Bitcoin has undoubtedly come a long way in the thirteen years it’s been in existence. However, there is still a long way to go before Bitcoin becomes a global means of payment. As this virtual currency has become increasingly popular, some of its features have created challenges and, in some cases, led to arguments over the direction the money should take. On the other hand, Bitcoin has become popular among speculative investors who purchase this digital currency via bitcoin up, hoping the price will keep rising. Here are the top four significant Bitcoin limitations.
The present infrastructure of this digital money network is capable of processing a maximum of seven transactions per second. On the other hand, a Visa transaction can handle 24,000 transactions per second. That difference leads to delays in how quickly the network can validate transactions, which get’s slower as more people use the web.
Moreover, there is a speed issue regarding how often this virtual money creates a new block. Satoshi Nakamoto, Bitcoin’s creator, allowed the creation of a new partnership every ten minutes to help prevent fraud on the network. A block can fit around 2,000 transactions, so backlogs of unconfirmed transactions are pretty standard. Eventually, these backlogs of unconfirmed transactions have led to a slowdown in how quickly the Bitcoin network can process transactions.
This digital currency has become incredibly volatile since its inception in 2009. For instance, the value of this electronic money hit an all-time high in 2021as. The value exceeded over $65,000 in November. However, in January 2022, this virtual currency saw a significant drop that erased almost all of the previous year’s gains. In January 2022, the value of this digital money was $35,000, but it approached $50,000 in March. However, this digital asset fell short and has been on a downward trend ever since.
But it’s not helping to fuel Bitcoin’s popularity as a currency. For instance, a merchant might accept this digital currency as a form of payment when the value is high; however, the matter may fall incredibly in the next minute. Therefore, many people do not want to deal with the level of currency risk.
Before this digital asset attains mainstream adoption as a currency, the price will become much more stable.
Currently, there are a lot of Bitcoin miners on the network, and the space in the block is limited. So, these digital money users attach a fee to incentivize miners to include their transactions before others.
As the payment backlog grows, spenders offer increasingly hefty fees to attract miners to their transactions. The price is the same whether the trade on this electronic currency was for $ 7 or $20 000- making this virtual asset unsuitable for small transactions.
4. Potential for Theft
Security measures exist that make this digital currency virtually impossible to steal. However, taking advantage of the security measures involves a complex knowledge of how this digital money works and requires much effort from the user. Also, many of these electronic currency enthusiasts do not mind taking extra security measures. With online Bitcoin wallets, there is always a chance that hackers could steal the currency.
Moreover, suppose someone or a group acting together controls more than half the computing power the mining process consumes. In that case, they could rewrite the blockchain’s financial history, allowing them to double-spend the currency. Eventually, these people who double-spend Bitcoin will create a 51% attack.
The Bottom Line
Generally, Bitcoin and the whole concept of a digital currency are still very much new, and several problems need fixing. Government regulation is also challenging since it can make this digital currency illegal in some countries.
Disclaimer: Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions.
Cryptocurrency trading involves high risk, and is not suitable for all investors. Before deciding to trade cryptocurrencies, tokens or any other digital asset you should carefully consider your investment objectives, level of experience, and risk appetite. TaxGuru does not recommend that any cryptocurrency should be bought, sold, or held by you. Do conduct your own due diligence and consult your financial advisor before making any investment decisions. By the use of the above information, you agree that Author / TaxGuru is not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof.