Prices Aside, Crypto’s Tech Stack Is Steadily Improving

Prices Aside, Crypto's Tech Stack Is Steadily Improving

Rachel Rose O'Leary and Alyssa Hertig

Feb 11, 2018 at 14:45 UTC

A look at the headlines of late may leave you with a familiar conclusion – with all the ups and downs in the market, it's just too early to take crypto seriously.

And it's true, despite the best efforts of even the industry's most notable developers, the world's largest cryptocurrencies remain not just volatile, but difficult (and risky) to use, at least in a way that their creators' intended.

Still, heading into 2018, enthusiasts the world over are hard at work on improvements.

As such, there's optimism advances could start to compound, creating a user experience that finally starts to transcend the issues – namely, the high fees and long wait times – users of most blockchains have become all too accustomed to.

In fact, in the year ahead, blockchain users could see exciting new features and scientific firsts that just might help push the industry closer to that vision:

1. Off-chain channels

What if it was possible for blockchain-based transactions to avoid using the blockchain at all?

That's the big idea behind off-blockchain payment channels, an idea that harkens back to 2015, but whose time may have finally come this year. Most associated with Bitcoin's Lightning Network, the idea is actually more general than this specific instance.

Essentially, off-blockchain payment channels would allow two people using any one cryptocurrency to send small payments back and forth, settling to the blockchain (and dealing with its high fees and slow transaction times) only when absolutely necessary.

Due to the potential impact, the idea is catching on – ethereum developers, while they often don't see eye-to-eye with their bitcoin peers, are at work on the same type of solution.

But there's more than just a rivalry at play, there's also reason to believe 2018 might be different in that actual live transactions could be sent in significant numbers.

The developers behind bitcoin's Lightning Network have declared the technology almost ready based on successful tests. Meanwhile, ethereum's developers have also unveiled successful tests for their versions of the concept, Raiden Network, with a more ambitious version, Plasma, potentially around the corner.

2. Real-live staking

As their popularity grows, attention is also being paid to the electricity required to sustain cryptocurrencies.

While the relevant data is difficult to pin down, proof-of-work, the consensus protocol that underlies bitcoin mining, is best defined as an energy-intensive process. As such, there are concerns about its electricity use could have large-scale environmental effects.

This is leading to new research on an idea from 2011. Called proof-of-stake, or "consensus by vote," the idea has been implemented, however, not at the scale intended by ethereum.

As such, it's long-awaited project Casper is likely to be under significant scrutiny this coming year, and early versions are beginning to see the light.

In a testnet released on New Year's Eve, one variation of Casper, was claimed to be functional. Karl Floersch, a leading developer behind the technology, told CoinDesk at the time that the code is working with "no hiccups."

Work remains to adapt this early version of Casper across the different ethereum clients, but ethereum creator Vitalik Buterin has said he expects the technology will be tested alongside proof-of-work sometime in the future.

3. Privacy advances

Privacy has been a somewhat neglected promise in the majority of blockchains, but it's nonetheless an issue that could see improvement this year.

Most notable is the advances in zero-knowledge proofs, what Buterin has called "the single most under-hyped thing in cryptography right now," are getting cheaper and easier to deploy.

A form of cryptography that hides information without risking validity, it's already been adapted to a small degree into ethereum, which could lead to a wave of startups experimenting with private smart contracts in novel and unexpected ways.

Plus, in a white paper published earlier this month, a system for achieving zero-knowledge without compromising trust – a point of contention in some earlier iterations of the tech – was released, an update which could have exciting consequences.

And as existing tech matures, privacy-centric cryptocurrencies such as monero and zcash are also set to improve.

In preparation for an upgrade, zcash has been steadily reinforcing its security, while monero is stepping up to implement "bulletproofs," a feature that could cut fees by 80 percent.

4. Decentralized exchanges

No, this isn't just a new version of Coinbase or Kraken.

As the industry's largest exchanges struggle to cope with the influx of new adopters, an increasing number of projects are at work developing something called a decentralized exchange. The term denotes not just a new browser-based exchange, but rather a type of software users can use to swap one cryptocurrency with another without a central entity.

2017 saw a flood of new decentralized exchange projects, such as ShapeShift's Prism, 0x, OmiseGo, Kyber Network, and many others.

Expect those efforts to accelerate this year.

So far, hardware wallet Ledger has already integrated with decentralized exchange Radar Relay, allowing users to trustlessly exchange tokens based on ethereum.

While functionality is limited (it's only supported by a single wallet and only ethereum-based tokens can be sent), many in the industry see it as a glimpse into the future of not just cryptocurrency exchanges, but the technology itself.

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Is Darknet Done With Bitcoin

Is Darknet Done With Bitcoin?

A new study by Recorded Future has found that Bitcoin is losing its position as the number one currency on the Darknet markets. The Internet tech company analyzed 150 of the most active message boards, marketplaces, and illicit service providers and noticed that the Darknet communities sentiments toward Bitcoin have taken a turn.

The Darknet economy

The Darknet is an Internet that uses non-standard communication protocols and ports to make it a bit more difficult for the digital identities of users to be revealed. The Darknet requires users to run a special software, the most popular being TOR. to connect to the Internet. One of the main purposes of using the Darknet is to make the information provider and the person accessing the information difficult to trace. Because of this privacy feature, the Darknet has become famous for its Darknet markets like Silk Road that allowed users to effectively exchange anything, legal or illegal over an Amazon-like marketplace. The anonymous Internet is said to attract criminals and those interested in black market activities as well.

A backlogged network

In mid-2016, Recorded Future noticed that the 150 entities they were analyzing were all expressing concerns regarding the functionality, usability and security of Bitcoin in the Darknet economy. Although it was a relatively mild increase compared to the increase in interest in Bitcoin in the latter half of 2017, the Bitcoin network was beginning to become overloaded with traffic which resulted in higher transaction fees for those using the Darknet markets. On Dec. 23, 2017 transaction fees were $52.18.

Recorded Future found that the average transaction size on the Darknet is $50-$300. If an individual tried to transact on Dec. 23, 2017 – it could have been the case that the transaction fee was more costly than the amount being transacted. One member of a Darknet message board posted this on the forum he uses:

“What's happening at the moment is incomprehensible. Despite that I've used the recommended commission fees, my transactions have remained pending for the past three days, and my work has been paralyzed. Dear vendors, please implement alternative payment options; otherwise, I will miss out on this Christmas season.”

A Christmas miracle

The backlogged queue on the Bitcoin network was making it difficult for some individuals in the underworld to conduct their business. This users transaction was logged so far back in the queue that it took several days for it to become verified. To combat double-spending attacks, most vendors on the Darknet adopted a rule requiring three confirmations before treating transactions as complete. Because a transaction cannot be complete until the payment has been confirmed, this user was effectively frozen out of conducting his “business.”

Although he was worried he would “miss out on this Christmas season,” his Christmas miracle was about to occur. To combat, the exuberant transaction fees that were increasing daily, vendors began accepting alternative payment options. The study found that Litecoin was the second most popular currency with 30 percent of all vendors accepting LTC, and Dash the third most popular currency, with 20 percent of all vendors accepting DASH.

Other Darknet studies

Back in 2016, economist Tuur Demeester was in the process of researching the Darknet markets. Demeester turned to r/DarkNetMarkets to see if the community could provide him with the statistics he was looking for: what percentage of trades on the Darknet was conducted with BTC? Was DarkCoin used and how often? How many Bitcoins were spent on the Darknet on a daily/monthly/yearly basis? But Demeester was not met with any useful answers from the community.

Prior to Demeester's endeavor, The Digital Citizens Alliance released a table with statistics about the number of drug listings on the Darknet markets in August 2014, but this table provided no information regarded prices, trade volumes and preferred payment methods.

Furthermore, Nicolas Cristin, an associate research professor in the School of Computer Science and in Engineering and Public Policy at Carnegie Mellon University (CMU) together with Kyle Soska, a Ph.D. candidate in CMU’s school of electrical and computer engineering back in 2013, conducted a study from 2013-2015 to get a handle on the Darknet market economy.

When the Silk Road was shut down in October 2013, Cristin and Soska noticed that the take-down spawned the development of anonymous online marketplaces, which continue to evolve to this day. Cristin and Soska used long-term measurement analysis on 16 different marketplaces for over two years (2013– 2015) to calculate the growth of the online anonymous marketplace ecosystem. Their research documented the types of goods being sold, the effect – or lack – of adversarial events, such as law enforcement operations and large-scale frauds, on the overall size of the economy. The two also gained insights into how vendors are diversifying and replicating across marketplaces, and how vendor security practices (e.g., PGP adoption) are evolving.

Payment methods are evolving

Recorded Futures study concluded by stating that the efforts that vendors are taking to diversify acceptable payment methods on the Darknet markets will continue. Although payment methods like Litecoin and Dash are becoming more popular, Recorded Future still expects Bitcoin to have a place in the Darknet economy- just a much smaller market share than it currently has. Recorded future also warns that with increased popularity in digital currencies will come an increase in malicious tools like ransomware that will try to take advantage of the mainstream trends in cryptocurrency.

Author Patrick Thompson

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Wells Fargo strategist – Bitcoin and the market are correlated

Wells Fargo strategist - Bitcoin and the market are correlated

Wells Fargo strategist – Bitcoin and the market are correlated

Assessing risk is a good gauge for determining stock market and cryptocurrency movement, says Wells Fargo strategist.
Wells Fargo raises its price target for equities up by 10 percent this year.
Both the market and bitcoin are now beginning to recover from dips earlier this week.

If the bitcoin bubble bursts, the stock market may go down along with it, said Christopher Harvey, head of equity strategy at Wells Fargo, who sees a correlation between the two.

"On Monday what we saw is all risk products sell off," Harvey said Wednesday on CNBC's "Fast Money."

A hit on the market, he said, can cause investors to panic and begin selling bitcoin as well.

"It sometimes adds fuel to the fire," Harvey said.

Risk in the marketplace was at a high earlier this year as the stock market rallied, which led to more interest from investors who saw the potential for big gains in the crypto market.

"Last year what you had was money chasing performance," Harvey said. As volatility shot up, he said, there was a "massive" demand for liquidity.

Then on Monday, the Dow Jones industrial average plunged 1,175 points by the end of the day. Bitcoin also fell to one of its lowest points in two months on Monday, trading at $5,947.40.

Harvey said the best gauge for predicting future market movement and the price of digital currency is simply by assessing the risk.

"We think of it more as what we have to watch out for, what we have to … tell our clients to be careful of," Harvey said. "We don't make a call whether it's going to go up or down but that it's a risk in the marketplace, and it's really far out on the risk spectrum."

Wells Fargo raised its price target for equities, up about 10 percent over the next year. Its 2018 S&P 500 year-end target is 2,950, compared with the earlier target of 2,863. Cryptocurrencies and the market should trade in correlation over the next three to six months, it said.

"If we're right, what we should see is risk product going higher," Harvey said.

"If we're right and risk starts to be bid again, it wouldn't surprise us to see a bid in some of the crypto markets," he said.

All eyes remained on bitcoin Wednesday as the market began to recover. The cryptocurrency was trading above $7,000, even briefly tipping over $8,000 in the evening.

As the crypto market becomes more regulated some of the risk should disappear, Harvey said.

Author Kellie Ell News Associate for CNBC

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Bitcoin âSKYROCKETS’ Cryptocurrency soars 25 per cent in 24 hours as ‘investors celebrate’

Bitcoin âSKYROCKETS' Cryptocurrency soars 25 per cent in 24 hours as 'investors celebrate'

Bitcoin skyrocketed last year that saw the prized currency hit an all-time high of £13991.86

Bitcoin ‘SKYROCKETS’ Cryptocurrency soars 25 per cent in 24 hours as 'investors celebrate'

A BITCOIN resurgence could be underway as the cryptocurrency soared over 24.5 per cent in the last 24 hours that has surely given investors an excuse to celebrate, it has been revealed.

Leading virtual currency tracker Coinbase declared that Bitcoin has seen an 24.5 per cent rise that saw its value climb back up to £5,288.03 ($7,383.45).

Bitcoin skyrocketed last year that saw the prized currency hit an all-time high of £13991.86 ($19,535.70) on December 17.

The increase will surely cause investors to let off a sigh of relief – the cryptocurrency had been plagued with severely declining values since it broke its price record.

As Bitcoin saw sharp declines, so too did other leading currencies Ethereum, Bitcoin Cash, Ripple and Litecoin.

Ethereum is currently valued at £534.31 ($746.04) while Bitcoin Cash sits at £656.88 ($917.17).

Meanwhile, Litecoin is worth £97.29 ($135.84) per coin and Ripple is worth 53p ($0.74).

The dramatic fall in virtual currencies recently could have been caused by increased regulations around the world.

India has been labelled as the next significant nation to outlaw cryptocurrencies, according to a finance ministry official.

New Delhi’s economic affairs secretary, Subhash Chandra Garg, stated that the government is setting up a panel to analyse cryptocurrencies and aims to submit a report on them in the current fiscal year.

He explained: “The government will take steps to make it illegal as a payment system. As well as having a regulator in place.

“We hope now within this financial year the committee will finalise its recommendations… certainly, there will be a regulator.”

Meanwhile, there are fears that China could harness its Great Firewall to block access to virtual markets.

Any and all websites offering services related to cryptocurrencies have been wiped from search engines and social media in the Asian superpower.

Initial coin offerings (ICOs) have already been banned in China.

ICOs have been previously attacked for being harnessed by scammers in a desperate effort to steal investor funds.

The US could also be targeting “increased federal regulation” for cryptocurrency trading platforms.

By JOSEPH CAREY | UPDATED: 05:41, Wed, Feb 7, 2018

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Bitcoin drops below $6,200 for first time in three months

The virtual currency fell to $6,190 for the first time since mid-November, according to Bloomberg News, and represents the latest hammering for a unit that saw a stratospheric 26-fold rise last year.

Bitcoin plunged 20 per cent to a three-month low today, its latest sharp loss following a series of setbacks for the cryptocurrency that, with a collapse across global mainstream markets adding to the selling.

The virtual currency fell to $6,190 for the first time since mid-November, according to Bloomberg News, and represents the latest hammering for a unit that saw a stratospheric 26-fold rise last year.

Today's collapse comes just six weeks after bitcoin hit a record high of $19,511, fuelled by a flood of speculators looking to make a quick buck, with warnings it could fall another 50 per cent.

Since those heady days the cryptomarket — which includes dozens of other units — has been pounded by news of crackdowns by governments including in China, Russia and South Korea, one of the biggest markets for the sector.

On Thursday, India said it would "take all measures to eliminate" cryptocurrencies' use as part of a payment system and in funding illegitimate activities, while Japanese authorities raided a virtual currency exchange after it lost $530 million to hackers.

Central bank in Europe, Japan and the United States have also flagged concerns about the unit and this week saw several commercial lenders say they would stop allowing their customers to buy bitcoin through their credit cards owing to debt concerns.

Stephen Innes, head of trading for Asia Pacific at Oanda, said "the dynamics behind the moves are regulatory clampdowns and investors losing confidence in crypto".

The sell-off on Tuesday was exacerbated by crushing losses on world stock markets, with the Dow on Wall Street suffering its biggest one-day points loss and wiping out all its 2018 gains.

The global rout comes as panicked investors fret over rising US borrowing costs, leading them to cash in profits after a stellar couple of months that have seen many indexes hit record or all-time highs.

Equities have enjoyed months of surges fuelled by optimism over the US economy, corporate earnings and the global outlook.

But while traders have been piling into equities, pushing many global indexes to record or multi-year highs, there has been growing concern on trading floors about elevated US Treasury bond yields — at four-year highs — and the likelihood of fresh Federal Reserve interest rate hikes.

"The risk-off tone is hitting Bitcoin almost as hard as a global regulator and bank scrutiny," said Greg McKenna, chief market strategist at AxiTrader. "The latest dent to the Cryptospace has been banks saying they are shutting down the ability of clients to buy bitcoin with their cards."

"This could end up a full round trip back into the $1,850/$2,966 region.

Source: Feb 06, 2018 10:39 AM IST | Source: PTI

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Bitcoin Not Giving a Big Enough Hit as âGateway Drug’

Bitcoin Not Giving a Big Enough Hit as ‘Gateway Drug’

Interest in Bitcoin hit its high point leading up to its own high of $20,000 in the middle of December last year. Interest peaked, not only in investing circles, but also in the mainstream as Bitcoin became the buzzword on everyone's lips.

This adoption was championed by Bitcoin as it welcomed millions of users to the cryptocurrency community, as expressed in Coinbase’s figures alone. However, in this fast paced ecosystem, Bitcoin is not enough to hold the attention of this vastly diverse community. So, while it may be the ideal coin to get people hooked on cryptocurrencies, once they are in and settled, there is time to seek out a multitude of other coins that are better suited to their needs or beliefs.

The draw of big growth

Bitcoin’s biggest draw was the incredible returns it was offering as it rallied from 2,000 percent in 12 months. This phenomenal growth continued to increase interest in the currency, and that sparked even further growth in this massive hype cycle. It has been correlated before that searches for on Google for Bitcoin are closely related to its growth – a phenomenon known as the ‘Satoshi Cycle’. In the lead up to December’s high, the Satoshi Cycle was in full effect as Google trends showed some interesting figures.

Nicholas Colas, a pioneering Bitcoin analyst in the world of traditional investments, has taken this correlation very seriously and states that it plays a big part in his predictions. "Going into December, [searches] skyrocketed," Colas said on CNBC’s Fast Money. He added that the total number of Bitcoin Google searches worldwide tripled that month:

"You saw that correlates to the total increased number of wallet growth, which doubled in December from approximately 5 percent to 10 percent as Bitcoin rallied.”

Already hooked

However, taking this metric into consideration, it could be argued that the new wave of adopters are now starting to disperse and find their way to other coins that are more suited to their individual needs. It makes sense that as people become educated and learn more about options in the crypto community that they begin to diversify and pick out their favourite coins to invest in. This often leads to money moving away from Bitcoin and into Altcoins.

Bitcoin, being the dominant, most adopted and scene-leading coin, will continue to be the ‘gateway drug’ of the community, but it is finding it harder to hang on to total support and dominance.

These sentiments are expressed by Colas, who adds:

"Bitcoin is considered the gateway drug to all cryptos and it has acted exactly that way. Right now [the Google search data] is telling me there's not really that next leg up in Bitcoin because there's not that interest that leads to wallet growth that leads to price appreciation."

Proof?

Colas tries to justify this position by explaining how Ethereum has been the only coin that has fared relatively well in the top echelons of the CoinMarket Cap:

“Some of the movement in Ethereum, which has traded much better [in January], is just money which is being pulled out of Bitcoin."

However, it is important to note that Bitcoin’s price fluctuations and movements are still heavily linked to all other coins. The saying that: ‘the tide moves all boats’ is still true in the cryptocurrency market with Bitcoin essentially being the tide. When Bitcoin is up, most coins follow, and when it is down, the same red graphs appear to follow suit across the board.

Author Darryn Pollock

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Cryptocurrency Markets Move Back Into Green After Substantial Selloff

Cryptocurrency markets are rebounding today, Feb. 3, following yesterday’s multi-month low in Bitcoin's price. Most of the top 50 coins are in green, with 24 hour gains over 20 percent.

In part due to pressure from misleading reporting on regulations in India, the overall cryptocurrency market took a massive nosedive starting Thursday, Feb.1, shedding more than $100 billion in market cap in the 24 hours following the news.

However, after the substantial selloff, the market has spent today bouncing back, with Bitcoin rising back above the $9,000 level. At press time, Bitcoin was trading at an average of $9,095, up 3.54 percent on the day.

Following Bitcoin’s lead, other coins have also rallied substantially. With the except of three coins, every top 50 cryptocurrency has seen gains, with Litecoin (LTC) and Cardano (ADA), and Verge (XVG) leading the pack with gains between 15 and 20 percent.

A quick glance at the Coin360 market snapshot indicates a clear positive turn after the substantial negatives of the week.

Despite the market lows this week, figures such as Litecoin founder Charlie Lee and CNBC’s Cryptotrader host Ran Neuner have made bullish statements recently about Bitcoin. In an interview with Cointelegraph, Lee in particular offered some level-headed perspective on volatility in crypto markets, often lacking in a market crowded with fearful newcomers.

News of the first Canadian Blockchain ETF approval may well have played into today’s rally.

Bitcoin hit a record high of 20,000 in late December, only to crash, along with the rest of the market, just a few days later, Dec. 22, when Bitcoin and altcoins lost 20-30 percent.

Since then, the leading cryptocurrency has yet to fully recover, hovering roughly between $10-$15,000 per coin, until this yesterday’s multi-month lows under $8000.

The entire month of January saw a market sell off, in part due to increased regulatory news from South Korea – and misleading reporting on it – that left many investors fearful.

Author Jon Buck

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Bitcoin is bottoming, expect a 70 percent surge â Trader

Bitcoin is bottoming, expect a 70 percent surge – Trader

The old saying goes, "buy when there's blood in the streets," and that's what I'm doing with the recent bitcoin price action.

Bitcoin traded to a low of $7,700, this level is a loss of 25 percent on the week and 40 percent on the year. That $7,700 low is ironic because it is the same level that it broke above and began a parabolic ascent in mid-November.

I am watching a key level at $8,650 and a continued close above that could signal immediate upside potential. The next level of resistance is $10,000, and a break back above that should bring further buying to the table, suggesting near-term upside to $14,500, a 70 percent jump from its current price.

On the other side of the coin, I believe we are witnessing a market-cap rebalancing. Many disregard bitcoin but most do not disregard blockchain technology.

While I expect bitcoin to recover from this low, I believe that there are cheaper and better technologies within the complex that are positioned for stronger gains. The five that I am focused on are ethereum, NEO, ripple, stellar and last but surely not least, VeChain. The crytpocurrency market cap reached a height above $800 billion, a number that is now cut in half. Bitcoin's piece of the this market cap has slowly shrunk and is now only one third.

As buyers step back in I believe this trend will continue and I'm watching for these five to gain further ground.

Author: Bill Baruch

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Bitcoin, Ripple, And Litecoin Sell-off – What’s Different This Time Around

Bitcoin, Ripple, And Litecoin Sell-off - What's Different This Time Around

Bitcoin, Ripple, And Litecoin Sell-off – What's Different This Time Around

The current sell-off in Bitcoin, Ripple, Litecoin, and other cryptocurrencies may have a long way to go before it’s over. For a “technical” reason: it’s broad, extending from major currencies to the smaller ones.

When Bitcoin dropped close to 40% back in the middle of December, Ripple rallied, quadrupling in value in just a few days. The rally quickly spread to Ethereum, Litecoin, NEM, Siacoin and Bytecoin, and other cryptocurrencies.

Then, as Ripple and other cryptocurrencies sold off a couple of weeks later, Bitcoin rallied.

There’s a good explanation behind the rotation among cryptocurrencies. Some cryptocurrency exchanges require Bitcoins to pay for coin transactions. So investors who already owned Bitcoins had to sell them to pay for those transactions.

Rotation from one coin to another isn’t new to investing. It has been applied on Wall Street for years, where investors rotate funds between “defensive” and “cyclical stocks,” at times when interest rates, i.e. the “opportunity cost” of money, remain low.

That’s bullish for stocks, because it confirms that money is staying within this asset class rather than moving back into money market investments.

And that was a bullish sign for cryptocurrencies back then, too.

But that’s not what is happening this time around. With the exception of Ethereum, all major cryptocurrencies are down simultaneously. In the last seven days, Bitcoin is down 10.10%, Ripple is down 17.23%, and Litecoin is down 10.40%; and all are 50% or more below their all-time high back in December.

Table 1

Seven-Day Price Change For Major Cryptocurrencies

Source:Coinmarketcap.com 1/31/18 at 1.30pm

Worse, the sell-off has been extending across the entire cryptocurrency list—see table.

Table 2

Source: Coinmarketcap.com1/31/18 at 1.30pm

This means that money getting out of major cryptocurrencies isn’t being plowed back into other cryptocurrencies. It is leaving the entire asset class.

That’s bearish for all cryptocurrencies.

And that’s what’s different with the sell-off in major cryptocurrencies this time around.

Panos Mourdoukoutas , CONTRIBUTOR

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Is Bitcoins Reign as King of Cryptocurrency in Danger

Is Bitcoin’s Reign as King of Cryptocurrency in Danger?

Regardless of where your allegiances lie in the crypto community, homage should be paid to the original Blockchain solution – Bitcoin. However, it has been 10 long years now since Bitcoin came into being (an eternity in the cryptocurrency space) and things are starting to get away from the King.

Bitcoin’s path was forever changed in August 2017 when a new challenger stepped up to the plate amid the rapidly escalating scaling debate. Bitcoin Cash appeared with its backers claiming it to be the one true ruler. Not long after this came Segwit 2x's failure to launch, which essentially confirmed Bitcoin’s status as digital gold. As a digital gold, it may have no rivals, but in the world of cryptocurrency it may have played its last move.

Scaling is a constant topic for evolving cryptocurrencies, and if Bitcoin cannot scale properly soon, it could be abandoned by investors for a more forward thinking cryptocurrency.

An aging King

After bringing in millions of users to the cryptocurrency space, Bitcoin has hit a log jam on its network as available blocks fill up with transactions quicker than they can be mined. This backlog has led to higher transaction fees and longer waiting times.

These factors all end up being counterproductive to the principles underpinning cryptocurrency which are to eliminate the power that banks have over money. Banking fees and centralised waiting times are part and parcel of the irritation that comes from another entity being in control of one's money. Bitcoin is increasingly picking up these bad habits, leaving its users with a feeling of déjà vu harking back to the days when banks held a monopoly over monetary services.

Waiting in the wings

Bitcoin’s move towards digital gold was a communal decision, and therefore blame cannot really be laid purely on the currency’s shoulders. But in that short time, frustrations amongst investors have grown with regards to the scaling issues.

There are other currencies waiting to try and take the mantle away from Bitcoin, and already this has been demonstrated as Bitcoin suffers a 50 percent drop in market dominance since November. Currently, market share for Bitcoin is just over 33 percent, having not too long ago been at over 60.

Bitcoin Cash is the most direct competitor to Bitcoin, trying to replace it as a ‘peer-to-peer electronic cash system’, as outlined in its white paper. However Bitcoinc has more than just its potential replacements to worry about, as the adoption rate of the currency is reversing. Bitcoin once held sway over a number of large companies who had adopted it as a form of electronic payment, but have since reneged on their adoption. Steam, formerly a strong supporter, no longer accepts Bitcoin, while Microsoft caused confusion when they looked to stop accepting only to rebut this and state:

“Microsoft has restored Bitcoin as a payment option after working with our provider to ensure lower Bitcoin amounts would be redeemable by customers.”

As companies turn away from Bitcoin, even some of the more established names in cryptocurrency join the march for the door. Civic CEO Vinny Lingham, who is well respected for his opinions in the crypto community said:

“When I look at it from the product standpoint, I think the greater demand is for peer-to-peer cash than for digital gold.”

Where to for Bitcoin?

There are currently plans underway for the oldest and most well-known digital coin to try and overcome this scaling issue. Some of the solutions being considered include the Lightning Network, or major upgrades to the network like changing block sizes.

Lightning Network, a technology which is being tested slowly but surely on the Bitcoin network, involves taking the transactions off-chain and opening payment channels. With these transactions taking place off chain, the result is an almost instantaneous transaction, at a much cheaper rate. This kind of upgrade will require a lot of consensus, and will need to undergo a lot more testing and proof before it becomes entrenched and usable on a large scale, which is another issue that Bitcoin has.

Even the idea of making big changes to the network could again fail and flounder. We have already seen this with the failure of the Segwit2x potential upgrade. Bigger blocks could solve the problem, but then Bitcoin will essentially going down the same path as Bitcoin Cash, and with too many staunch supporters in the community, this is unlikely to happen.

Hard to dethrone

Bitcoin is well entrenched in the cryptocurrency space, and will likely be a leading currency for a good while more as people refer to Bitcoin first before anything else. But, as the community matures, explores, and demands more, Bitcoin could be in trouble. Changes need to happen, and while Bitcoin will not fall on its sword too soon, if it does not make changes, then the potential for failure will continue to increase.

Author Darryn Pollock

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