Libertarians flocked to it “because of the potential that Bitcoin offered, as a decentralized form of money.” That is now over.
By Nathan McDonald, Sprott Money:
Today we are going to take a trip down memory lane and rewind back to the year 2012 – the year in which I discovered Bitcoin and registered an account on the now famous Bitcoin Talk public forums.
This was truly the wild west of the Bitcoin era, when almost no one knew what Bitcoin was, nor did they even remotely care to know. It was a scoffed at idea when mentioned to others, and members on the public forums would openly talk about how often they were laughed at by family members and others within their circle for even remotely thinking about the idea. It was a “scam” through and through and was not going to last.
Despite this extreme negativity, this small community continued to grow. Libertarians flocked to its banner, because of the potential that Bitcoin offered, as a decentralized form of money. Bitcoin was for the community, maintained by the community and was the community.
Community was a key word. It was a word that was paramount to the success of Bitcoin. Without it, we wouldn’t see the staggering numbers we see today. This push ever onward by the community is why Bitcoin was able to get its footing and build the foundation it vitally needed to survive and prosper.
Businesses popped up and flourished within this community. Bitcoin-only shops catered to those within and services became readily available. People sold precious metals, cookies, and there was even an eBay-style website for Bitcoin-only transactions. Bitcoin was known as a near-free-to-use “currency”, as transaction fees were almost non-existent and hyper-fast.
Now, sadly, let us fast forward to the state of the community today. Bitcoin Talk still has a community of sorts, but long forgotten is the idea of helping one another and creating its own ecosystem. For years now, holding has become the only valid idea. Barely anyone supports each other in a meaningful way and the once-flourishing ecosystem has all but eroded away.
Transaction fees have ballooned to upwards of $20.00 per order, making it almost impossible for any small business to accept Bitcoin as a payment option. Traditional credit cards, or other forms of payments have once again stolen back their crowns.
Just recently, Steam, the largest online gaming platform and seller of video games, summed up exactly what I am talking about in a recent press release . They stated that it simply doesn’t make sense to accept Bitcoin as a form of payment any longer, given its extreme volatility and cost to transact in:
In the past few months we’ve seen an increase in the volatility in the value of Bitcoin and a significant increase in the fees to process transactions on the Bitcoin network. For example, transaction fees that are charged to the customer by the Bitcoin network have skyrocketed this year, topping out at close to $20 a transaction last week (compared to roughly $0.20 when we initially enabled Bitcoin). Unfortunately, Valve has no control over the amount of the fee. These fees result in unreasonably high costs for purchasing games when paying with Bitcoin. The high transaction fees cause even greater problems when the value of Bitcoin itself drops dramatically.
Unfortunately, they are far from alone, as I have watched many small and medium size businesses turn off their Bitcoin payment options over the past year. Additionally, I have watched numerous other “Legendary” status Bitcoin Talk community members “rage quit” over these very points I am bringing up.
This is something that is not being discussed openly by the markets, as they blindly push the price of Bitcoin higher and higher, and thus increasingly make it even less affordable to transact in.
Perhaps this is not a big deal, and to the new “community” that has formed around Bitcoin, displacing the old guard that used to exist, it likely isn’t. They have no intentions of using their Bitcoins as it was originally intended to be used, holding is all that remains and can you truly blame them given the recent parabolic moves higher?
This has made those who have done so incredible gains and even fabulously wealthy if you were able to acquire at early prices and hold throughout all the volatility we have witnessed.
The question is now, when will the broader market finally understand this point and come to this realization? Bitcoin is still touted as an alternative form of money and is one of the reasons why it has risen so much in price.
Bitcoin can be called a form of saving, an alternative asset or even a store of value, but no longer can Bitcoin can be called money. By any definition it no longer fills this role.
Perhaps one day this will be Bitcoin’s undoing, perhaps not. But for those who have wishful thinking, believing one day that it will become a form of reserve or national currency, think again. This is just simply not possible.
Bitcoin is not and will not be money, the dreams that the early members of the community envisioned are long dead, but the gains are not. As life tends to prove time and time again, you cannot have your cake and eat it too. By Nathan McDonald, Sprott Money
And at her press conference, Yellen was repeatedly badgered about bitcoin. Read… Yellen Shrugs Off Bitcoin as “Full-Blown Financial Stability Risk.” In Other Words, No Fed Bailout when Prices “Fluctuate”
Enjoy reading WOLF STREET and want to support it? Using ad blockers – I totally get why – but want to support the site? You can donate. I appreciate it immensely. Click on the beer and iced-tea mug to find out how:
Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.