It was never meant to be this way.
With the price of Bitcoin skyrocketing by the hour, it's either time to buy buy buyor step back a moment and ask ourselves just exactly how Bitcoin went from a proposed digital currency to an increasingly popular investment opportunity — and what that says about its future. As this is a blog post and not the internal dialogue of a cryptocurrency trader, we're going to go with the second option.
SEE ALSO:This was Bitcoin's big year, but where does it go from here?Launched in 2009 by a still unknown person (or persons) under the pseudonym of Satoshi Nakamoto, Bitcoin offered a decentralized currency that removed any sort of central authority from the mix. This, of course, is a fascinating idea — and over the following few years news outlets reported on it with a mixture of confusion and befuddled amusement (if they covered it at all).
But that didn't stop Bitcoin or its adherents. In 2010, a Florida programmer made what is generally considered the first transaction paying with Bitcoin — 10,000 BTC for two pizzas — and the dream of a digital currency was one step closer to reality.
But, wait — you're surely asking yourself right now — 10,000 Bitcoin for a pizza?And you'd be right to be incredulous. At today's BTC prices, the cost of that pizza comes out to $170,999,950, although that value changes hourly.
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That hourly change — with Bitcoin shooting up in value thousands of dollars today alone — is great for investors holding their BTC to sell at a later date, but not so good for anyone trying to use it to, actually, you know, buy something. This extremely volatile state, combined with high transaction fees, even led one major company to cease accepting Bitcoin as a form of payment on Dec. 6.
"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," the company, Steam, explained in a blog post. "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)."
Other companies may soon follow, with the future of actually using Bitcoin perhaps best represented by a joke made by security researcher Marcus Hutchins.
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When he tweeted that, on Nov. 26, a single Bitcoin was worth around $9,298. At the time of this writing, it's trading at $17,457 on Coinbase.
And it's not just the lost potential gains of spent Bitcoin that makes its practical use as an actual currency dubious. The aforementioned network fees themselves are pretty ridiculous. In order to process a transaction yesterday, a person would have needed to fork over around $7.34 — plus whatever fee the exchange charged.
Buying a beer with BTC doesn't make much sense when the fees are higher than the cost of the drink.
So, is Bitcoin doomed? Hardly. While no one knows exactly what the future holds, BTC looks like it's here to stay in some form or another. Is that as a decentralized digital currency, or merely an investment opportunity? Today's volatility perhaps provides a hint. In the end, Bitcoin may end up being too hot for its own good.
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