Everybody knows that bitcoin is now mainstream as more and more people are starting to invest in it. Coinbase direct listing is proof that Wall Street is now embracing bitcoin technology and its benefits. This makes the coinbase a 100 billion dollar company as bitcoin reaches $63,000. Even the most beloved businessman Elon Musk on Twitter announced that you can buy its Electric Vehicle Tesla by using Bitcoin and its company also invest billions of dollars in bitcoin from its cash reserves. Because of these scenarios, cryptocurrency becomes credible and boosted even as Dogecoin reaches the moon.
A single Bitcoin reached a value of more than $60,000, and people are curious about how Bitcoin will be used in the future. Are we witnessing a catastrophic bubble here? Or will it continue to be a valuation tool?
Critics contend Bitcoin is unusable in any practical sense and therefore has no social or economic value. They argue its "value" is based solely on the opinions (and hype) of investors and is unsustainable. They point to its exceptional volatility as a reflection of these truths and also as a reason why it will never come to replace fiat currencies, as some fans envision.
The majority of Bitcoin users are concerned about volatility. Since Bitcoin is still relatively new, it may naturally stabilize, but it has several much more existential issues that may keep it from being widely adopted.
The Power of Blockchain
Bitcoin’s structure is the reason behind its success, is designed to run on a chain of transactions. It runs on a blockchain, which is a database that is built from blocks of information that are connected and accessible by anyone on the internet.
The distributed nature of its ledger—its record of transactions—also makes it accessible, public, and immutable. These characteristics have contributed to its popularity:
- It’s distributed and public: This makes it more trustworthy: It is not verified by the government, but rather by math, which is more reliable and stable. There are multiple copies all over the world, and anyone can add to or read it.
- It’s immutable: Bitcoin blocks cannot be altered once they are added to it, which means transactions can be kept forever and can’t be falsified—its primary advantage.
This same characteristic could turn out to prevent it from becoming a standard currency.
The Downside of Blockchain
The blockchain is open for public use because it is distributed and not controlled by a single entity. Anyone can modify the internal code anonymously and without repercussions.
Some unusual elements have already been included: digital images (including one of Nelson Mandela), the Bitcoin logo, advertising, and prayers; More worryingly, leaked classified information and illegal pornography have also been inserted. If someone starts distributing child pornography or state secrets, through the ledger, it will become an increasingly dangerous problem because nothing can be removed from it after it has been added.
Security Issues Could Be Caused by Fragmentation
Lack of accountability and permanence may prompt government interference or business interference.
- When people embed censored information, for example, the Chinese government may blacklist the IPs that process those blocks if they found some censored info in the blockchain.
- An organization might threaten to sue networks hosting large-scale miners processing blocks that contain the intellectual property of a company, such as a Disney character.
Any of these could grow into new blockchains that run in parallel to the original Bitcoin. If it did this repeatedly, it would lead to a variety of regionalized versions of Bitcoin (one in China, one in the USA, one in Europe) that might pose problems for security.
It is easy for hackers to compromise small vulnerable blockchains so that they can easily steal the funds encoded in the system.
The environmental impact of Bitcoin is another objection to its use. Bitcoin transactions are verified by "miners," individuals who solve increasingly complex calculations using enormous computer capabilities. As a result of Bitcoin mining and processing, it produces carbon emissions equivalent to that in New Zealand each year.
In a world increasingly concerned with sustainability, how are firms going to justify the use of Bitcoin?
Many companies that promote environmental protections tend to have difficulty explaining the use of cryptocurrency. For example, PayPal is a proponent of climate initiatives but announced plans to allow Bitcoin transactions. Additionally, Tesla, which was established specifically to reduce carbon emissions, invested more than $1.5 billion in Bitcoin and now accepts the cryptocurrency as payment.
Many investors and money managers evaluate the environmental impact of an organization’s activities when assessing their investment options. Customers, too, are increasingly focusing their investments on companies with better environmental records.
In other words, Bitcoin's use will be in conflict with many firms' mission statements if the mining industry doesn't switch to renewable resources.