Last year the world of bitcoin exploded in different shades and hues. There was the many who found evil lurking at every twist and turn of the virtual currency and there were those who kept vigil monitoring price movements for the sake of their capital.
It was a year of explosive price increases, record-breaking adoption volumes in Nigeria and other countries in the world, failed forks, first bitcoin billionaires and many more.
It was also a year that three deep vulnerabilities were laid bare. Bitcoin was exposed as not just highly volatile but practically unusable as a day-to-day currency, prohibitive transaction fees questioning its viability as a better replacement for fiat currencies and regulatory threats that saw it floundering to record lows.
It may be wishful thinking for those who have been expecting it to crash and bring active bitcoin users back from Wonderland; bitcoin has demonstrated over time that it is here to stay. But there is truth to the view that bitcoin utility is questionable.
What really is the true value of bitcoin?
In an article for the Forbes, James Cheo, Investment Strategist at Bank of Singapore called the price of bitcoin a “mirage”. According to him, bitcoin is a poor store of value because of its extreme volatility. “Bitcoin’s price is characterised by wild swings, both up and down, with the potential to move more than 20 percent in a single day,” he wrote.
Another analyst for the Wall Street Journal, James Mackintosh asserted that the wild ride of bitcoin in 2017 only proves that its true value is zero.
“There is no chance whatsoever that bitcoin can displace the dollar, for the simple reason that it is badly designed. Bitcoin can handle a pathetically small number of transactions, and uses an inordinate amount of electricity to do so, making it entirely unsuitable to replace ordinary money,” he said.
Nonetheless, Tim Akinbo, co-founder at Tanjalo.com, a local bitcoin exchange said it may be too early to call the jury on the cryptocurrency given that it is relatively new and still evolving unlike fiat money which has been around for ages. Time and usage will clarify what the true value of bitcoin really is, he suggested.
Will that time be in 2018? Ray Youssef, co-founder at Paxful has predicted that this is the year that adoption and everyday utility of bitcoin will increase.
Should that happen, we predict it will be a game changer.
Reducing the transaction fees will also be a game changer for the crypto. Previously, one of the big selling points for bitcoin was that payments would be fast, convenient and cheap. Cheap transaction fees have been the case until we entered 2017, where everything took a new turn.
Growing popularity and demand has become a blessing and a curse. On the one hand, price of bitcoin is going bananas and on the other, transaction fees are rising because of the network’s inability to cope.
Fees have skyrocketed with the average going for about $28 from below $1 it was before 2017, according to BitInfoCharts. Cost is incurred from transferring money to an external bitcoin address. Bitcoin addresses are like virtual bank account numbers where users can store their bitcoin tokens.
Finally, addressing the dilemma of regulation could prove a winner for the crypto in 2018. The bitcoin futures which kicked off in late December 2017 is a proof that anything is possible and finding a regulatory framework that will favour the growing space and all stakeholders may be rocket science after all.
