“The limit of bitcoin’s transaction processing capacity demonstrates the impossibility of its adoption as an alternative currency”

HASfter a remarkable surge during the year 2021, which took it in November to almost $68,000, the price of bitcoin has since experienced a no less remarkable fall. The price of the cryptocurrency bottomed out below $18,000 during the second half of June 2022. As of July 14, its value stood at $19,965. Some will see in this development the bursting of a speculative bubble.

But doesn’t the collapse in value of the first cryptocurrency have a fundamental reason that would be intrinsically linked to its design? Answering this question first requires keeping in mind that bitcoin’s only real value comes from its ability to be used as a decentralized currency.

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However, a crucial but insufficiently known property of the computer protocol of the bitcoin system poses limits to its wide use as an alternative currency. Economists traditionally define money as any object generally accepted as an intermediary of exchanges, that is to say as a means of payment, in a given space.

A virtual digital object

Bitcoin was designed as a decentralized peer-to-peer payment system requiring no third-party intervention, such as the banking system for example. His favorite space is first of all the Internet space. But it can be more extensive: if it is generally accepted as a means of payment in a delimited space, then it can be considered there as a currency and will then have to exercise, more or less well, the three classic functions of a currency. currency: intermediary of exchanges, unit of account, store of value.

However, bitcoin remains a virtual digital object whose sole use is to be an alternative currency of a decentralized nature. Therefore, bitcoin’s value can only come from its ability to function as an intermediary in exchanges. In its role as a store of value, bitcoin can naturally be considered a digital asset.

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But this virtual asset produces absolutely no return. This means that any phenomenon of speculation on the value of bitcoin should only be concerned with the extent to which bitcoin is or will come to be widely used as a medium of exchange. At the present time, the available data do not make it possible to establish the proportions of the exchanges of bitcoins which are done for reasons of transaction, or speculation.

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