The motto for Fintech is improve — always innovate — or die.
Think, Steve Jobs.
But is Bitcoin innovating? Can it survive?
Bitcoin is not managed by Satoshi Nakamoto, who may or may not be Craig Wright. The mysterious inventor of Bitcoin is uncertain.
What is more and more certain is that Bitcoin is edging closer and closer to an apparent disaster and many are holding their ears — and virtual bags of coins.
Ignore for a moment, that Bitcoin is nothing but cryptography. That it has no backing in gold or official sanction by major governments. Assume that it’s just trust that makes it work. Assume that it will not crash in value overnight.
Let us suspend belief still further. Ignore our instinct to put a physical face to Bitcoin. Allow the argument from the intrinsic to sort of drift into a nearby room — and wait there whilst we examine a more glaring problem.
Here it is…
The viability of Bitcoin — the software. The system. The fees. These issues are glaring at us. There is sign post ahead, just like Rod Serling told us…but this one is flashing madly and the sirens are wailing.
Bitcoin developers have warned us — are warning us. There are serious problems with Bitcoin. Be prepared.
According to Kyle Torpey at Coin Gecko, Bitcoin must improve soon or it could be surpassed by Ethereum.
Gavin Andresen believes potential Bitcoin users may look at alternatives, such as Ethereum, if the block size limit is not raised soon. — Kyle Torpey (May 31, 2016)
Torpey advised that Gavin Andresen, who remains the Bitcoin Foundations’s Chief Scientist, but no longer one of its Core Developers, supports Bitcoin Classic.
It’s a better Bitcoin, Andresen advises.
Who supports Bitcoin Classic? Maybe 5% of the users. That’s it. So it’s not popular. It may even be less popular now that Andresen supports the ‘Craig Wright is Satoshi Nakamoto Theory.’
Bitcoin Classic, if implemented, would increase what is known as the blocksize. In fact, if Bitcoin does not innovate soon, it is probable that investors will begin to diversify their crypto-portfolios voluntarily.
Why diversify? The simple answer is to protect one’s investment. The real answer is probably even more basic: Fear.
Fear that Bitcoin will crash — permanently — or fear that some wanton hacker will abscond with their Bitcoins.
There is even a deeper dread. One I have discussed in my recent blogs — privacy.
Bitcoin was not built for complete privacy, but they are working on it. Maybe, if the current developers fix the block-size issue, before it’s too late, they can fix the privacy problem.
Don’t hold your breath.
Perhaps privacy won’t matter anyway. Bitcoin is slowing. It’s running out of fuel.
Mike Hearn has stated that Bitcoin is a failed experiment. Hearn has since moved on.
I’ve spent more than 5 years being a Bitcoin developer. The software I’ve written has been used by millions of users, hundreds of… has failed… — Mike Hearn (January 14, 2016)
Hearn cited many reasons for Bitcoin’s failure. From the concentration of mining power in China to the fact that 10 people actually control it. Fees are unpredictable, Hearn said — and on the rise.
But these are just a few of the problems plaguing Bitcoin.
So what happens next — given the circumstances?
Which crypto’s are likely to see surges in volume, if Bitcoin slows to a crawl? That is the million dollar question.
The answer, according to some, is to look at the popular crypto’s waiting in Bitcoin’s wings?
Two come to mind. Litecoin, a staunch ally in this Fintech war of money — often touted as the silver to Bitcoin’s gold — may morph into the new Digital Gold. It could, potentially, unseat Bitcoin.
But this is not what Gavin Andresen warns, according to Torpey. Andresen thinks that Ethereum, which has a higher trading volume than Litecoin and is now favored by several major exchanges, is the ‘up and coming’ crypto.
Okay, that is a taste from the developer side. What about the business side?
Many banks and investment houses, ignore Bitcoin entirely. They don’t pay homage to Bitcoin, but are, without a doubt, experimenting with the technology.
These “blockchain” enthusiasts, to include the government of Russia, want to create their own ‘official’ versions of crypto.
But some investment gurus still see promise in Bitcoin, presently. They seemingly ignore the warnings, set aside the intrinsic value question and watch the flow of funds.
Technical analysis of the U.S.Stock Market leads many to believe that it is currently overvalued. That investors should move into cash holdings.
Chris DeMuth Jr., says as much in Seeking Alpha.
Stock market prices are high. One should have plenty of cash. Bitcoin is one way to diversify cash. — Chris DeMuth Jr. (May 31, 2016)
A debate comes then. Is Bitcoin a good form of cash? Well, there are U.S. Dollars, which seem to hold a bit of value, at least over the last few years; but that Bitcoin thing — it looks so shiny from the outside.
According to DeMuth, at least 10% of your cash holdings should be in Bitcoin.
Is there a disconnect here?
On one side — the Gavin Andresen side –there is a warning. Mike Hearn seconds that warning. He also advised that Bitcoin has failed. Both of these developers are in-the-know.
The determinations made by Andresen and Hearn could even be termed the fundamentals of Bitcoin. Meaning, a report of its inner workings, it users, miners and overall functionality. The bedrock of the system, so to speak.
On the opposite side, perhaps basing their advice to invest, solely upon the technicals –the numbers — are the DeMuths of the world. But technical investigators don’t necessarily look at managerial aspects or what’s happening at the human level, within a company.
Technical guys look at the product, the profits and the numbers. These ‘indicators’ provide a reasonable picture of potential profits and how best to leverage one’s investment therein.
If we simply look at technicals, Bitcoin is a ‘buy,’ they advise. The analysis indicates it will soon surge or at least maintain its value. And yet Bitcoin has often defied technical analysis. Gained when technical market indicators said otherwise.
Perhaps Bitcoin defies technical analysis because it is a new type of company. The idea of course, was to have Bitcoin be “decentralized.”
Yet Bitcoin has become more rigid with time. It gives outward appearances of being centralized. It has a large a mining base in China — a place not known for government non-intervention.
The future of crypto, in this writer’s view, is not Ethereum, unless it adopts privacy features. We may see, in the near term, surges in the price of Ethereum and Litecoin, if Bitcoin stumbles or loses the trust of the masses. But these surges may be temporary.
It is hoped, by many, that Bitcoin will find its way. If Ethereum or Litecoin fills the void, so be it.
In the mean time, many of us are looking in a more secure direction — available now. Where block-sizes and security are not an issue.
Monero is one such crypto and it is essentially, still on the ground floor.
Featured Image: Photo by: By Chmee2 (Own work) [GFDL (http://www.gnu.org/copyleft/fdl.html), CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0/) or CC BY-SA 2.5-2.0-1.0 (http://creativecommons.org/licenses/by-sa/2.5-2.0-1.0)%5D, via Wikimedia Commons
Of the many hundreds of competing blockchains growing like so many weeds around Bitcoin, it is difficult to separate the ‘Scrypt’ from the ‘SHA-256.’ Not to mention the ‘Blake-256’ from the ‘X11’s’ or even ‘X13’s.’
In fact, the cryptocurrency (crypto) space has developed its own sets of specialists, programmers and even universities have begun teaching the new freely distributed technologies. What one thinks about private currencies may be irrelevant, however, even in the short term. They are changing and improving faster than many of us can imagine.
From Bitcoin to Paccoin, the ever increasing number of crypto’s grows unabated. Recently, Crypto Currency Market-Capitalizations listed at least 688 different crypto’s. Where this will end is anybody’s guess. But what is the burning question? Which one will win? Which crypto will become the most widely used? Right?
Doesn’t that keep the crypto-enthusiast up at night? Don’t lie. I know you’ve stared at the ceiling thinking about the potential of crypto’s to deliver us from the pit of government spending. That is, unless governments decide to make such private currency creation illegal or otherwise sideline them via over-regulation. Conjecture has it that governments will choose to replicate blockchain technologies.
But there is a problem with blockchains in general. They publish the total number of coins in existence. Some crypto’s, such as Bitcoin have a limited supply of coins. Other crypto’s factor in small percentage increases to account for growth and potential future demands. There are few that have no fast number or percentage at all.
Governments would require the ability to generate or mine as much cryptocurreny as needed. Given the histories of monetary policies in most countries today, that would necessarily result in permanent and ongoing price inflation. Imagine Peercoin or Infinitecoin gone wild.
However one feels about the right to create currency is also tempered by how public one would like financial transactions to become. Many blockchains do not keep the transactions invisible from prying eyes. But some do. Coins like DASH, which currently utilizes an X11 algorythm, offers private transactions. But DASH also operates more like a private/public business. This is not to say that DASH cannot become a serious competitor to in the crypto space, however, many innovators are negative about the long-term prospects of DASH.
There are also concerns that ultimately, any cryptocurrency, especially those displaying a public database or having known developers, can be required by governments to hand over the records. Many would say that being able to obtain transaction records of all persons is the price one pays to live in a free society. But this sentiment is misplaced, to put it politely. Few would agree that everyone needs to know that you purchased a chocolate bar with cash at the convenience store at 5:30 p.m. More would agree that anyone who uses cash, credit or crypto to commit crimes – to steal – should be brought to justice.
And that is the genius of the right kind of crypto. The kind of crypto that more closely resembles cash. But secure and private electronic cash. The kind nobody else can see but you. The kind that criminals cannot find. Bitcoin, however, does not cut the cash cake. Bitcoin is more like a check or debit card. If it does not have your name on it, it certainly has your account number for all to see.
One of the first serious attempts to create a more cash-like crypto was Bytecoin. Bytecoin, a CryptoNote based crypto, is currently not very popular. It has yet to become a Fintech household word, but the technology is designed to keep the currency, the “BCN,” cash-like. Bytecoin is the “dark horse.” Although, some would call it a dead horse.
As the privacy-minded Bytecoin continues improving, however, many hope it will assume its rightful role as a serious competitor to Bitcoin. The fact that its developers remain private is certainly a critical factor for many a blockchain purist. Privacy through anonymity means that blockchain records cannot be confiscated from developers. It also allows users to send and receive crypto’s with peace of mind.
Where Bytecoin lacks in popularity, however, Monero has gained. Monero, a fork of Bytecoin, with some rough beginnings, chugged along and earned the respect of the loosely organized crypto community. Today, Monero is actively garnering a grassroots support structure via Stack Exchange. And to say it resembles CryptoNote any longer, is a stretch. But as with DASH, at least one critical developer is known in the Monero “dev” club. Does this make Monero easier to compromise? Some argue in the negative – that reliable hackers would save the day.
On the other hand, the fact remains. People can be targeted. It’s a bit more difficult to target a decentralized system of financial records, however. For all its improvements and continuing upgrades; and community support, the Monero parents birthed a new crypto with even more promise. Again — debatable.
Enter AEON. It is, like Bytecoin, resistant to external political-monetary pressures. But, AEON has been and is being modified and streamlined. AEON is a fork of Monero. The developers of AEON have remained private. But just as in Bitcoin, their cash-like currency has been made public.
AEON is based on the CryptoNote Protocol and differs from Bitcoin in one big way: privacy. But that is not all. AEON uses CryptoNight-Lite algorithm to vary block rewards and a limit the supply. This is new tech.
Think of it this way. Bytecoin is the Aircraft Carrier. Monero, the escorting Submarines. And AEON is the squadron of new jets warming up on deck. Fast and sleek. Care to fly one? Buckle in.
Another major adaptation with AEON is “pruning.” Many will understand this term, as it relates to bloated blockchains. Monero has that issue, but it can change. For the layman, just know that the amount of data stored in a the blockchain ‘ledger’ becomes more unwieldy each passing second. If one can reduce the data storage requirement without loosing critical information, the entire system speeds up.
Think: jet fuel. Think streamlining.
Bitcoin, as we all have read, continues to experience slow downs. There is even speculation that breakdowns could occur. Can you see billions in currency frozen forever in a blockchain? What of the upcoming halvings? If one were to imagine Bitcoin, it would have to be like the castles of old. They served their purpose, but eventually they outlived their usefulness. They became giant crumbling — sitting targets.
We are in a new AEON now. The Bitcoin Castle does not need to be torn down. It is crumbling all on its own. Its ragtag army of developers, innovators in their own right, are in disarray or have moved on. And AEON is just beginning. Its innovators eat, drink and breathe crypto.
The cryptocurrency space has little time for stragglers camping around crumbling castles, for sure. And that is why I wrote this blog.
I’ve experimented with a number of crypto’s. As a layman, I’ve clocked the transfer speeds of various cryptocurrencies, especially from the exchanges to my personal computer. Some, like Peercoin and DASH are very fast. But many of the crypto’s are extremely slow to process. Some take seconds, others, including Bitcoin on occasion, take hours – if they don’t ‘break’ altogether.
Running into user unfriendly software isn’t fun either. AEON has what is called a “GUI” Wallet, which is generally easy to use. But I used what is called a “simplewallet.” A simple wallet will remind most of a DOS based interface. But hey, some of us older gents cut our teeth on BASIC. In any event, I used the simple wallet and thought I was loosing my CPU’s.
I transferred AEON crypto’s from an Exchange called “Bittrex” to my personal computer. At first, nothing special happened. As usual, one transfer took a few minutes. Then another, took fewer minutes. Then, quite by accident, I was shocked by the third transfer.
I thought: jet fuel. I had just initiated a transfer from Bittrex. I then moved my eyes right, where I had my simple wallet open on my screen and the command “balance” already typed in. I pressed the enter key.
My transfer was already processing in my wallet. I’d have to say it was about a second. Even Vcash never went this fast for me. Maybe Ripple could compete, but many a purist would advise that Ripple isn’t really crypto.
— Stay tuned…more about AEON and other crypto’s to come. A little more history about AEON is here.
(Note: I am not a developer of AEON, just a user.)
Disclaimer: The above blog is the author’s opinion. Do not base any investment decisions upon the information provided. Please conduct your own research.