For those who would like to see Bitcoin succeed as a currency, not just an idea, the recent relative stability in the exchange rate of the digital currency against the U.S. Dollar is certainly a hopeful sign. That doesn’t mean, however, that the future is secure. There are still a few things that could yet derail the future.
I hate to burst the bubble of critics who run around making negative comments on any Bitcoin article, but it is not their efforts that represent a danger. Most users and believers are well aware that Bitcoin is “based on thin air” as they constantly claim, but understand that that is true of just about any currency in the modern world. They also don’t need to be told that the run up to $1100 was a bubble; they lived through it.
Nor is it unique that there have been some bad actors that have, at various times, latched onto Bitcoin. Again, that can be said of almost anything used for exchange. It is not these tired objections that are the biggest dangers to the future. Those dangers come from within the digital currency community.
Bitcoin is by far the best known and most widely used cryptocurrency, but there are literally hundreds of other peer-to-peer currencies, known collectively as altcoins, in existence and many more planned. BTC was, however, the first decentralized ledger currency, and the blockchain is a large part of its strength. It also has the advantage that over 13.5 million of the 21 million total Bitcoin that can ever be mined are already in circulation, giving some degree of liquidity.
Perhaps its biggest advantage, though, is the public awareness that comes from increasing acceptance by merchants. Many are prompted to investigate the phenomenon after repeatedly coming across “Bitcoin accepted here” as they go about their lives. Some of those don’t understand the concept or see only the dangers of anything new, but others can see the benefits and potential of a peer to peer currency.
They may not immediately become users, but many become advocates. Even if those merchants immediately exchange Bitcoin for dollars, as most do, it still increases awareness and strengthens the perception of BTC as the most viable alternative currency.
History, however, is full of examples of an innovation being superseded, even after gaining initial acceptance. There is always the chance that somebody will build a better mousetrap but, so far, Bitcoin remains as king of the cryptos, with over ten times the market capitalization of nearest rival Ripple.
In the future, it is easy to envisage a situation where multiple digital currencies exist side-by-side, just as is currently the case with fiat money. That may remove some of the efficiency advantages that the prospect of one transnational currency and payment system offer, but it is perfectly feasible. In that case, just as with fiat money, one digital currency will likely emerge as a de facto reserve currency, the unit by which others are valued. The current situation would suggest that that will be BTC, which indicates that far from weakening Bitcoin or becoming an existential threat, innovation in the field could actually help it cement its position as the market leader.
There is, however, another danger inherent in altcoins. If too many come and go, and in the process too many early adopters get burned, it will give ammunition to those who maintain that digital currencies are simply a way for con-men to take money away from a gullible public. The fact that those early adopters were presumably well aware that they were taking on significant risk will get lost. The cries to protect investors from themselves will still get very loud should that be the case.
That in itself could lead to what is probably the greatest danger to the future of Bitcoin, and maybe even to the blockchain: politics. I have stated before that some degree of regulation of the businesses surrounding digital currency is needed. That said, decentralization and a lack of government control is at the very heart of the concept of Bitcoin. Anything that compromises that, up to and including restrictions or even a ban on use, would kill the currency in short order. To many of a moderate disposition that may seem unlikely, but with the amount of campaign money that comes from big banking, nothing is impossible.
That doesn't mean, however, that it is only the political Left that poses a threat. In the eyes of many of those moderates the politics of many Bitcoin supporters could also present a problem. The decentralized, non-governmental nature of digital currency makes it particularly appealing to those of an extreme libertarian bent. When those voices are the only ones heard, it makes wider adoption and acceptance less likely. When every piece of news heralds a diatribe on the evils of government, there are an awful lot of people who will be turned off of the idea of alternative currencies.
Decentralized currency has its roots in libertarian ideas and those of that ilk have every right to voice their opinion. However, when it drowns out all others it will, over time, hurt the very cause that they are championing. Demands for ideological purity always end badly, whether they come from the Right or Left. The answer, of course, is not suppression, but debate. There are supporters and Bitcoin believers who have a different approach and their voices must also be heard.
With Bitcoin as established as it is and with acceptance around the globe still growing apace, it is most likely here to stay. An altcoin that challenges could emerge or political considerations could get in the way, but with each passing day one thing looks less and less likely. Bitcoin and the potential for revolution in global commerce that it represents will not simply fade away.