The creator of Twitter believes that bitcoin will be the only currency in the future, but there are many things against it.
Cryptocurrencies are not going through their best moment, but those who believe in their future are doing it at face value. Jack Dorsey, co-creator and current CEO of Twitter, just stated that bitcoin will be the only currency to be used in the future.
Dorsey’s support is not surprising as this manager has made significant investments in this technology. However there are compelling arguments that make it difficult to think that bitcoin ends up becoming that single currency that we all use worldwide.
The hope of turning bitcoin into a single currency
Dorsey was interviewing The Times, and among his statements he highlighted the one he dedicated to this cryptocurrency, which for him will eventually replace the dominant role of the US dollar in the world economy.
Opinions about the future (or lack of it) of bitcoin are prevalent among personalities in technology and the financial world. Jamie Dimon, CEO of JPMorgan, one of many who described the bitcoin phenomenon as a bubble about to burst even if he later retracted. That has not happened at the moment, and Dorsey believes that the future of bitcoin is indeed bright:
The world will end up using a single currency, the internet will use a single currency. I personally think it will be bitcoin.
There are many other technocrats and even financiers who see a future in crypto visas. Peter Thiel claimed, for example, that critics of bitoin they were underestimating him, and that “it is more like gold, a store of value.”
For Mark Cuban, a billionaire and venture investor, the value of bitcoin “is a function of supply and demand” and seemed much more interested in the blockchain, which he described as “a great platform for future applications.” The statements of Christine Lagarde, director of the International Monetary Fund, who declared that “I do not think it is wise to dismiss cryptocurrencies” were surprising, comparing these criticisms with those of those who denied that computers were to conquer our homes.
There are many other personalities in the world of finance who have criticized the role of cryptocurrencies in general or bitcoin in particular – at Bloomberg they have an excellent compilation with some of the most relevant – but the certainties in favor of bitcoin are few.
Bitcoin as a currency or as a store of value?
Those who defend this cryptocurrency and go beyond mere speculation believe that at least currently bitcoin looks much more like gold as a store of value than to the legal tender coins with which we carry out all kinds of transactions on a daily basis.
That future as a currency seems a priori difficult to come true: the platform’s own structure has caused undesirable effects like huge fee growth when the bitcoin fever broke out in the last quarter of last year. The value was around 20,000 dollars, but the commissions to operate reached 35 dollars.
That fever eased shortly thereafter and trading costs are now manageable again (typically under a dollar) but there is another equally worrisome element in bitcoin’s role as currency: the limited number of transactions per second that supports.
Currently bitcoin supports between 5 and 7 transactions per second according to some studies, while traditional electronic payment methods such as VISA supports around 2,000 transactions per second and PayPal is around 150.
That is precisely what the Lightning protocol that the Lightning Labs company is developing is trying to improve to improve that “weakness” of bitcoin. Dorsey invests in bitcoin, but also invested 2.5 million dollars on Lightning Labs recently.
The downsides of bitcoin are implicit in its design
There are other arguments against it, such as the lack of transparency that from the beginning made bitcoin the perfect alternative for that. black market for illegal products, services or substances that had its maximum exponent in Silk Road and in successors such as Silk Road 2.0, AlphaBay or Hansa.
Other analysts added more disadvantages in this area and considered a future in which banks would issue their own cryptocurrencies, something for which they did not find too many reasonable arguments: in Sweden, they recalled, they are trying to completely eliminate payments with cash, something destined among other things to avoid or at least minimize the black economy. It has not been necessary to create cryptocurrencies for something like that, which seems to complicate the future arguments of bitcoin as a substitute for fiat currencies.
The very philosophy and design of bitcoin means that the amount of available coins is fixed: although it is growing asymptotically, there will come a point where no more coins can be produced, and if it were to become a means of payment, some suggest that that would cause negative inflation (permanent deflation). The prices of the products and services that we pay in bitcoin would have to fall to face this reality, which does not seem like a situation aligned with the social and economic policies that surround us.
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