Bitcoin 2014 Report Card : A Mix of the Good and the Bad

Bitcoin 2014 : Final Grade : C

Some people who write articles about bitcoin feel that to remain objective they shouldn't actually 'own', any bitcoin.  While I can certainly understand that argument, it does not apply to me personally.  I have been involved in bitcoin for a relatively short period of time, only since early 2013.  I have spent time over the past year doing analysis of the blockchain and have tried to glean whatever useful information I can and share it with the community.  I own a small amount of bitcoin that I have acquired at far below current market price, so it is easy for me to weather the latest price declines with a cavalier attitude when, unlike many, I'm still ahead of the game on paper.  In addition to being a 'holder' of bitcoin I also strive to use it as often as possible in my daily life.  I buy donuts at 'Strange Donuts' and have frequent meals at 'Sister Cities' in St. Louis but, mostly, I try to do as much of my online activities exclusively in bitcoin; something which has become dramatically easier to do in the past year.  

I am a champion of bitcoin as a technology and I continue to have high hopes for its future.  All that said, objectively speaking here, overall it has not been a good year for bitcoin and I think the next year is going to be key to determining whether or not it will ever reach critical mass.

The Positives

There has been a lot of good news in the world of bitcoin in 2014 and we should certainly embrace that.

• Merchant Adoption : Merchant adoption has grown wildly.  While a year ago options to make purchases online were very limited (remember Overstock.com wasn't even accepting bitcoin one year ago), today there are few things you can't buy online with bitcoin.  Companies now accepting bitcoin include Tiger Direct, NewEgg, Dell Computers, Overstock, PayPal, Shopify and, the 900 pound gorilla, Microsoft itself.  This is certainly great news.  In addition numerous charities now accept bitcoin that were resistant to it before which includes Wikipedia, a long hold out.
• The Core Network : The network has remained strong and not succumbed to any major problems.
• Venture Capital : Massive amounts of venture capital has flowed into bitcoin startups and some of them have already unrolled early products.
• Micro-Transactions and Tipping : ChangeTip has begun to grow as a micro-transaction network; backed by bitcoin but not flooding the blockchain with noise.
• On-Ramps : People have more ways to purchase bitcoin with Circle, Xapo, and Coinbase all helping the cause and easing new people into the ecosystem.
• Media Coverage : The tone of media coverage in general has improved with many admitting that blockchain technologies have great potential, even if they don't believe in bitcoin as a currency
• Apple and Wallets : Apple removed its ban on bitcoin apps and, throughout the year, the various bitcoin wallet applications have improved tremendously.

The Negatives

Honestly, I feel that the negatives really outweighed the positives this past year. Hopefully, 2015 will be a big improvement.

• MtGox Collapse : The MtGox collapse was particularly hard on bitcoin this past year.  While nearly everyone agrees that, in the end, it is good riddance, the damage that was done was certainly severe in a number of ways.
• Transaction Malleability : Related to the MtGox collapse was their efforts to blame a real problem with the bitcoin protocol (transaction malleability) as having been the culprit.  While it turned out that 'transaction malleability' was never a major problem, and fixes for it were quickly deployed, it still tarnished the reputation of bitcoin and reminded everyone that a simple software bug could have devastating results.
• Centralization : During these times when we see major corporations and entire countries suffering under online attacks it is easy to become nervous about something like that happening to the bitcoin network. The bitcoin network, as a widely distributed peer-to-peer system, is supposed to be fault tolerant . However, with the advancement of just a handful of mining pools controlling the bulk of the network and relatively few full nodes being run, it is probably right to be concerned that concentrated attacks could hit the network. Less centralization would help a lot. Sadly, the proof-of-work at the core of bitcoin has turned into a kind of nuclear arms race. Imagine if, instead, every person were equally incentivized to run a full-node. No one would get rich but everyone would share equally in a modest reward that would make them feel good about participating in and fully validating the network.
• Hostile Governments : Various governments of the world began to take a hostile attitude towards bitcoin this past year.  This began with China and spread to Russia, India, Indonesia, and other countries.  Probably one of the most insidious developments was when Australia recently ruled that bitcoin was subject to sales tax, effectively making it useless. This is certainly a new strategy, where a country acts like they are welcoming bitcoin but pass absurd rules making it essentially impossible to use bitcoin in their country. It has nearly the same effect as outright banning it.
• Overbearing Regulation : The New York 'bitlicense' proposal entered the scene this past year, a piece of regulation no one asked for, no one believes is actually needed, and is doing bitcoin little real good.  The last thing we need is 50 separate states creating their own set of licensing rules with onerous reporting requirements.  Death by bureaucracy, a time honored tactic.  While no good argument can be made why individual states need to set up bitcoin regulation, that didn't stop New York from creating an initial proposal which was absurd and clearly designed to make sure that bitcoin is not allowed to continue to function as originally designed or intended; at least in the state of New York.  The initial proposal was so heinous that when the revised version removed some of the more absurd rules it felt like false sense of 'progress'.
• Financial Tracking : We learned that companies which have been providing the on-ramps between fiat currency and bitcoin are being overwhelmed by issues of compliance and heavy handed regulations.  Late this year we learned that not only was Coinbase tracking when users convert bitcoin to fiat and back (something largely understood and expected), the community was shocked to learn that they were also tracking how individuals spend their bitcoins after the fact; with some reports claiming that tracking continues even after bitcoin has been removed from the Coinbase wallet service.  Not even the banks follow you around once you take cash out of the ATM, so these developments are particularly chilling.  
• Wallet Software Flaws : Late this year the popular online wallet system 'blockchain.info' introduced a bug, briefly, which caused a large number of bitcoins to be lost almost immediately.  While these bitcoins were almost entirely recovered (through the generosity of a 'white hat hacker'), the mere fact that a single typo in a line of code could make so much value disappear is truly disconcerting.  So much of our trust in bitcoin is really trust in the software infrastructure that is being built around it and, even though the core bitcoin protocol remains strong, the failures everywhere else have become frequent and frightening.
• Transaction Volume : We are repeatedly told that all of the known challenges facing bitcoin can be 'easily addressed' but, as each year passes and nothing significant is being done, it becomes more concerning.  It is understandable that changes to bitcoin are made at such a glacial pace because, of course, a single tiny undiscovered bug, if accidentally released, could wreak havoc.  Nevertheless, very little progress was made on the issue of transaction volume which is probably the first and largest concern if and when bitcoin were ever to gain wider acceptance.  In fact, now that so many people are paranoid (rightly so) about their bitcoin transactions being tracked, we find that much more of the traffic on the network is being dedicated solely to mixing coins!  What some people have reported as an increase in transaction volume is actually just the opposite.  It is a net decrease because a substantial percentage of the daily transactions are simply to mix coins.  So, while bitcoin transactions were already limited and expensive to begin with, now they are becoming even more limited and expensive because the community is no longer willing to simply send bitcoin directly from one public key to another.
• Consumer adoption, volatility, and price : While today we can use bitcoins to buy nearly anything online thanks to massive merchant acceptance in the past year, sadly, it doesn't seem like all that many people actually have any bitcoins and, those that do, don't spend them much.  It has become a joke lately that whenever bitcoin gets any good news, the price goes down.  That is because this past year has been one long slow price decline even in the face of largely positive news and dramatically increased merchant acceptance.  If the price is, on average, increasing over time then it is a lot easier value proposition for people to buy some bitcoins on a semi-regular basis to use for online purchases.  However, the reality this past year is that if you wanted to just acquire bitcoins for online purchases you would be losing so much value from between the time you bought the bitcoins to the time you spent them that it would discourage most people.  Until the price is on average rising over time and the volatility less extreme, consumer adoption for commerce is going to continue to be slow.
• No Publicly Traded ETF : Many expected 2014 was going to be the year 'Wall Street' got into bitcoin, but that never really happened.  And people who were excited after watching the staggering rise in bitcoin price through 2013 lost most of that excitement throughout the past year.  Perhaps 2015 will bring a publicly traded bitcoin ETF and, perhaps, that will help raise the price and tame volatility, but there is certainly no guarantee.

Conclusion

I'm still a long term bull on bitcoin.  The core technology is solid and the network continues to function fine.  My biggest concerns are simply whether or not more people will start using it and if something can be done to tame the volatility and price declines.

I remember we used to have endless debates about deflationary currencies and whether or not anyone would spend their bitcoins if they would always be worth more later.  I think we can see by now that many people, including myself, would love to spend bitcoins that were always increasing in value.  For the past year, we haven't had much of a chance to do that.

Untuk pemesanan, hubungi kami melalui kontak yang tersedia berikut:

Chat WhatsApp Send SMS Call