Anyone reading mainstream media would probably be familiar with at least three issues with bitcoin. Namely, they could think it is a fraud, that it is a bubble, or that transaction fees are prohibitively high. Well, the first two aren’t really tangible issues that relate specifically to bitcoin, so I’ll leave those for a philosophical discussion another time; however, the third issue is. Bitcoin transaction fees have increased significantly this year, but is it such a problem?
Well, it really depends on how you use bitcoin, and myself being a bitcoin holder and only small transactor of the currency it doesn’t affect me greatly. And, there are a number of ways you can reduce your fees which I will cover in a separate article. I can hear chant from the ‘low-fee’ camp now… so I will quickly move on.
The initial vision of Satoshi Nakamoto was for bitcoin to be a form of digital cash ready for regular use almost anywhere. However, due to a number of reasons this has not played out as originally intended and bitcoin has become more of a store of value. In actuality, the fee issue relates to the scalability of bitcoin and the inability to reach consensus on the issue by the main parties. Notably, it has also been the stimulus for a number of bitcoin hard-forks (bitcoin cash, bitcoin gold etc). This is a very long and boring issue but nonetheless one that requires careful attention by someone other than me I have to say.
Store of Value
If you think about why something is a ‘store of value’ you immediately think about something unique – something that can’t be reproduced or acquired easily. One of the reasons gold is such a store of value is that it can’t be copied, reproduced, or transacted easily – ever tried buying or storing gold, or maybe trying to buy something with a bar of gold? What about trying to do the same with a piece real-estate, or an Argyle pink diamond, or a Picasso? Doesn’t work does it? So, why can’t bitcoin just be store of value too?
Well, if you ask the naysayers they will immediately run the line that it was Satoshi’s original vision for bitcoin to be ‘Digital Cash’ which infers low fees – and I agree – but it was also his vision to create a currency free from borders available to anyone anywhere. I don’t know about you, but for me that is quite a bit more important than saving money on fees, but I might be wrong…
Anyway, the flip-side of the increasingly high-fees (not just for bitcoin) is that the price fluctuations are reduced as it takes more time to bring the item to market. The technical term is liquidity. And, if you have experienced very liquid markets first-hand, which bitcoin still is, you will know how fast they can move. A move of 10% is considered normal, and a move of 30% or more is not that uncommon. These moves are normally follow a FUD (Fear, Uncertainty, and Doubt) campaign that has been unleashed on bitcoin for one reason or another.
In contrast, illiquid markets move much slower and tend to not to move much in even the worst market conditions. A FUD campaign against gold, or another commodity of fiat currency can see a movement or only a few percent in a day. Obviously, there are some exceptions to this, but generally they are caused by a fundamental shift in the commodity, a change in regulation, or pressing global financial conditions – all you crypto-enthusiast are too young (me included) to remember 1929, but take a minute to read about some of these events as they will give you a better perspective on the benefits of cryptocurrencies.
So, although the bitcoin market still shows some violent swings, the fundamentals of bitcoin have not changed in a long time. Bitcoin has clearly demonstrated it’s ability to be a store of value – it is unique and there are only ever going to be 21 million of them, it can’t be reproduced or copied, and once that bitcoin is stored correctly, it will never leave as long as the Internet remains turned on. For me, that it is more than enough, and I know many others who agree. So, while every other cryptocurrency, and newly minted altcoin is trying to reduce fees and tweak Satoshi’s vision for their own gain, let’s just hold our bitcoin and simply buy coffee and other junk with all the other cryptos.