The economic situation in 2016 is grim. How can Bitcoin survive this?

In 2016, many parties predicted that the international and domestic economic situation would be grim. The "Government Work Report" pointed out: From an international perspective, the world economy is undergoing deep adjustments and is weak in recovery, and international trade growth is sluggish...; from a domestic perspective, long-term accumulated contradictions and risks have further emerged, and the economic growth rate has shifted gears, structural adjustment pains, and the transformation of new and old growth drivers are intertwined, increasing downward pressure on the economy.

This year, blockchain technology has developed rapidly. As one of its typical applications, can Bitcoin survive such a severe economic situation?

Bitcoin faces several issues: dual identity, struggles with governments, competition from other cryptocurrencies, and scalability. If Bitcoin wants to survive, it must innovate.

In a report published on April 4 , 2016 by Vanbex Group, Brandon Kostinuk compared Bitcoin to light: Is Bitcoin a currency or an investment? Is light a particle or a wave? The answer to both questions is, of course, that it has a dual identity.

Kostinuk ’s analysis points out that Bitcoin faces multiple difficulties — difficulties that could prevent it from becoming a widely accepted currency.

Whether it is from the inside, outside or fundamentally, by design or accident, we have to admit that Bitcoin faces real-world pressures: it cannot be widely used for the time being. The most notable problem is the scalability of Bitcoin applications.

What beneficial impact does the “Developer Fund” have on Bitcoin?

There is good news recently: MIT's digital currency organization received a $900,000 Bitcoin developer fund, which is also the organization's first foray into the Bitcoin and blockchain field.

Motherboard ’s Christopher Malmo wrote a great article about the $ 900,000 fund called “Bitcoin needs a break from the real world to survive in the long term.”

In the article, he concluded:

“Taking Bitcoin away from where it is now and bringing it into academia is like a shot in the arm for Bitcoin — so that it can keep moving forward and innovating. In order for Bitcoin to progress, it needs to be able to breathe a little, away from the constraints of the real world.”

Bitcoin's multiple confrontations

Kostinuk doesn’t think bitcoin’s problems will stop suddenly, let alone if a new competitor emerges with the backing of a tech giant. As Van der Laan told CoinDesk last January , it’s important to be clear that discussions and planning are over at this stage, and we need to have a clear goal and move forward.

Looking back at history, during the banking crisis in Cyprus in 2013 , many Greek citizens viewed Bitcoin as a means of saving money that the government could not interfere with. From the government's perspective, it is understandable that they would not accept such an account or exchange method that would affect their royal rule of law.

Guillaume Babin-Tremblay, executive director of the Montreal Bitcoin Embassy , ​​has repeatedly stated that the Cyprus incident has pushed cryptocurrencies to a new level. He told Kiteo News : "Before the Cyprus incident, Bitcoin had been developing slowly, so this incident was a catalyst for the surge in Bitcoin prices."

According to Babin-Tremblay , the price of a bitcoin was $ 40 , and then doubled in a few days. Kitco News also reported that "the price once reached $200, but fell back to around $ 60 after the banking crisis eased ." Bitcoin gave Cypriots a place to store money that was not subject to government regulation , as they had previously had to fearfully keep their money in the Central Bank of Cyprus.

As the economies of China, Argentina, Iceland and Russia slow due to international sanctions and falling commodity prices, investors in these countries are looking for other ways to invest. Citizens also have other reasons to move their money abroad, such as their money is no longer used to promote economic development in the form of taxes, consumer spending or bank deposits, which can also hinder economic growth.

This means that investing in Bitcoin is equivalent to opposing the subsequent legislative process of cryptocurrency. The above example can also illustrate how digital currency generates value and how to cope with constant changes. In fact, this is a cycle.

Bitcoin as an investment

On the one hand, it is related to demand, which increases the purchasing power of a currency. On the other hand, the demand for investing in a certain currency is related to the purchasing power and value of this currency in the world market, otherwise, why would you invest?

Venezuela is an interesting example. According to the IMF, its economy could be inflated by 700% . This is the highest inflation rate in the world. The collapsing economy has led entrepreneurs to embrace Bitcoin. This economic environment will promote the demand for cryptocurrencies. But cryptocurrencies are making a decisive choice. If they are not legal currency, cryptocurrencies may be banned by the government.

Many authorities believe that Bitcoin's market cap could reach $ 6.3 billion, while the second-place Ethereum cryptocurrency is estimated to be less than $ 900 million. As we can see from Bitcoin's history, both management and action are necessary.

Bitcoin needs to keep innovating

In order to take this digital currency to the next level, we should realize that if we continue to let this decentralized currency operate in the free market, it will never be possible to form an efficient and secure monetary system.

At this stage, the biggest problem facing Bitcoin is the discussion about its block size. At present, if it is designed, it will only take about ten minutes to transfer 1MB . But under the current conditions, the time span may reach 45 minutes or even several hours. In contrast, we also know the time it takes to use credit cards or other tools. Whether this delayed transaction time is due to China's centralized mining of Bitcoin is another topic for discussion. Just like for the overall goal of Bitcoin, centralized mining of Bitcoin is also a topic that needs to be discussed.

Bitcoin is about innovation and real-world activity, and a $ 900,000 fund raised from bitcoin companies is a pittance to revive bitcoin — a cryptocurrency worth billions of dollars that is the bread and butter of these companies’ businesses.

Consider the example of Venezuela: Why did the people there choose Bitcoin over other currencies? This may have nothing to do with the way cryptocurrencies are calculated, but rather with the existing value set by demand.

We know that in a competitive environment, demand for a product may not always be met. Bitcoin Core developers must rise to the challenge of addressing the issues that plague Bitcoin .