Bitcoin will soon be dead, claims David Yermack, chairman of the Finance Department at NYU’s Stern School of Business. He blames the democratic process of decision-making in the Bitcoin community for the cryptocurrency’s problems.
“You have a bottleneck in the technology and as it grows, the bottleneck worsens. It’s like trying to fit more cars on the highway where the highway needs to be widened at some point.”
Too many people using Bitcoin
He thinks that too many people have begun to employ Bitcoin. As a result, the payment system has become overcrowded. As opposed to processing payments instantly, it is taking hours in some instances. Hundreds of thousands of transactions are in a queue at any given time waiting to be processed, and merchants that had earlier accepted Bitcoin are now hesitating and dropping out.
Do the experts from the cryptocurrency world agree?
“This isn't the first time Bitcoin has been called 'dead' and it seems he has been reading from the banks’ Blockchain developers cheat sheet - Mike Hearn" - Simon Dixon
“Bitcoin needs to adjust to scale. There are billions on the line and Bitcoin will rather adjust than die. When a company has to make changes, they fight behind the closed doors of a boardroom. With Bitcoin, we debate in the open so it looks like crisis, when it is the usual process for any large company worth billions making major changes,” says Simon Dixon, the CEO of BnkToTheFuture.com and Fund Manager Bitcoin Capital.
Tone Vays, head of research at BraveNewCoin, also ridiculed Yermack’s claims:
“Vendors will not drop out because it's taking a few hours to process transactions. For starters, Credit Card transactions take 3-6 months to process and being a finance professor, I hope he knows that, but our educational system does have a problem with theoretical instructors who never worked in the industry or owned a business. If merchants are dropping out, it's because there use Bitcoin at the moment not enough. Another point is that Bitcoin is a new type of asset first and payment processor second, so all these little transactions in the backlog will be going off Chain in the near future if the Core team is left alone to work on the protocol.”
Selfish Miners Killing Bitcoin
The second concern of Yermack is that “the service now has thousands of ‘miners’, or people who are paid 25 Bitcoins to clear a transaction. In order for the system to expand, these miners need to agree on a solution. People who now have the fastest computers continue to profit, and most of those people happen to be in China. They have no reason to change rules because it will benefit others at their expense.
Simon thinks Yermack’s concerns are baseless because miners will agree that cutting mining margins is a better outcome than letting Bitcoin 'die'.
Tone Vays appeals people to give a free market a chance. He says:
“Even if the majority of current miners are in China, the halving of the reward may cause this geographical advantage to decrease. In the future, if Bitcoin works and millions of people use it, the power users will run small miners just to support and decentralize the network even at a small yearly loss. Just think of all the people that pay for a gym membership but almost never utilize it.”
Bitcoin Will Never Satisfy Governments
Yermack’s third concern on why Bitcoin may not survive for long is that it can never please the government:
“No government will ever support a virtual currency that goes around borders and doesn’t have the same controls. It’s not going to happen. Tomorrow, the US government could just say, " You can’t use Bitcoin now, it is illegal" , and that would be it for Bitcoin!”
While this concern may seem like it has more merit than the previous two, our experts are very dismissive of it.
Simon Dixon comments:
“Governments have given no indication they are going to make Bitcoin illegal and countries are now competing for jobs. If one country makes it illegal another country will see that as an opportunity. They said the same about the Internet. But even if it does become illegal, so are drugs in many countries and that does not stop all from using them. It means they become black market rather than dying. The benefits of Bitcoin far outweigh the negatives to ever make it illegal.”
Tone Vays compares the belief that governments can write a law to change human behavior to belief in existence of Santa Claus. He said:
“If Bitcoin use is to be criminalized, it will only highlight and promote its utility of being this censorless value transfer which is the only thing that gives it value. Laws are only as good as their enforcement, and as we have seen from criminalization of Alcohol, Drugs & Prostitution, it is only a waste of resources and money on the part of the Governments to control human behavior.”