Bitcoin: Fails as a Solution to Double-Spending
A few years ago the world was introduced to Bitcoin; the brainchild of Satoshi Nakamoto; It is not the first crypto currency created, but certainly the most widely held. Bitcoin was built to address a very specific problem, Nakamoto coins it “double-spending.” E-commerce from the very beginning has relied on financial institutions to act as a trusted third party to process payments. Bitcoin sought to remove the third party and in turn eliminate transaction costs; prices in the past few years have ranged between pennies on the dollar to 1500 USD per bitcoin.
Created From Nothing
In my perspective, it seems that Bitcoin is just a finite source created from nothing; but given value based on its speculative upside. If that was the case everyone would just create their own crypto-currencies, give them a value and then expect producers and consumers to accept them as if they were a regular currency. And in a sense that has happened, there are hundreds of fiat currencies with zero intrinsic value out there vying for their chance to become the next Bitcoin.
I have always understood the need for a product like Bitcoin though; it makes sense that the market is attempting to be more efficient by eliminating third party fees. User to user transactions are more logical, but the way online currencies have come about, are in my opinion ridiculous. For a crypto-currency to remain reliable it must keep a stable price. One thousand percent growth is great for speculative traders but, as a currency, as a means of purchasing/selling goods it just doesn’t work.
A crypto-currency, just like any other type of currency, it is only as stable as its regulating board. My opinion is that current oversight of fiat currency is not reliable enough to solve Nakamoto’s problem of double spending. Presently, electronic currency is primarily used as an object of speculation, traders making bets on whether the price or value of said currency will rise or fall.
Bitcoin’s Future
For this to work, a crypto-currency must have a stable value, and initially, be fixed or allowed to float a predetermined amount from a physical currency. A business won’t take on transactions in Bitcoin, to then turn around and pay a processing fee to exchange BTC for USD. Because that’s what companies will do with currencies that fluctuate too much. There is no advantage to accept Bitcoin with too much price fluctuation. Crypto-currency might reach a stable point in the future, but it will most likely not be Bitcoin. A new currency will have to be created, one that is initially fixed to another currency and is free of the negative stigma that Bitcoin carries.