With Bitcoin creating immense excitement among investors and traders with its rise in value, concerns regarding its wider acceptability, scalability and regulations has jeopardized investors. In a report published by Dutch banking giant ING’s principal economist, Teunis Brosens has flagged similar concerns and he believes that the Bitcoin is destined to become a niche asset that will only be limited to tech nerds, people obsessed about their privacy, people afraid of (hyper)inflation in traditional currencies.
The report titled “A cryptocurrency reality check” has thrown light on the factors why Bitcoin and other cryptocurrencies will not get wider adoption in its present structure. However, Brosens has hailed the blockchain technology but he is very critical on the future of Bitcoin.
“Blockchain is an impressive technology that may bring progress to a variety of fields, ranging from finance to health care, and from notary to voting. Long live the blockchain.”
Considering Bitcoin as not a normal investment asset because of difficulty in appraising its true value and cannot be compared with any conventional source of investment. In his views, the true value of Bitcoin depends on the future use case scenario which is between anywhere between zero and several million and the risk remains as there is nothing to back on.
Several other factors will also bog down users from its wider applications. Brosens mentions that at present regulation, scalability, lack of an intermediary, volatility and the huge energy consumption.
“For Bitcoin to play a meaningful role as a payment system, the transaction processing power needs to be a 100, maybe even 1,000 times better.” At present Bitcoin processes 7 transaction per second which is very low and can create huge network congestions and pending transactions.
These factors will prevent Bitcoin from becoming serious contenders to existing mainstream payment systems in the short to medium term. Bitcoin has to overcome these issues either through innovation or by reforms of Bitcoin which are scalable without a major sacrifice in other areas.
“Bitcoin has a more convincing business case in countries with less advanced monetary and financial systems. Scalability and volatility are practical impediments that could be overcome. However, Bitcoin governance (or rather, lack thereof) make implementing the needed changes a slow and painful process.”