Digital Revolution, Will Bitcoin Survive?
The 'one currency to rule them all' debate has existed ever since the first set of altcoins — Bitcoin alternatives — started appearing in the digital currency ecosystem.
The typical argument ranges between the necessity, or not, to further decentralization through incorporation of altcoins. Bitcoin enthusiasts rely on the cryptocurrency's infrastructure as the single most important reason why no other digital currency could rival it.
However there's another, more organized, surmounting challenge: Governments, worldwide.
As the past week of news and headlines illustrates, banks and governments are pursuing, or have already pursued, their own digital currencies. If this doesn't present a greater threat to Bitcoin's existence or subsistence than anything else, it should.
Bank of Tokyo-Mitsubishi UFJ, Japan's largest bank, revealed a couple of weeks ago that it was developing its own digital currency called MUFG-coin, which went on trial in fall. Attached to it will be a smartphone application also nearing its completed state.
Similarly, China's central bank the People's Bank of China (PBoC) revealed in late January it too is considering issuing its own digital currency, with no particular timeframe but specific wants and qualms (see news story below).
In addition, countries have exhibited the wherewithal to push ahead of the digital curve, in particular, Ecuador. The South American nation of over 15 million citizens pioneered the national adoption of digital dollars in December 2014.
As reported in TechTimes.com, the system is not complicated, "People can simply walk into participating banks and exchange their money for electric currency, which is storable on their smartphones. That currency can then be used to purchase goods or services."
There are also whispers that Mexico may be developing its own digital currency, a digital peso. As well as the Phillipines' and its discussed "e-Peso" to be used in online exchanges. Both are also rumoured to be used in conjunction with blockchain technology.
With financial sectors as well as administrations across the globe continuing to explore blockchain technology, the pursuit of a digital evolution in finance, commerce and more is on.
To anti-establishment folk this shouldn't grate at the prospects for Bitcoin, but to those that hope the cryptocurrency will push into even greater mainstream use, these developments, especially in the wake of Bitcoin's civil war, should be alarming.
Bitcoin currently sits atop the pyramid in terms of digital currency market cap at around USD$6.5 billion. In other words, one Bitcoin (BTC) is worth about $434 U.S.
Centralized efforts as seen in Ecuador and developing elsewhere around the world increasingly undermine the value of BTC as a legitimate currency, pushing it into the realm of commodities, to be traded like gold or iron (an argument which could also hold some sway under current conditions).
The underlying technology of Bitcoin, the use of a decentralized network that successfully achieves consensus without a central authority, i.e. the blockchain, must be held separate in value to Bitcoin as money.
Money is a medium of exchange to trade for goods and services; must hold some store of value. Volatility is duly problematic in a currency.
With governments developing their own currencies, what value will there be, besides black market use, to possess Bitcoin or any quantity of altcoins?
Presumably, payment for work, goods and services will all be conducted using the centrally regulated national digital currency. The desire, the need, to possess Bitcoin will diminish in the face of digital currencies that possess similar, if not identical, qualities.
Add to that the factor of a centralized, government-backed digital currency to afford a greater level of stability and trust, and it grows difficult to see ordinary citizens wishing to flock to the unregulated counterpart(s).
The worth of currency, like any other good or service, is predicated on the demand and pursuant supply. But demand is crucial to prescribing value.
At the moment there is no other currency that can match the value and infrastructure Bitcoin provides. It has value, as a currency, because you can buy goods and services discreetly, and as an investment capable of converting into "real" currency.
But this can all be rearranged, reordered.
If governments like China, Ecuador and others, move to provide the same convenience and security as Bitcoin affords digital users, and then tie it to widespread, government-approved use there would be little point to possess unregulated or "convertible" virtual currencies save for anonymity or for illicit purposes.
See the trend?
Currencies that are subject to volatility and with no economy, no government, and minimal regulation behind it will be a hard-sell if there are more trusted and secure alternatives.
This would likely contribute in reducing BTC's value as a currency and perhaps as a commodity.
Further to even suggest Bitcoin as a widespread currency would mean deflating its value because of the current supply constraints placed on the currency. While money supply presents its own set of issues, the limited supply of Bitcoin does as well.
So the current divide in Bitcoin's development must reach consensus because copycat governments can and are seemingly shifting the balance and discussion from the traditional to digital. In order to survive the Bitcoin community needs to come to an agreement.
The only certainty, invest in hardware wallets, because digital currency is coming, but just like driverless cars, the most popular make and model is yet to be seen, and Bitcoin could play a role, but that role needs to be defined, and quick.