Whatever Happened to Bitcoin? Has It Bitten the Dust Yet?
This blog has featured a couple of posts about bitcoin more than a year ago. Although none of the bitcoin posts here sang high praises for the digital currency, we shared the optimism of many digital currency proponents, hoping that bitcoin and other forms of digital currency advance into something that can truly offer benefits and advantages.
So what happened to bitcoin? Apparently, it’s been anything but good. What was once considered as a heavy favorite alternative to fiat currency and gold now seems to be falling apart. After several problems, from the Trojan pony to the controversy involving the prominent use of bitcoin by criminals and the collapse of Mt. Gox, good news seemed to have evaded bitcoin for a long while now.
A little refresher for those who may have already completely forgotten bitcoin – bitcoin is a digital currency or a virtual currency. It operates as a peer-to-peer value system wherein users transact directly without requiring an intermediary to validate the value of the amounts being passed or received. It is a decentralized currency system, which means that there is no central bank or other equivalent central authority that administers it. Instead of relying on physical tokens and the vital role of intermediators, bitcoin uses some form of digital cryptography technology (which by the way has also made bitcoin earn the moniker “cryptocurrency”)
Bitcoins, the value in particular, are created through sophisticated numbers crunching by computers that belong to a peer-to-peer network carrying the bitcoin wallet software. The process of creating bitcoins is called “mining” and is monitored and verified by all the computers in the network. All transaction information are collectively maintained across the bitcoin network. It is a computationally intensive process that tends to become more intensive as more bitcoins are produced. This is why powerful computers are required in producing bitcoins. The whole system is also the complete opposite of transparency. It is highly complex and even some of the frequent users of bitcoins may not really know what’s happening behind the scenes.
Unfortunately, bitcoin’s value continues to trend downwards. In January, the value was already reported to have fallen below critical support level at $261. As of July 2, bitcoin value has been playing around the 250 to 260 levels or averaging at 254. The prevailing momentum is on the downside and is expected to continue going down unless some breakthrough is achieved in terms of bitcoin technology or management.
Blockchain is considered as the backbone of bitcoin. It is like a digital ledger that is responsible for tracking and determining the value of bitcoin. Before the approval of a bitcoin transaction, a cryptographic algorithm checks it against the histories saved on each computer in the bitcoin network. Introduced in 2009, it can be said that blockchain technology is still in its infancy. It still has a lot of room for growth. There are still several vital hurdles that need to be addressed before it can become applicable on a much larger scale, to become truly secure and reliable. Perhaps if bitcoin significantly steps up its blockchain tech, it can stimulate value boost.
At the moment, blockchain technology already being explored for other applications. Companies are studying the use of blockchain for the clearing of their transactions with the goal of eliminating intermediaries from financial transactions without sacrificing security and transaction transparency. There are proponents who envision modern commerce that is powered by blockchain or some similarly inspired protocol. In the United States, ecommerce company Overstock.com is already testing the limits of what blockchain can do. The company has established a trading system with blockchain as the platform and plans on offering $25 million worth of “cryptobonds” that will be traded on the said platform.
What’s Next for Bitcoin
Despite all the negative press and less than encouraging developments in bitcoin, this digital currency appears to have not completely lost steam yet. There are still many news about it being pursued by companies in different parts of the world. In Spain, there’s a service that lets people buy bitcoins at around 3,000 local stores. International Business Times also reported how MasterCard’s decision to cut ties with classified ads site Backpage.com is opening up a major opportunity for bitcoin to assert its relevance. Massachusetts Institute of Technology, on the other hand, is taking inspiration from bitcoin technology to develop an encryption technology that can address the shortcomings of homomorphic encryption.
Bitcoin is unlikely to die soon. Even if the name “bitcoin” disappears, it is highly probable for a similar technology to emerge and continue what bitcoin has started. Bitcoin, after all, has many compelling advantages that would be too unwise to disregard or ignore.