM, and major banks. It just wont be BitCoin that wins in the end.
Disclaimer: The author owns multiple cryptocurrencies, including Bitcoin (even given the critical statements above).