The Collapse of Bitcoin
story © Michael Betancourt, June 12, 2018 all rights reserved.
The collapse of value for Bitcoin and all other cryptocurrencies is likely to be inevitable.
Bitcoin mining is a computationally intensive activity that coincides with exchange: to buy, sell or spend Bitcoin requires the transaction to be processed by the blockchain; this action is paid for by the generation of new Bitcoins for the miners, generating wealth for them only so long as there are outstanding Bitcoins to generate. However, Bitcoin has a inherent limit which means that eventually all the coins will be generated, removing the incentive for miners to process transactions for “free.” Once that happens, the transaction costs for blockchain processing are no longer incidental due to the consensus required to ratify any transaction. This horizon means that these costs which are currently hidden in this system will suddenly emerge, resulting in either transaction fees being applied by the miners, or an abandonment of the currency for others which continue to generate new values. Some combination of these alternatives is likely. The result of this inflection will be an implosion in the market for Bitcoin that has a real potential to create a distrust of other, similar cryptocurrencies.
Copyright © Michael Betancourt June 12, 2018 all rights reserved.
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