The Fact That You ‘Want to Own’ Bitcoin is Why it Won’t Last as a Currency

The idea seems brilliant to some, and necessary to others. Leaving the world’s most-used currencies in the hands of governments that have proven they don’t always act wisely is a mistake. The world’s consumers are better suited to self-manage such matters, relying on a market-driven approach to managing the means of buying and selling goods.

Except, maybe government-managed currencies aren’t such a bad idea after all, of the only alternative to that option is something like bitcoin, or another cryptocurrency.

Such a notion rubs some of the more forward-thinking minds the wrong way. In the modern era where we live our lives via a digital cloud, a more liquid digital currency just makes sense. The fact that this currency operates outside of central banks’ management makes it all the more attractive, as that nature means it sidesteps all the potential pitfalls a particular country’s government might stumble into.

There’s an overarching problem with an affinity for the alternative to dollars though. Dollars, warts and all, still offer the most important attributes people want – and need – in money. Cryptocurrencies offer very few of those attributes.

The list of desirable characteristics of money changes a little from one source to the next. The broad consensus is, however, that was as a species want our currencies to have durability, portability, divisibility, uniformity, limited supply, and acceptability.

Bitcoin has some of those characteristics. It’s particularly portability, and though acceptability is something of a challenge, that can be changed. It is changing, in fact. More and more entities are accepting Bitcoin-based payments, even if they also accept other currencies too. Uniformity? Sure. And, even though Bitcoin isn’t divisible in the way we presently understand ‘making change,’ it wouldn’t be difficult to add a decimalization factor to the transaction platform that allows for more precise buying and selling.

Bitcoin falls woefully short on two of those measures though… arguably the most important two. It’s not durable, and it’s not in limited supply.

Don’t misunderstand the use of the term ‘durability’ here. It’s not a matter of physical strength. In this context, durability means we as consumers more or less have a good idea of what one Bitcoin will be able to buy tomorrow, and the next day, and the next day. A dollar’s value over time will change to be sure, but that change is slow, and reasonably predictable.

Bitcoin’s price changes are neither slow, nor predictable. In December of 2017, one Bitcoin would buy a new, small car. Now one Bitcoin will be a small, used car… maybe. In that vein, if you’re buying up Bitcoin because you feel it will rapidly gain in value and buying power, you’re tacitly conceding it’s anything but the predictable means of exchange it needs to be to be a ‘good’ alternative currency.

As to the other matter – limited supply – some would argue that. There is a limited supply of Bitcoin that can ever be ‘mined’ or created. There can only be 21 million of them, limited by the underlying algorithm. Nearly 90% have been found. Another 10%, and the mining of them stops.

But, once the world has maxed out on the number of Bitcoins that can be drudged up, there’s little nothing to prevent other cryptocurrencies from taking shape. And they already have, by the hundreds. For any currency to effectively work in a society or culture, everyone must agree to have one currency, and agree to exclusively use that currency. If any currency can be used, there’s nothing to prevent anyone from creating their own, forcing merchants, sellers and service providers to accept hundreds if not thousands of digital currencies that they themselves may not be able to do anything with.

That’s just not going to happen.

So, trade Bitcoin all you want, getting in at highs and out at lows. Just know that it’s never going to be a viable currency – or even a secondary alternative to currency – as long as you’re looking to speculate on its price swings. That’s why Bitcoin, as a currency and as well as an idea, just isn’t going to last forever. Indeed, it’s likely to be closer to its end than its beginning.