Bitcoin appears to be on its death throes

Not long ago, venture capitalists were talking about how Bitcoin would transform the global monetary system, making it impossible for governments to control currency transactions. But now, the cryptocurrency system seems to be struggling on its lifeline.

At the beginning of the new year, on January 14, the first signs of the incident emerged. An influential Bitcoin promoter, Mike Hearn, announced that there was a problem with the Bitcoin cryptocurrency system and revealed that he had sold all the Bitcoins he held. As soon as the news came out, the price of Bitcoin fell by 10% that day. For those who lost money as a result, January 14 was a sad day.

Bitcoin was once favored by many people, but now this monetary system has collapsed and cannot be repaired, and a new monetary system is urgently needed to replace it.

Why do I say this? Because most currencies and their transaction systems are currently opaque, inefficient and expensive.

Take the Nasdaq, the North American stock exchange, for example. Nasdaq is one of the most technologically advanced stock exchanges in the world. But even so, if I buy or sell a Facebook stock on Nasdaq, I have to wait for several days for the transaction to be finalized and cleared. In my opinion, this is completely unacceptable and the transaction time should be shortened to a microsecond level.

In Venezuela, citizens have to queue up for a whole day to go shopping in supermarkets because hyperinflation causes the banknotes in their pockets to depreciate sharply every day.

When migrant workers send money to their hometowns in Mexico, India and Africa, remittance companies take advantage of the opportunity to charge them fees as high as 5%-12%. Even in the United States, payment processors and credit card companies charge merchant fees of 1-2.5% of the value of each transaction. This undoubtedly creates a huge burden on the economy.

The emergence of Bitcoin is to change this irrational phenomenon, but it is inherently flawed. First, Bitcoin has no regulatory system and participants can operate anonymously, so it quickly became a safe haven for drug dealers and anarchists. Second, Bitcoin prices fluctuate greatly every day, which in turn triggers crazy speculation. Moreover, most Bitcoins are controlled by the small consortium that promotes it, so its characteristics are like a Ponzi scheme.

Not only do transactions built on top of Bitcoin have serious security vulnerabilities. Don’t forget, there are also venture capitalists involved who are often blinded by profits.

Several venture capitalists buy a certain amount of Bitcoin together, and then start to hype and exaggerate the disruptive nature of Bitcoin, claiming that its disruptive nature has penetrated into financial fields such as mobile banking terminals and borderless instant transfers. They invest huge amounts of US dollar capital in Bitcoin startups, hoping to gain huge profits.

But Bitcoin isn’t ready for peak performance yet. Hearn’s critique punctures a nightmarish reality — a long list of horrific negatives.

Bitcoin's distributed network can only process a small number of transactions per second. This can lead to unpredictable transaction resolution times and behavior that people do not want to see in a monetary system. For example, Bitcoin fees exceed credit card fees during peak hours.

As if that weren’t the worst, there seems to be an open civil war going on within the Bitcoin community. Community members are censoring debates and attacking each other’s servers. A committee of five core developers that control the Bitcoin codebase have formed the Star Chamber Tribunal to try to guide the future of Bitcoin.

This is undoubtedly a heavy blow to the reputation and wallets of venture capital. However, some of them still firmly defend Bitcoin.