Can Bitcoin become a major currency?

Bitcoin image

Some Crypto enthusiasts state that Bitcoin or other altcoins like Ethereum or Ripple will become a major currency.

Bitcoin and other altcoins have the potential to become major currencies. However, cryptocurrencies are mostly used as a speculative tool and not to pay for goods and services.

Value of Bitcoin

Over time, only 21 million Bitcoin can be mined from miners in the network. Meaning that there will only 21 million Bitcoins exist in the future. Like with everything, the price of Bitcoin depends on the supply and demand on the market.

However, the real value of Bitcoin is the blockchain technology itself. Transactions that enter the blockchain are permanent and immutable. In addition to that, it’s hard to manipulate a blockchain because of the decentralized model. Furthermore, everybody could participate in the network by download it and verifying the accuracy of the blockchain.

Theoretically, you could trade Bitcoin with everybody in the world. This concept is a massive advantage for people because they don’t need to exchange currencies anymore.

If you make a transaction on the Bitcoin network, it is peer-to-peer, meaning you exchange funds directly with a person (like cash). So, Bitcoin makes the need for a bank or middleman redundant. In addition to that, you don’t need to pay extra fees for a middleman like a bank.

Why Bitcoin or other cryptocurrencies can’t become a major currency

#1 Blockchain speed limit

The Bitcoin network can only handle, on average, seven transactions per second, meaning it is really slow. Why can it only process seven transactions per second? Because the Bitcoin protocol is designed in such a way that a new block is mined every 10 minutes. In addition to that, blocks have a limited size, in Bitcoins case 1MB.

Other cryptocurrencies have other specifications. For instance, they could generate a block in less time or have a higher block size. As a result, more transactions can be handled in less time. However, having a higher block size or a faster generation time leads to a faster-increasing blockchain.

This process could lead to a centralization of the crypto network, meaning only individuals with high-end equipment can participate in the network.

Solution

The lightning network aims to take the workload from the network can let it get handled by the lightning network. The lightning network is 2nd layer solution. Users can make (nearly) instant transactions on the lightning network with even fewer fees in comparison with transactions on the blockchain.

#2 Vendors

There are only a small amount of vendors who support Bitcoin transactions to pay for goods and services. The reason for this is simple: Bitcoin transaction needs a long time to be confirmed, and the price of Bitcoin is volatile. However, if more people are aware that the lightning network exists and use it, vendors could use it for their benefits too.

#3 Value (Price)

Cryptocurrencies are volatile. The volatile level is another reason why vendors are not using cryptocurrencies.

If a vendor sells a product, he is not willing to speculate on the price of a currency. If they sold a product for 1 dollar, they still want the 1 dollar to be the value of 1 dollar on the next day. However, cryptocurrencies are volatile and therefore, the price fluctuates between 5 percent every day. Meaning, you have the same amount of coins, but get a different selling price for it.

This would not be a problem if everyone would accept cryptocurrencies because they could have a fixed coin amount price. However, most people prefer national currencies like dollar or Euro.

Therefore, people who use cryptocurrencies are forced to sell a certain amount of coins or at least hold a certain amount of FIAT currency to buy everything they want/need.

#4 Regulation

Some states see Bitcoin or other cryptocurrencies as a threat to their economy. As a result, they ban selling or buying of cryptocurrencies are regulate the market in a way that users who use cryptocurrencies have huge disadvantages.

However, governments can only regulate countries. Cryptocurrencies operate globally. Therefore, only people in a state would be affected and not people who live in another state.

Governments obviously want to prevent fraud. However, preventing fraud by banning the use of cryptocurrencies is not the solution.

There is a need for fair and strict rules that every cryptocurrency has to fulfill. Based on that, cryptocurrency developers could develop new features where everybody could benefit from.

Furthermore, there would be less fraud.

Furthermore, it is important that the rules are accepted globally by multiple countries (in a perfect scenario, every country would accept the rules) because cryptocurrencies operate globally. So, they can only be regulated globally.

Conclusion

Bitcoin and other cryptocurrencies have the potential to become global currencies. If everybody would use Bitcoin, everybody could transfer coins all over the world and as many coins as they want to. In addition to that, they have access to all their funds at any time.

However, first, Bitcoin developers and other cryptocurrency developer teams need to solve certain issues, like the fast-growing blockchain, energy consumption, or that more vendors offer the option to pay with cryptocurrencies.

The crypto space is growing every year. The cryptocurrency protocols get updates, get better and the crypto space gets more user-friendly. More and more people start using cryptocurrencies. However, with more people using a cryptocurrency, new problems occur that have to be fixed.

Maximilian Groß

I'm a software engineer. I'm the owner of FireStake.com and know the crypto space since 2016. Furthermore, I share everything I learn about crypto on this blog.

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