Reasons Not to Trust Bitcoin

Endy Callahan

Some may call Bitcoin a perfect equivalent to gold. Nowadays the currency is a highly developed system that is capable of storing value. More than that, it transfers value hence it has been growing through a noticeable rise in market capitalization which started more than twenty years ago. Its futures infrastructure is exceptionally strong and so is its exchange and custodial infrastructure.

Analysts are ready to explain why Bitcoin is not the best things for investors to consider. They concluded that there are mainly three points.

The reason that bothers analysts most is that the cryptocurrency cannot boast appropriate level of privacy – it is relatively limited. Next, they find mining centralized and this is what makes them warn investors before it’s too late. Finally, Bitcoin lacks scalability. All of the three mentioned factors do not help the crypto look any more appealing.

At the same time, a number of experts disagree and claim that these reasons are not valid. On the contrary, we can consider them quite beneficial. How you perceive the issue depends on your viewpoint and attitude. Just like in most other complicated situations, there are as many pluses as there are minuses.

Lack of Privacy – Pluses and Minuses

A couple of years ago many financial bodies and governments thought that Bitcoin was not anonymous by nature. According to them, the currency could do lots of harm to the global financial system. However, tracking addresses can help identify criminals and fraudsters. In fact, cryptocurrencies attract scammers and total anonymity would prevent authorities from finding those people.

Laundering money is less probable when there is a way to see, control and supervise money transfers. If privacy is absolute, then the amount of funds criminals need to commit their crimes would increase. We cannot, though, deny that complete transparency is as dangerous as total privacy. Finding the right solution that would help solve this dilemma may take some time.

Scalability Leads to Second-Layering

Scalability issue reminds of the first point related to privacy – it has its advantages and disadvantages, too. Networks that reach their peaks cannot offer affordable transactions. The good thing is that it stimulates second-layer scaling.

Analysts admit that fees in the crypto network are high. That’s what would push for the use of the other scaling solution. In case the number of people using Bitcoin increases, this seems to be inevitable – second-layer scaling will change the situation and one of them is plasma.

Cetralization Needs Improvement

Mining centralization is really high. Now China rules over sixty-five per cent of the crypto’s network. That’s much higher than analysts may have predicted a few years ago. Hopefully, the problem will not be as annoying as now and worldwide distribution will make the network more decentralized.

Chinese mining centers have always been doing their best to gain access to cheap power supply in the most mountainous territories across the country. They have been operating ASIC miners with natural cooling, which decreased the costs. As a result, mining centralization approached incredible levels before 2020.

The latest hardware is developing and will soon move outside the Chinese market. Researchers expect that the current ratio will then fall. They also claim that they the major part of hardware is now in China. According to specialists, this may have happened due to several factors. Geographic and relational proximity to manufacturers makes barriers to business relatively lower.