Hey everyone, it’s Whatever Wednesdays and I’m here talking about Crypto again. I’m actually not sure why I like writing about it so much. I guess it stems from my belief that cryptocurrency will change the world. Anyways, today we’re going to talk about “What is the Future of Cryptocurrency?”
What is the Future of Cryptocurrency?
There has been a lot of movement in the crypto market lately. A huge increase at year’s end and year’s beginning with a series of “crashes” from mid January until now. People are all wondering when/if Bitcoin (and cryptocurrency) will recover. I don’t think anyone can tell you for sure.
My major criticism of Bitcoin is that it doesn’t really have a real world use case. While very secure, it’s also very slow, some people have sighted “7 transactions/sec”. Compare this to Visa has a daily peak rate of 5000 transactions/sec, and says it can do up to 24,000 transactions/sec. Of course, that isn’t necessarily a fair comparison since Visa has years and years behind it and Bitcoin is still relatively new and is a new technology. However, you can see that it has a long way to go before trying to do what Visa does (but without the middle man).
But… is that what it wants to do?
The real question is:
What does Bitcoin want to be when it grows up?
Does Bitcoin just want to be a store of value or does it want to be a medium of exchange?
If you ask Satoshi Nakamoto, the creator of Bitcoin, they would argue that he/she/they wanted it to be a “Peer-to-Peer Electronic Cash System”. This is in the title of the original white paper. For this reason, we’ve seen the hard fork into BitcoinCash and we’ve seen altcoins like LiteCoin, zCash, etc. sprout up trying to fill this void.
I think the answer for most people holding Bitcoin is:
Which will make Bitcoin more valuable?
However, I don’t think anyone knows that answer to that question.
If Bitcoin becomes a “store of value” like digital gold because of its scarcity, then it can continue to be a volatile. Gold’s volatility is well documented over the years. I don’t think it’s been that volatile compared to Bitcoin, but what has? If we assume that Bitcoin will reach some reasonble volatility then the potential for a store of value is there. This will hold as long as people think it will hold value. Gold is a store of value. However, will people believe in something to hold value that isn’t tangible?
I think it’s possible that the world will accept intangible store of value eventually. But is the world ready for that concept yet? I’m not sure.
What else is in store for Crypto?
I think we will see a homogenization of the exchanges. I mentioned this before in a previous post: Getting Started in Crypto.
Before, in order to convert fiat to Bitcoin/Ethereum, your choices were limited to Coinbase, maybe Bitstamp and Kraken. The major crypto-to-crypto exchanges were Bittrex, Bitfinex, and Binance. Other exchanges are coming up like Kucoin, and maybe Robinhood someday.
However, recently Bitstamp and Kraken have added XRP to their fiat exchange, and Bittrex has added fiat to its exchange. I think in the near future, we won’t see “fiat/crypto” versus “crypto/crypto” exchanges, they will just be called Crypto Exchanges. If your exchange doesn’t allow for fiat exchange or your choice if altcoin isn’t listed — it will die off.
Coinbase has been very successful in creating a user-friendly interface for a portal to crypto. It’s kind of like yahoo was a portal to the internet back in the day. However, that is not enough anymore. It really needs to start offering the other cryptos on exchanges, at least the top ten. Otherwise, I can guarantee you that they will be losing out on significant volume from Bittrex as people will become more savvy and just do all their trading through them. Binance, which I think has a good user interface will need to follow suit and add fiat as well.
The truth of the matter is that if Binance was to offer fiat exchange, then people will not need to use Coinbase anymore (or Bitstamp, or Kraken). Bitstamp and Kraken must understand this because they are slowly adding more cryptos to their lists. Bitstamp has Ripple (XRP) and Kraken has Ripple (XRP) and maybe 10 other altcoins available for exchange.
I do understand that this is real money at stake. For this reason, you don’t want to implement too many things too fast and break things. However, I feel Coinbase’s window of opportunity to be the portal to all cryptos is closing. This is coming from a guy who lives in Hawaii and can’t even get on Coinbase.
Adapt or Die.
We already had the crash you mentioned right? This was it?
I may be wrong, but I don’t think we’ve hit peak enthusiasm for cryptocurrency yet. I think one of two things will happen:
- Cryptocurrency is a bubble and we will see it absolutely take off in 2018 with a $5000 Ethereum and $30000 Bitcoin.
- To me, this would signal that a crash will probably happen.
- Cryptocurrency trades sideways for the entirety of 2018 with Ethereum hanging around $1000-1300 and Bitcoin $10000-13000.
- This doesn’t mean much to me. It could still be a bubble, just not ready to pop in 2018. But it could mean it’s not a bubble.
Of course, I’m not a financial advisor and not an economist. I’m just a guy trying to make sense of everything. Neither of the above two scenarios will change how I invest (gamble) in cryptocurrency. I’ve placed my small amount of gambling money into cryptos that I think will survive a crash if it happens. I explained this in my Searching for Amazon post.
When I was a boy, my dad knew that computers were going to be “the thing”, so when he bought a computer he told me to learn how to use it. I remember it fondly. It was a 286 and I think it cost about $3000 at the time, which was a TON of money back then. He taught me how to load the 5 1/4 floppy discs and how to use the basics of DOS. We played a little bit of Space War together:
I remember I figured out if you turned on gravity and teleporting, you could beat the computer by teleporting before you ran into the planet from gravity. The computer wouldn’t teleport in time, so you would win. Anyways, after that, I helped type up an engineering book he was writing on Wordperfect for DOS. Wordperfect for DOS was very functional, but if you compare it to what we use now, it was absolutely horrid.
Then “Windows” came out and changed everything. It’s so easy to use, just point and click, and stuff happens — until it breaks and you have to fix it from DOS. I learned a lot of computers mostly from just messing around with them. We had to format my dad’s computer a bunch of times because I messed it up. Good times.
Then the internet came out and people started saying stuff like “World Wide Web” and “Internet Super Highway”. These were the buzz words for “people in the know”. I learned how to use a modem and bulletin board systems (BBS) and taught my dad how to use America Online. My Practical Peripherals 14.4k modem (PM144MT II) was bulletproof by the way. That’s 14400 baud (bits/second).
Fast forward to 2018.
No one knows what a 5 1/4 floppy is, or probably even what DOS is. If you talked about the “World Wide Web” or “Information Super Highway”, people would look at you funny. No one says “baud” anymore, we use Mbps now. The world is different.
People don’t question how they get on the internet or how things work — it’s just how it is.
That’s how I imagine cryptocurrency will be in the future.
When my daughter goes on her senior class trip to Europe in 2032, she won’t need to exchange US Dollars to Euros, she will just carry whatever the cryptocurrency of the time is. Whatever country in Europe will exchange it on the fly to whatever fiat that country uses. If my daughter decides she wants to go join the Peace Corps for a few years, I will be able to send more money instantly if she needs it. I will have that feeling of security. My daughter won’t question how these things are settled in real time or how she gets internet pretty much anywhere on the planet — it’s just how it is, and both blockchain technology and cryptocurrency will be behind that.
However, I do want to try to teach her now, so here’s her new video: Blockchain versus Cryptocurrency:
This one was much more difficult that previous one, and she worked really hard on it. Enjoy!
What does Bitcoin want to be when it grows up? Payment System or Store of Value?
Exchanges will need to allow for fiat exchange and a reasonable amount of cryptos to be competitive in 2018. Adapt or Die.
I don’t think we’ve seen “the crash” yet, we’ll see what 2018 brings.
Blockchain (and Cryptocurrency) is the future. For my kids it will just be “how it is”.
Agree? Disagree? Questions, Comments and Suggestions are welcome.
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