Bitcoin has had many trials in the nearly ten years it has existed. The “Bitcoin is Dead” rhetoric that made its way around the internet is now a running joke with its own website to catalog the now obviously fallacious stories.
Over the last several years, this ecosystem has been a rollercoaster ride of the market: its rapid expansion, the hacks, and – of course – sensational headlines. On this wild ride, it has been easy to lose sight of what Bitcoin means and what it represents fundamentally.
Core and Cash
Recently, we have been flung into fundamental debates about what Bitcoin is, was, or ought to be. For the past year, Bitcoin has been plagued by high fees and long confirmation times due to the one megabyte limit on each chunk of transactions it processes approximately every ten minutes.
A cup of coffee will have the same very small transaction fee as buying a million dollar home with Bitcoin.
How to fix this problem and allow Bitcoin to scale has been a debate lasting for years now. Here in the 11th hour, enthusiasts are debating furiously, reaching for The Book of Satoshiand changing their twitter handles to reflect their stance on the now imminent doubling of the block size and the contentious hard fork it represents.
The core developers see Bitcoin as only a settlement layer on a larger ecosystem. So Bitcoin will only be used for infrequent high-value transactions. Smaller transactions will be handled by side chains which are linked to Bitcoin in the same manner that your city streets can onramp onto major highways. All the commerce happens on Main St. but when you need to truck goods cross country, you onramp to the interstate.
“Segwit2X” will allow Bitcoin to double its transaction bandwidth pretty much immediately by doubling the space within each block. The transaction fees should fall greatly, at least for the time being.
Bitcoin Cash, which forked off from Bitcoin on August 1st, 2017, increased their block size to eight megabytes and that, along with lower transaction volumes than Bitcoin, has lead to transactions fees that are a fraction of a penny.
These expanded bandwidth solutions allow Bitcoin to be practical for all forms of payments without the urgent need for side chains and other more complex solutions. A cup of coffee will have the same very small transaction fee as buying a million dollar home with Bitcoin.
Bitcoin’s emerging use as a store of value is rooted primarily in one fact: So long as you control your private keys, your Bitcoin will be there. You don’t need to pay a storage fee or trust anyone but yourself and it will be there.
Bitcoin is now secured by the largest computer processing network in the world. Its cryptographic roots ensure, for the time being, that no entity, no matter how powerful, can violate your control over those Bitcoins if you have used best practices to secure them.
As time has gone on, and multitudes of exploits have been patched or rebuffed by the network, confidence in the technology has grown. And growing confidence in the ongoing proof of concept also grows its value.
Of course, Bitcoin does not stop there in its abilities.
The Original Superpower
Forgive this slightly arcane quote:
“What is the value of 15° 17’41.32″ N 121° 57′ 0.55″ E?”
The transactions see no borders, no middlemen, and no caps.
For those long-time cypherpunks, you may recognize this quote from Neal Stephenson’s Cryptonomicon. Spoiler alert: in the novel, it represents the location of a HUGE stash of gold. The catch? Basically, whoever finds it has no hope of ever being able to remove it, giving rise to a more famous quote from the novel that, “Gold is the corpse of value.”
In other words, what’s good about a store of value if you cannot transfer it to other parties in exchange for something? Here again, Bitcoin delivers big time. Not only can you send to anyone in the world for an acceptable or unacceptable fee (depending on who you ask) no one can stop or censor that transaction or intercept the funds.