According to Jay Krishnan, the CEO of T-Hub, India’s largest startup incubator & venture advisor to SRI Capital, Bitcoin has failed due to $20 transaction fees. Except that since December, for over nine months, the median transaction fee of Bitcoin has remained below $0.2.
In December 2017, the demand for Bitcoin and other major cryptocurrencies like Ethereum, Ripple, and Bitcoin Cash achieved an all-time high. The price of Bitcoin, which hovered at around $19,500 in the global market, surpassed $24,000 in South Korea, as premiums pushed the price of BTC up.
False Argument About Scalability
Bitcoin and blockchain-based systems, in general, are decentralized networks that exist on peer-to-peer protocols. As such, scalability through cryptographic engineering and development is required. Since the end of 2017, Bitcoin, Ethereum, and many other blockchain networks have seen a drastic improvement in scalability.
Bitcoin has integrated SegWit and Lightning while Ethereum is in the process of implementing Sharding and Plasma to potentially increase the transaction capacity of the blockchain to a million transactions.
Yet, Krishnan, a figure that is responsible for overseeing innovative developments in one of the biggest markets in the world in terms of population and market size, concluded that Bitcoin has failed due to its inability to address unprecedented levels of transaction activity and demand in December.
“The fallacy of Bitcoin as a currency is its transaction fee which is typically above $20. The transaction fee is paid to ensure convenience and security in the exchange. This is not only higher than the transaction fee paid for regulated currency but is also an indication of the security risk it holds,” he said.
The difference in stance towards cryptocurrencies by Krishnan and world-renowned venture capital firms like Andreessen Horowitz is quite evident. This week, at the TechCrunch Disrupt conference, legendary investor and one of the most successful venture capital investors Ben Horowitz said that crypto represents the birth of a new computing system.
In the beginning, crypto may seem more inefficient and impractical than legacy systems. But, its decentralized nature leads to the development of apps that were not possible to build before. He added that the deceptiveness of new computing systems is that at the start, they seem worse in most ways than old platforms.
“I think that there is probably more developer activity in crypto than in anything we’ve seen since the Internet and the right way to think about it is, it’s a new computing platform. Once every decade or two, a new computing platform comes along. The thing that is deceptive about is that when the new platform at the time is generally worse in most ways than the old platform but has some new capabilities.”
Bitcoin Has Succeeded
It is easy to find arguments to dismiss the emergence of disruptive technologies. Analysts condemned smartphones in 2007, as they seemed more inferior to computers at the time.
However, it is important to acknowledge the potential of new systems and the ability of disruptive technologies to create applications that have not existed before, such as consensus currencies like Bitcoin.
Transaction fees for using Bitcoin could be considered high for most people, even though it is currently less than $0.1. But, compare it to the fees involved in using offshore bank accounts to store money and $0.1 seems much lower than tens of thousands of dollars required to transfer millions of dollars.
With the adoption by financial institutions and investment firms like Citigroup, Goldman Sachs, Andreessen Horowitz, Morgan Stanley, and acknowledgment from government agencies, it can be said with sufficient evidence that Bitcoin has succeeded.