One of the biggest bankruptcy in history of modern financial world took place in September, 2008 when hundreds of business suits dressed employees left Lehman Brothers Bank.
At the time of its collapse Lehman Brother was the fourth-largest investment bank in United States and this 2008 credit crisis led to the global meltdown of the financial market.
People completely lost their trust in the centralized financial system.
Then came a breakthrough revolution in the traditional financial system, when Satoshi Nakamoto attempted to develop a parallel decentralized financial system. Away from regulators, governments and financial institutions, more like borderless internet.
“A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.”
Digital currency Bitcoin made its debut in 2009 and ushered in a new era of cryptocurrency.
Bitcoin was invented as a parallel digital global virtual currency and was slowly adopted by several programmers, gamers & enthusiasts as a new cool thing. And soon, capitalism and human greed took over the noble characteristic of Bitcoin and challenge’s, bubbles and bursts started popping around the modern era of digital currency. Without a doubt in the past couple of years digital currencies have experienced significant boosts in popularity, there are persistent unthruths, myths and rumors about the space in general and about certain coins and tokens in particular.
Challenges associated with Bitcoin
The new boom in the price of Bitcoin has bought a lot of challenges to the concept coined by Satoshi Nakamoto. Few of them are discussed as follows
1. Nobody is using Bitcoin as a decentralised currency: Bitcoin’s original use case has gone to dust, people are no more using it as a currency, they are just buying and holding in their wallets, hoping someday somebody else would buy it from them at a higher price.
Without any underlying use case of Bitcoin payments, it is no more a digital currency but just a belief store of value.
2. BTC mimics increasingly an MLM scheme:
If everyone is doing it, does not make it right.
Best suited in today’s financial world, where cryptocurrency is just being bought as a digital currency without any use. A cryptocurrency bubble is formed where few influencers buy Bitcoin and tweet; others follow them; media coverage increases as btc value goes up; and it goes on repeating until – the above cycle breaks leading to market crash.
3.Fear Of Missing Out: The fear of missing or FOMO is helping Bitcoin bubble to grow, where people and corporates are just buying bitcoins without any proper guidance or knowledge about the usage or payment modes of cryptocurrency. Mob mentality is helping mainly a handful of people holding the maximum Bitcoin wealth.
4. Bitcoin mining is highly inefficient and hurting the environment: There is reason for concern about the impact of digital currencies on the environment. With 18.5mn in circulation btcs, number of mining operations around the world have surged dramatically. Each of the individual mining rigs requires massive amounts of computational power, and this, in turn, requires large amounts of electricity.
Daily bitcoin mining consumes more electricity than running a whole country like Austria’s electricity needs. And not only mining but one bitcoin transaction generates carbon dioxide equivalent to 70k Visa credit card swipes.
5. There is HIGH Centralisation within the (original targeted) DeCentralisation of BTC:
- 2% of the blockchain wallets to hold 95% of bitcoins. How is it even different from Capitalistic World Wealth distribution?
- 5 major crypto exchanges are controlling more than 90% of global cryptos trading. How is this exposure to few private centralised exchanges, making Bitcoin decentralised.
- Bitcoin was invented to get away from the bank who are these days the biggest custodians of them.
- Miners who validate bitcoin transactions are fairly concentrated; 9 miners running 90% of mining pools (that too in a few countries).
- The same regulators who led to several previous financial crises are the one who are regulating Bitcoin, listings, derivatives, around the world.
Inspite of all that, Bitcoin still has an equal probability of hitting $10,000 value, as it has of hitting $100,000.
The fundamentals and raison d’etre of Bitcoin are not valid any more. Weak foundations lead to house of cards, bubbles, and eventual crashes.