This post is going to piss some people off.
There are thousands of pro-Bitcoin people who crawl the internet all day, looking up any mention of their precious Bitcoin, and viciously attacking any criticism of it.
Granted, they don’t really provide good counterarguments. They just all dogpile onto criticisms, hoping to cause enough of a headache to silence those critics.
My guess is that the vast majority of those folks might hold 0.0001 bitcoin, and are hoping and praying it goes to $100,000,000,000 so that they will be a millionaire, just like those early bitcoin buyers.
After all, I can’t imagine that any legitimately wealthy Bitcoin holder is spending any amount of their spare time anonymously arguing with Bitcoin doubters on the internet. To them, their own success is all the argument they’ll ever need.
However, we live in 2021, and it’s important to take a sober look at things, rather than investing in Bitcoin now as if we were the first ones to “discover” it.
So is Bitcoin going to go to $0? Let’s take a look.
The Oldest Cryptocurrency
An analogy I like to use is that if cryptocurrencies are supposed to be a technology (and they are), then Bitcoin is like Netscape, if we likened cryptos to web browsers.
There is no inherently special property to Bitcoin. As a technology, it is the oldest cryptocurrency. It has had 0 updates since its anonymous founder mysteriously disappeared roughly a decade ago.
It takes an unbelievable amount of energy to process transactions and “mine” the coins, and transactions are relatively slow.
Bitcoin’s supporters argue that the great energy consumption required to produce Bitcoin is actually what gives it its value – that if it costs $10,000 in raw energy to produce 1 Bitcoin, that $10,000 is its inherent minimum value.
That’s all nonsense. Keep in mind that in the not-too-distant future, no more Bitcoin will be mined. Nearly 100% of all processing power used for mining Bitcoin will be used strictly on transactions.
I don’t know about you, but the concept of using enough energy to nuke Hiroshima to checkout my groceries doesn’t seem very practical.
This is where the Bitcoiner will say “It’s not meant to be an everyday currency! It’s a store of wealth!”.
Unfortunately, this argument inherently detracts from the value of Bitcoin. It used to actually function as a pretty effective currency for all sorts of illicit activities, and its transaction fees and energy usage were once a fraction of where they stand today.
If Bitcoin was just going to be just a store of wealth, I’m not even sure it’d be the best one. If it were a desired trait for the store-of-value-coin to cost $10,000 to mine, it isn’t also necessary for transactions to cost so much ($18 – $60+), or be so slow (Bitcoin can only process 7 transactions per second).
What if I’m wrong, and there really is something to Bitcoin other than hype and name recognition? Let’s look at another cryptocurrency that came out almost immediately after Bitcoin: Litecoin
Litecoin was a near-clone of Bitcoin, with the main modification being that confirmation times were much faster, allowing for 56 transactions per second.
You’d think that the much faster transaction times would be a major competitive advantage, but Litecoin’s creators made the grave mistake of choosing a silver-colored logo, always placing itself second to Bitcoin’s gold icon.
Litecoin used to always be second to Bitcoin on the market capitalization charts. Today, while Bitcoin stands tall on a 1 trillion dollar market cap, Litecoin is down in 10th place at 1/50th the value, around 22 Billion.
(Noteworthy: At the time of this writing Dogecoin, an intentionally worthless coin, is at #4, with an 84 billion dollar market cap)
So we see immediately that a clone of Bitcoin with more utility is actually valued far less by current markets.
Inability to update
While Litecoin, Ethereum, and nearly every relevant crypto still around today has the capacity to update semi-regularly, Bitcoin does not.
Some call that a feature, but I’d say that’s a bug. Especially as competitors who can update increasingly consume market dominance.
There have been obvious, glaring issues with Bitcoin, and people have made numerous attempts to fix them. However, it takes a majority of the mining network to switch to the updated chain, and so far those miners have mostly refused.
When I first started writing this section, the Bitcoin Cash / SV saga came to mind. In 2017, two separate forks of Bitcoin were created that attempted to resolve Bitcoin’s speed and energy requirement.
The fork meant that anyone who held Bitcoin in a regular Bitcoin wallet, would receive the same amount of that Bitcoin in the new version, and unlock the wallet with the same key. But even with these incentives in place, the fork still failed and miners stuck with the old version.
I did some digging though, and it turns out there’s a likely update coming to Bitcoin this year called Taproot. This will allow for protocols like the Lightning Network to allow for cheap transactions, as well as the rudimentary execution of smart contracts.
Still, it took 12 years to get to this point, and Bitcoin’s about 6 years behind Ethereum. One update like this is not very promising, and the network will still use a massive amount of computational power that could instead be used for more advanced decentralized purposes.
Inaccessible Coins
Bitcoin maximalists love to say something along the lines of “There will only ever be 21 million bitcoin! Don’t you want to own one?”
The funny thing is, there is actually far, far less than that.
Bitcoin was basically the training grounds for cryptocurrency. It’s where people started to understand “Oh shit, I’m responsible for my own banking”. And that meant when you lost the coins, there was no calling up a bank and getting a transaction reversed.
It was pretty much a bunch of monkeys figuring out how to do banking again for the first time.
A lot of people ended up locking up all of their coins and throwing away the key (mostly by accident). There are countless millions of BTC on lost, broken, or encrypted hard drives and missing paper wallets.
Is this a bad thing for Bitcoin? Not necessarily, but its liquidity and availability is actually much less and for many dumb reasons, and its price is more easily manipulated as a result.
Can Bitcoin Actually Go to $0?
You might be wondering if that’s even possible. There is one scenario where it is, and I don’t think it’s necessarily too far off.
The trouble is, if it happens with Bitcoin, it will happen to nearly all cryptocurrencies.
The encryption that powers the wallets on the blockchain uses a public-private key encryption combination. The generation of these key combinations are known as a mathematical “one-way” or trap-door function.
What that means is that it’s very easy to compute these keys together during their creation but very hard to reverse engineer either key to determine their public or private counterpart.
People who love their cryptocurrencies like to say how you’d need a computer the size of the sun to hack a wallet. But theoretically, that’s not true. All you need is a quantum computer.
And if someone with a powerful enough quantum computer develops the theoretical algorithm to reverse engineer a public key, you can be sure that some very powerful people will lose vast amounts of money very quickly.
And after that, bitcoin will probably be pretty damn close to $0 and no one will ever want to hear about cryptocurrencies again.
That’s all for today.
–Gabe