Bitcoin a failure? Let the market decide

February 16, 2016 //By Jérôme Rousselot
Bitcoin a failure? Let the market decide
Recently we have seen in the mainstream media many stories claiming that Bitcoin is a failure, citing Mike Hearn, a long-time Bitcoin developer, who recently quit. While the Bitcoin industry is familiar with being in the news, this time feels different as we are questioned by investors, business associates, friends, and family.

I was very surprised to see how much importance was given to what one developer is saying, without judging the quality and importance of his work. Thousands of developers have been working on Bitcoin for several years. I believe this happened because we, as an industry, focused too much on making our products better and didn't spend enough time explaining it to the wider audience.

This post discusses the claims made in Mike's post and in the subsequent Forbes article - "Something Rotten In The State Of Bitcoin" - and explains why they are actually good news:

• Bitcoin is running out of capacity
• Some Bitcoin companies operate in China
• Bitcoin is managed by a community
• Some Bitcoin users have libertarian views.

Bitcoin is running out of capacity
Does anyone believe that it is bad for airlines when lots of people want to fly? Or that it is bad for telecom companies when their users make phone calls? I believe fax vendors are quite unhappy about not selling their machines anymore. The same is now happening to PC vendors.

Similarly for online businesses, it is good news when the product sees increased adoption and encounters growing pains. Luckily with Bitcoin, and contrarily to most other businesses, all usage data is immediately and available online. This is how the Bitcoin network works.

Bitcoin transactions

Is this your definition of failure?

Every technology must evolve and adapt to increased adoption. That is exactly what Bitcoin is doing currently. In fact, at least three different technology solutions are under development to increase the network capacity: Bitcoin Classic, segregated witness, and sidechains. Another one, Bitcoin-XT, designed by Mike Hearn, the developer cited by Forbes, was not adopted by the Bitcoin community.

Bitcoin mining is mainly performed in China
As Bitcoin is a global network available in all 196 countries in the world, any business can connect to it if it makes sense for them. Bitcoin mining is a specialized industry that plays a very important role: it secures transactions and builds the blockchain, an immutable public record of all transactions ever performed. Miners receive newly created Bitcoins as a reward.

Currently two large miners are based in China. As they make profit by generating and selling Bitcoin, they have a strong incentive to keep the network working as intended. In fact, the Bitcoin network has been operating correctly 24/7, 365 days a week for several years now. Current technologies used by banks often suffer from unplanned downtime, despite their massively higher development and operating costs. Even companies like Google, Facebook, Apple, and Microsoft occasionally suffer from major IT problems.

Bitcoin computer

21's Bitcoin computer was launched in November 2015

Finally, anyone can start a mining operation anywhere very quickly. Mining could become distributed thanks to new devices like Balaji S. Srinivasan 21's Bitcoin computer, and Valery Vavilov BitFury's portable mining device. Operating costs could go up in China. Some financial institutions or big technology companies may find an interest in operating a Bitcoin mining data center. Don't judge a movie from just one snapshot.


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