If anybody is putting up a brave face and assuring you that bitcoin will soon reach a bottom and then head to all time highs – RUN.

If bitcoin was going to be a reserve currency it would have by now.

From its’ peak of 20K in January of this year it has drop month after month and is poised to break below 4000 soon. If bitcoin was going to be a reserve currency and hit mainstream, used by everyone as money then it would have done so by now. At least the adoption would be on an upward slope.

The above graph clearly shows that adoption growth stopped in January and we have been on a downward trend ever since. In the world of the internet, if you are not growing then you are dying. That is the awful truth. Bitcoin is just too volatile to be used as money. For that we need a stable coin. As a reserve currency, there is just too much push back from central banks. They are unable to control the issuance of bitcoins and they certainly do not want to elevate Satoshi and all the early adopters to become the richest people in the world. Even richer than countries. No no most countries that have large holdings of gold will prefer that gold be the reserve currency. The problem is that real gold reserves are not held by countries like the UK, EU and USA. They play around with paper gold and so far they have managed to hold back the price of real gold. The new Shanghai gold exchange and the possibility of a gold backed Yuan may break this impasse. We shall see.

Is this the end of the road for Bitcoin?

Bitcoin weakness is also its’ perceived strength – mining. As the price tracked upwards and asic miners became more efficient, home miners were driven out of the market towards large scale industrial miners controlling a few mining pools. This huge waste of energy to secure the chain would be fine if there was not another way. As it is when the price starts tracking downwards, all marginal operators will have to shut operations. No miner can afford to mine at a loss for long. The last to holdout will be those with access to the cheapest electricity and even these will have to give up as bitcoin price track towards $3000.

With the sharp drop in difficulty, block time for BTC have started to lengthen. This drop in difficulty is caused both by the Bitcoin Cash wars as well as the drop in price. Bitcoin may yet get snared up in the dreaded “chain death spiral“. 11 more days to the next difficulty adjustment.

Proof of Work and Proof of Stake

If you really don’t need to spend millions of dollars in electricity to secure the chain then why should you? Proof of work proponents have always insisted that we have to and that proof of stake is inherently flawed as it favours those who hold the most coins.

The EOS chain is delegated proof of stake, and have been live since June. It has humm along effortlessly gathering adoption and users at measurable rate weekly. Refer to Blocktivity and Dapp Radar. Barely 6 months old and there is an increasing number of high volume dapps building on the chain. Proof of stake works. EOS works and continues to improve with every update and upgrade.

The way to become money is not to try to be money.

Money is what everyone accepts as money. Unlike Bitcoin and almost all other cryptos EOS does not try to become money. It is a platform for fast, secure and free transactions. Because of this central banks may issue their currency on the EOS mainnet or their own sister chain. Cross chain transactions will not be a problem when transacting across several national currencies. Being a platform token EOS will not be a stable coin.

A stable token will emerge and gain worldwide adoption to the extent that everything worldwide is priced in this stable unit. What this is will be is yet to be seen but it is likely that something will happen. Perhaps the Bancor algorithm could pave the way towards such a stable coin or an exchange unit.

If this is the future then Bitcoin will have no future. We shall see.

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  1. CryptosDecrypted

    Hi Phanapp – I’ve rated this 5 stars because you argue your case well make a coherent argument. However, I completely disagree with the conclusion you have reached about BTC. The idea that BTC should be a world reserve currency already is unfounded. BTC has already disrupted legacy markets but 10 yrs is nothing. a steep decline in difficulty will also in time reduce the cost of mining – equilibrium will very likely be re-established. Stable coins are not true crypto – there are not even scarce. BTC price might fall to sub 1k and still many people would support it because it offers a freedom from financial intermediaries. I could go on. I feel EOS is a great project but exceedingly unlikely to supplant BTC. In any case, thanks for the article.

    1. phanpp Post author

      I do not think that EOS seek to supplant BTC. I am not saying that BTC will go to zero. Cryptos never die. I am saying that the blockchain has evolved and moved forward. Most are focused in the token that comes with the blockchain because that is what they are invested in. That is the least significant part of this technology. It is about how secure, fast and useful the blockchain is. This article needs a followup. Thanks for your critique it sharpens the mind.

  2. SouthernCrossroads

    Nice assessment of the state of crypto technology. People continually try say they are following the new tech while advocating for the truth behind the oldest blockchain tech. The new advancement will drive out weak ideas, but we also have to be cautious not drive everyone ‘s investment to zero with each new innovation as well.

    Thanks for the info…

    1. SouthernCrossroads

      I also have to agree with @cryptosdecrypted in some sense. I do believe disruptive technology will challenge older projects just as Bitcoin was a disruption to traditional monetary systems. There is room for more than 1, 2, even 50 or many more projects, but the strong projects will survive to have a top place in the market.

      The real issue, as I see it, putting the down pressure on the market is institutional investment money trying to break the competition crypto creates for traditional banking. This is an economic war to break free of government control of money and we may lose. I for one plan to end up on top or go down swinging.

  3. crpp

    Interesting article. I think that bitcoin is too valatile to be a currency. I don’t think bitcoin can ever achieve that. As an investment… it’s hard because it provides no income to have it, unlike shares. Basically people hope it will go up. I’m really torn on this topic. I think blockchain is a great tech and bitcoin made it possible. I don’t see that bright future for bitcoin though, but I’m sure blockchain companies will be big in the future.

    You got my follow 🙂