It would be foolhardy to claim that bitcoin has a bright future without any resistance. There is no doubt that bitcoin is an excellent idea for disruption, but that per se is no guarantee of success. Even a tech entrepreneur who gets full support from the nationalist governments can’t get success without strategy and efforts. bitcoin is rather trying to disrupt nations. The basic idea of blockchain/distributed ledgers is no doubt acceptable to all, but that doesn’t mean the idea can’t be implemented in a centralized, permisioned manner. The attraction of bitcoin lies in redistributing power through decentralized and permissionless ecosystem in a trustless operation. Indeed people are attracted to it as they always are to anything that promises freedom from the tethers of state, military, and corporate. The soothsaying of the future of bitcoin requires analysis at several levels starting from the resistance from state to the possible political expressions in a completely unimagined perspective. I am attempting some below but don’t know what.
bitcoin, the cryptos’ answer to the fiat currencies, is a highly volatile asset characteristic of the cryptos at large. In fact, presently, the bitcoin advocates have stopped calling it a currency. They would rather call it a commodity like gold and a store of value. In my earlier post, I have already criticized this claim and am not repeating it here. However, there I derived the store of value character of bitcoin from its status as a currency. Also I claimed Dollar to be a better store of value than bitcoin though nothing can match gold. Here I retain my views with an accidental endorsement from El Salvador. El Salvador has accepted bitcoin as a legal tender, which, to be frank, I never imagined any nation would ever do. So, El Salvador is definitely a very small light in the otherwise dark tunnel of despair. If El Salvador can do it, so can others.
I am an anti-national humanist and have also authored an essay of the namesake caption. I do believe bitcoin; or some other crypto like Monero, Nano, or Litecoin; can be a currency of choice of the world without nations. However, if a nation is adopting bitcoin, I am cautious as it is so out of character. The biggest proponents of nationalism are militaries. A military less nation has better chances of adopting a cryptocurrency like bitcoin as a legal tender. El Salvador is a small nation, but it does have military operations with compulsory conscription. It also has very strong connections with the USA. Dollar till now was the only legal tender in El Salvador. I am not ready to believe that El Salvador would take such a drastic step without consulting the USA. I think El Salvador’s adoption of bitcoin has stamp of approval from the USA, which is possibly because China is trying to hammer bitcoin (at least publicily). If that’s the case, the future of bitcoin can’t be discussed without China.
Sixty percent of bitcoin mining takes place in China. Most of the bitcoin mining pools are also located in China. Many people have rightly raised flags about it because of the possibility of cartelization of miners and loss of decentralized character therefore. From the history of bitcoin, China looks like a promoter rather than a destructor of bitcoin. It is just not comprehensible what has prompted China to make such aggressive statements against bitcoin in the recent past. Till now, I was holding that the coordinated statements from Musk, China, and the USA were to benefit the big business (which btw I do even now privately), but El Salvador is definitely bigger than some gains of the big business. It has put China and the USA in clear conflicting positions. Sometime back, Iran, a member of the China affiliated nations, stated that only bitcoins mined in Iran can be used in Iran. Russia has also been going back and forth on bitcoin. It gave legal status to bitcoin in 2020 but also banned it from being used in payments.
China definitely has ambitions to become the world leader replacing the USA, which would essentially also involve replacement of Dollar with a Chinese currency (in whatever form). In 2018, I thought China was promoting bitcoin as some strategic option against Dollar, but the present apparent attitude of the USA and China has left me perplexed. This politics is too complex with possibilities ranging from complete destruction of bitcoin to its establishment as a worldwide legal tender (especially if it is indeed a brainchild of some intelligence agency as claimed in some conspiracy theories). I don’t have the wherewithal to foretell the outcome of such a complex political churning. However, I can do analyze bitcoin as a currency.
I think bitcoin is a very poor candidate for a currency. It is expensive to use. It exchanges hand after a long delay. It is highly volatile. It is not private at all. It is also not truly fungible. In fact, Monero is a far better candidate for a currency. But, of course, if bitcoin is mass adopted, everything gets overlooked, but the question remains why would masses adopt such a poor currency. Purely from analytical viewpoint, I don’t think bitcoin has any future as a currency. Bitcoin is, however, the most secure repository of data at present. What use this status will be put to remains to be seen. I only hope it doesn’t become dog(e) food.