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Recently, Bitcoin transactions have been out of control with the mempool having over 170,000 unconfirmed transactions and fees costing over $30 to get confirmed on the next block. The community has been in an uproar, with people either having their Bitcoin “stuck” in exchanges, as people would be losing a significant chunk of their assets moving it or they would have to convert their BTC into other coins such as LTC or BCH because fees are significantly lower. This poses a huge problem for everyone involved in Bitcoin, and I have a few predictions on what will happen if the Bitcoin Core devs decide to keep going this “store of value” route.

Core developers have acted completely oblivious to the dire transaction crisis Bitcoin is facing. They think Bitcoin is perfectly fine, as people are willing to spend so much money on a transaction. The problem with this line of thinking is that they are completely ignoring the millions of people who are priced out by these fees. They have also responded by saying Bitcoin is intended to be a “store of value” rather than a currency made for small transactions.

Bitcoin vs gold

Bitcoin was made to be “digital gold” in the sense that it could be similar to gold but more efficient. Let’s review what makes gold a good investment, and then I will go through its downfalls. Gold has been perceived as a symbol of wealth for thousands of years, and it has a myriad of practical uses such as dental equipment, jewelry, electronics, and decor. It also has a physical luster which makes it even more of a valuable asset to have. The problem with gold is that it is unspendable in the modern world. The United States discontinued the Gold Standard during the Nixon administration which means that money is not tied to gold. If you wanted to buy anything with gold, stores would not accept it. Bitcoin fixes this problem by businesses being able to accept it as payment. Until recently, many different stores and online websites began to adopt the currency. Overstock and APMEX are just a couple websites that give you the option to pay in Bitcoin. Now with the advent of high transaction fees, many businesses are starting to either adopt new cryptocurrencies or shut down their Bitcoin operations. Steam, the very popular gaming platform, discontinued cryptocurrency entirely by citing high fees and high volatility. Bitpay, a popular platform that helps businesses accept Bitcoin is currently working on implementing Bitcoin Cash. Gold being physical means that it can not be used online, and as the internet becomes more popular for shopping, being digital is only an advantage. Lastly, the smallest practical unit of gold is a measly 1 gram. This small amount costs $50-60, so any amount below that threshold is unattainable in gold. Bitcoin fixes this problem by being able to be fractional. Still unknown to many, people can buy and sell very small fractions of a Bitcoin. This helps people be able to make small purchases.

Why Bitcoin needs to be a currency as well

The benefits I described largely have to do with Bitcoin being an efficient currency. The advantage of Bitcoin over gold is that it is like gold, but spendable. If the spendable aspect of Bitcoin is taken out of the equation, it is worse than gold as a store of value. Bitcoin is very easy to obtain due to it being digital, but it also has never been easier to buy physical gold online. A fundamental element of a store of value is to hold its value over time and to be a hedge against inflation. It is the safest form of investment, as the risks associated with them are minimal. With Bitcoin it is the opposite. It is a very risky investment and can fluctuate by 20-30% in a single day. A store of value is not meant to make money, it is just an alternative form of saving. No conservative investor would ever go near Bitcoin, and assuming the price of it will always rise is extremely naive. I am much more experienced in the space than most people and even I have never experienced a true bear market. When a bear market starts to happen, people will scratch their heads wondering why their “store of value” plummeted so quickly.

What this store of value narrative will mean for the future

I think eventually, people will wake up and realize Bitcoin is unusable. Very few businesses will see high fees as practical and will abandon Bitcoin as a method of payment. Merchants will switch to alternative currencies such as BCH or LTC in droves. As people hold their money in exchanges, they will not want to put it into a hardware wallet to keep their money safe. The high fees will be a deterrent and therefore more money will be left on exchanges. It is the equivalent of destroying 1 gram of gold just for moving your investment into a safe. It makes no sense. As more money is left sitting out of their holders hands, hackers will have more of an incentive to take down exchanges. If a large scale hack of an exchange such as Coinbase or Binance happens, it could be MtGox 2.0. A large event like this could trigger another large exodus of Bitcoin, and the value would plummet significantly. If outsiders see Bitcoin as a store of value that can suddenly lose its value quickly, nobody will use it as an alternative way to save. If another currency such as BCH plummets, people will still have demand for it, as it would still be able to be used as a fast, cheap, and reliable method of payment. Businesses have an incentive to accept cryptocurrency due to it being cheaper for them than Visa or Paypal. Of course this is just speculation from myself. But I think Bitcoin is better off having qualities of gold and spendable money combined. It is what would make it unique compared to anything else. Sadly the core developers as well as many others in the community are turning Bitcoin into a worse version of gold.

Thanks for reading guys! If you liked my article, you can donate Bitcoin Cash, Litecoin, or Ethereum to my wallet addresses. Lets be honest, nobody is going to donate BTC with such high transaction fees so why even ask for it anymore… If you’re broke like me, you can click on my affiliate links to get free Bitcoin and Dogecoin on the fountain website I use. You can also follow me on my official Twitter at “Jackson_Kwiat” where you can see my insight on anything cryptocurrency related.

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