Could Bitcoin Die Because It's Too Successful?
The announcement of Bitcoin’s death has been a regular occurrence since the introduction of the virtual currency. Although the value of the currency has taken many for a roller coaster ride as an investment, the impact of the currency throughout the world has been documented here.
With a disruptive technology like Bitcoin, the demise of the virtual currency has been heralded by those who “respect” it, but enjoy reminding us that the status quo financial system is operating just fine, thank you. These arguments may be convincing, but the reality is that Bitcoin keeps marching on.
Bitcoin is being used by more and more people. Major banks and financial service firms are working on projects to integrate blockchain technology into their existing businesses. The price of the virtual currency has doubled over the last 2 years and even some alternative cryptocurrencies such as Ethereum have created major gains for investors.
It’s this success, however, that the latest of Bitcoin’s grim reapers believes will lead to its demise.
Will Success Kill Bitcoin?
David Yermack who is chairman of the Finance Department at NYU’s Stern School of Business (located in New York City, which is also home to Wall Street and most of the large financial service firms and banks) has provided his views that the growing use of bitcoin will lead to its death.
Yermack, who counts many of those on Wall Street and existing financial service firms as his students, says that “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.”
The fact is that Yermack has a valid point. If you’ve noticed that bitcoin transactions are taking longer than usual, you can see Yermack’s point. The reality however, is that the Bitcoin community is aware of this and that’s why we’re seeing the current efforts to modifying the underlying technology.
Even Simon Dixon, the CEO of BnkofTheFuture agrees, “Bitcoin needs to adjust to scale. There are billions on the line and Bitcoin will rather adjust than die.” However, Dixon points out a major difference between Bitcoin and the existing opaque financial systems that are controlled by many who graduate from schools like Yermack’s, is that these concerns are aired and addressed openly.
“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,“ Dixon says.
Tone Vays, head of research at BraveNewCoin points out that credit card transactions also take time and that the technology will improve as those Bitcoin developers continue to make appropriate and open modifications to the underlying protocol. He also takes aim at Yermack when he states, “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.”
Considering Both Sides
In all fairness, Yermack also believes that the potential for blockchain will be enormous. Yermack is a highly respected and talented professor who was one of the first to introduce a course that integrates legal studies with bitcoin. It has been one of the major ways that graduate students have come into contact with the issues related to bitcoin.
Yermack also agrees with the "bitcoin dismissive" Jamie Dimon, who believes that the government will just kill the technology when it wants to. This may be true but he needs to understand that it being widely used beyond our borders. We can understand that Dimon has a reason to kill off bitcoin to protect the status quo system which obviously benefits his company’s bottom line.
However, Yermack’s views should not be dismissed by the Bitcoin community. They should be debated with open minds on both sides.