If you have been keeping up with the news about bitcoin, being a crypto-enthusiast, no doubt you have read about NYA or the New York Agreement. It is yet another idea to change bitcoin. Ostensibly, to make it better.
Many feel that it will simply remove the original intent of Satoshi Nakamoto, but even this is a weak fintech argument. Nakamoto knew or could have imagined that if bitcoin became more popular, the necessary electricity to run the systems would increase exponentially. Did Nakamoto think that governments would then take over the operation?
Recently, Bitcoin Cash came onto the scene. It has garnered some support — in the billions of dollars — but there are still those who do not agree with the changes. Again, Bitcoin Cash, appears to favor large companies or governments since it requires more resources. In some respects, the economy of scale kicks in and prices — the cost of sending/receiving bitcoins — goes down.
But what of the other, long-term costs? The centralization aspect? The average citizen in 2009, could run bitcoin on his or her laptop. Not now.
Now we have the NYA. Well, actually, it’s been around since at least May 23, 2017. The Digital Currency Group claims it has enough supporters to once again fork the bitcoin blockchain and create a new bitcoin. At that point, if it happens, the world would have three bitcoins — but not really. There are many bitcoin clones.
If the NYA succeeds, old bitcoin would probably devalue overnight. Bitcoin Cash might hold its own and compete, but looking at the support behind the NYA, it would probably fall from grace
So, what is happening? Are we still watching a power play unfold before our eyes? Sure we are. It’s about who can run the best bitcoin and bring in the most money. And who can make bitcoin the most efficient and essentially steal the thunder. Finally, it’s about brand. Name recognition. Competition.
With all the bitcoin clones running around out there, the first mover still holds sway. Even the tired, slow and sometimes buggy bitcoin, is trusted. It just seems to keep growing. Yes, it pulls back, but then it usually recovers. Why? Trust.
But trust can only get you so far. If Bitcoin Core is divided or gives that appearance, we could see the world’s fastest devaluation. The question then becomes, who will remain standing?
Interestingly enough, and this is a good thing, there are new base-currencies in the cryptosphere. With a base-crypto you can purchase a sort of primary coin, then buy other altcoins. Should bitcoin suddenly fail, these others, such as Ethereum, Ripple and Dash, could, in theory, pick up the slack. Naturally, if bitcoin begins the fail, these other coins should increase in value, but usually they devalue when bitcoin does.
One wonders if the entire cryptosphere will survive, if bitcoin fails. But which one?
Add to this mix, the constant pressure by governments to rein bitcoin in. CNBC reported about China, Japan and now Australia. The impression appears to be that this newest push to regulate will ultimately lead to sort of a tacit acceptance by the people, as it were. In other words, if it’s regulated, well, it must be safe, right?
Unfortunately, government oversight, now gaining in popularity, as the volume of bitcoin transactions grow, will result in bitcoin’s original intent being subverted. It was designed as a stop-gap measure against government monetary policy. Ideally, and this is not to say that all proof-of-stake cryptocurrencies are poorly designed, but that would be a best choice. After all, governments need to be able to print unlimited numbers of ‘coins.’
I hate to admit it, but some other coins are starting to look better again. Remember, the excitement surrounding bitcoin could be irrational at the moment, fueled by speculators as well as good people. Who will get hurt, if the bubble bursts?
Maybe we should diversity our holdings.
Incidentally, if you like conspiracy theories, Clif High is still implying that silver can hit $600 an ounce. When? I’m not so certain, but if he is right, the value of gold will go down.