What’s the Biggest Problem About Bitcoin?
What’s the biggest problem about Bitcoin? Well, I’m glad you asked.
There are numerous risks and weaknesses in the system. There is no obvious reason why this currency should be a success or how it will come to replace the U.S. dollar.
If you’re still skeptical, just read the above paragraph over several times and then try to imagine how many small number of very rich people got rich using this medium. That’s not a very small number, is it? The main point is that Bitcoin isn’t a solution for everyone.
Let’s take a simple example. You have a business and you want to convert your profits into fiat money. All of your clients won’t be happy with this because they’re paying for the service they get with a credit card, which requires them to open an account with you.
Clients will move on to another bank. Still, you don’t have cash to pay their bills. That’s where Bitcoin can help. Your bank doesn’t have any obligation to take your money and you don’t have to pay a penalty to switch banks.
There is one flaw in that logic: if you sell a product for a dollar and make it worth one hundred dollars, then, logically, you should make the buyer pay you 100 dollars. It makes no sense. Yes, there are trading currencies out there that trade in this way. This is called PPP.
This will create a lot of volatility, because the market is based on supply and demand. If demand suddenly increases, then the currency will surge in value and vice versa.
As such, one of the most important things that people should look for in the future impact the dollar, so there should be similar issues with the dollar. As it is a completely digital currency, there won’t be a physical element.
There is no need to convert one’s savings into a very expensive online investment because the Federal Reserve can print new ones anytime it wants. Bitcoin does not have any reserves to protect you from inflation.
If you have a large online store that offers thousands of products for sale, you’ll be forced to accept all of them, regardless of quality. Does that sound good to you? If you use Bitcoin, then you have to wait for it to catch up and stabilize.
This is especially a problem for governments that are controlling a major financial institutions. They can print whatever amount they want without consequence to their credit ratings.
Security is a big issue. If there is no way to hold Bitcoin securely, then there is no reason for people to use it. Yet, if people decide to hold it and to invest in it, then we could have a completely different scenario, but for now, Bitcoin is the currency of the future.