The Bitcoin cryptocurrency was launched in 2009 and was the first project that uses blockchain technology. At the beginning of 2018, the list of decentralized digital currencies and tokens already reached the number of one and a half thousand. Bitcoin is the most expensive coin, and by capitalization, it is significantly ahead of its competitors. But does this currency really deserve the first place in the top and is it worth the money? In this article, we will consider the main problems of the most popular cryptocurrency and compare it with other developments that have solved these problems.
Cost and transaction speed
One of the main problems of bitcoin is the bandwidth of its network. A large number of unconfirmed transactions accumulate in the queue and their cost, as a result, increases. This was especially acute in 2017, when the popularity of blockchain technology began to grow rapidly and everyone rushed to acquire bitcoins. In the spring, for one transfer of funds, it was necessary to pay several dollars. In winter, after reaching the mark of 20 thousand dollars per coin, the cost of transfer increased to several tens of dollars.
The mempool, which stores all system transactions until they are confirmed, now has thousands of records. However, by the end of January, the cost of sending bitcoins significantly decreased and on January 30, 2018, it did not exceed the dollar. This may be due to a depreciation or a decrease in the volume of spam attacks on the network, which the Bitcoin Cash fork advocates were accused of.
They tried to solve the scalability problem more than once with various forks. The development team of one of them suggested increasing the block size from 1 megabyte to 8 megabytes. But after doing a little research, it turned out that a blockchain of this size would take several petabytes. Not every node can afford to store so much data. Ultimately, the number of nodes would decrease, which would lead to a deterioration in the decentralization of the entire network.
Bitcoin Cash can be considered the most successful fork of all that has been held over the years. Its developers decided not to change the block size, but only to exclude signatures thereby freeing up space for useful information. Now BCH is in the TOP 5 cryptocurrencies by capitalization, and its cost is approximately equal to the value of Bitcoin a year ago.
As for sending funds using other currencies, here Bitcoin really has a lot of competitors. There is no need to transfer small amounts to BTC, especially when it comes to over-the-counter transfers. For example, the cost of sending Dogecoin cryptocurrency will be only a few cents, and the transfer will be confirmed in about six minutes. A similar situation is observed in Ripple. This project, although not a classic decentralized cryptocurrency, demonstrates very good throughput, which makes transactions cheap and fast.
Contrary to the opinion of most inexperienced users, Bitcoin cannot be a truly anonymous means of payment. Yes, the wallet itself is really not tied to the real owner, but data on all transactions and movements of each satoshi in the system are permanently recorded on the blockchain and stored by network nodes. Moreover, the IP addresses of other participants in the system are accessible to the nodes and during the transaction, attackers have a chance to successfully match the sender’s IP and wallet.
To circumvent this vulnerability, so-called “mixers” were invented. These are services that accept transfers from several addresses and transfer funds to several others in order to distort information about who and where what amount was sent. However, there is no guarantee that you will receive your bitcoins back, since such services are in the shade and themselves are anonymous. Their owners can deceive their users at any time.
Now there are several cryptocurrencies that ensure the confidentiality of funds transfers using built-in mixers. So, for example, the mixing of coins occurs on the blockchains of the Dash and Monero currencies. And the creators of Zcash went even further and developed a system that allows you to encrypt all transactions from the inside. Also worth mentioning is the Verge (XVG) project, which uses the I2P network to tangle users ’IP addresses and mixers like in Monero.
Bitcoin, with all its pros and cons, is an interesting payment system. However, today it can no longer satisfy all the requirements of users for platforms on the blockchain that have been formed in recent years. Bitcoin, in fact, cannot be called a platform. This is the final product, the currency, without any possibility of expansion, in contrast to, for example, Ethereum.
Ethereum supports smart contracts that allow users to create various solutions for business, cryptocurrency exchange, trading, or even their own tokens to collect funds for projects using ICOs. Moreover, their use can be safer, because it minimizes the human factor and all the conditions of what is happening are programmed and written in detail on the blockchain. This also prevents situations where different parties to a contract interpret its terms differently.
Of course, some developers are talking about connecting the possibility of creating smart contracts to Bitcoin. The developers of the Rootstock project were even able to realize this, but with a number of controversial points. Firstly, the entire project is implemented as a complete analogue of Ethereum, but uses a different blockchain. Secondly, this network is not decentralized and its users will have to trust RSK Labs with their funds. The creators themselves consider their development more likely an experiment and declare that they do not represent competition to Ethereum.
Ethereum is not the only example of a smart contract platform. Already there are many projects, such as Neo, Cardano, Aeternity. Each of them has its own specifics and differs in the approach to obtaining data for the contract, the programming language used or other subtle features of the platform.
Bitcoin in the near future
To date, the capitalization of the entire cryptocurrency market exceeds $ 520 billion. A year ago, 51% of all capitalization belonged to Bitcoin. Now, despite all the disadvantages that we examined, Bitcoin still holds a third of the entire market. Probably the reason for this is that it is with the help of Bitcoin that cryptocurrency is popularized and fiat money is converted into it. This state of affairs should change with an increase in user literacy in this area. Now the community is discussing two options for further developments.
Some consider the most likely outcome to be a decrease in the capitalization of the most popular cryptocurrency to 15-20 percent of the entire market and a slight drop in price, or fixation at the current value level. The first place in the ranking, in this case, will be taken by another, more advanced cryptocurrency. Most are inclined to believe that it will be Ethereum. The latter, by the way, is very likely if rumors about the planned implementation of anonymous transactions in the project are confirmed.
Others believe that Bitcoin will not give up its positions and will remain in first place in the ranking. And its further development and development will contribute to this. In their opinion, the percentage of BTC capitalization will still slightly decrease due to the influx of capital into other projects, but this will not have a strong impact. At the same time, a strong increase in value is forecasted. We are talking about a return to the mark of 20 thousand dollars, a further jump to 40, 100 and even 500 thousand. It should also be remembered that all these are only assumptions and it is impossible to accurately predict the development of the situation in such a young market.
Cryptocurrency Bitcoin really managed to revolutionize not only the Internet, but also in the global economy. It is thanks to her that blockchain technology has achieved such popularity over the past few years and is now actively being introduced into all areas of our lives. Bitcoin has clearly contributed to history and ushered in a new industry, but technology is evolving and user needs are growing. Undoubtedly, this cryptocurrency will be used for a long time and it is unlikely to be completely abandoned, but it is likely that it will soon cease to be the most important one.