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Is Bitcoin still relevant?

At the recently concluded Blockchain Cruise Asia, Wall Street investor turned cryptocurrency investor, Ronnie Moas shared a perspective that sent a sense of alarm around the Bitcoin camp of the conference. He said, “Bitcoin is the champion of the cryptocurrency world. But know that champions fall. We all know what Facebook did to MySpace, what Amazon did to brick and mortar retail. The only way to be safe in this market is to diversify your holdings.”

The conference was all about altcoins and upcoming ICO, prompting a discussion among crypto investors – is Bitcoin still relevant? While Satoshi’s white paper envisions the cryptocurrency as a peer to peer, permissionless currency, the sudden surge in demand has dramatically increased transaction times and the problem of miner fees keeps increasing over time. Add to the mix that there are new cryptocurrencies which have exhibited great growth, as well as powerful scaling technology, and this leaves investors and cryptocurrency enthusiasts wondering if Bitcoin is still relevant.

In this article, we will try to look at the features that made Bitcoin famous in the first place and if they still hold true today.

Bitcoin – the transaction currency

As I spoke with developers in the blockchain cruise, the one insight I could derive was that the technology behind Bitcoin was still the gold standard for cryptocurrency. One England based developer told me, “You look at the top cryptographers and engineers in the world. They’re not working on Ethereum or B*H or any other coin for that matter. The best of the best are working on Bitcoin.”

The promise of a highly inexpensive and instant mode of transaction was one of the biggest USPs of BTC. But 8 years since the inception of the genesis block, the Bitcoin network is seeing scale that it didn’t anticipate. The 1 MB block size has limited the number of transactions to 6-7/second. The transaction confirmation times has become more than an hour.

Newer altcoins, including Bitcoin forks like B*H have presented solutions that may overcome the scaling issue. Ripple is another contender. But the benchmark for both these metrics is Visa, that confirms transactions almost instantaneously and can scale up to 60,000 transactions per second. It is safe to say that any cryptocurrency is far away from achieving this kind of performance and scale.

Cryptocurrencies have failed spectacularly when it comes to addressing scaling issues. Ethereum, for all its hype, was brought to its knees by the crypto kitties game. Another interesting fact shared by prolific YouTuber and former derivatives investor, Tone Vays, is that the cost of transactions with B*H is much higher than what it was for BTC when it saw the same trading volume. This is despite the higher block size. Now, of course, the B*H team is even experimenting with Giga-bit block sizes, but nothing as of now has a solution to scale.


If the problem of scaling hasn’t been solved, and given the trading volume of Bitcoin, the first cryptocurrency may be the best we have. Which brings us to the next parameter.

Bitcoin – As a store of value

When it comes to market cap and unit price, nothing comes close to Bitcoin. In the last year alone, BTC grew almost 20x, before dropping back to 11,000 US dollars. The investor interest in BTC is unprecedented and bitcoin exchanges like Coinbase have added millions of users in the past year alone. This increase in value has caught the attention of the investing world.

BTC is considered to be Gold 2.0 and it exhibits all the properties that make Gold such an interesting prospect. It’s not just scarce, its fixed in its supply. Its transferability is unprecedented and it is next to impossible to counterfeit. And when compared to Gold’s 6-7 trillion dollar market, Bitcoin’s 200 billion market cap only shows that there is a long way to go for BTC the asset.

As of now, it is possibly the most successful asset because it has a global speculation. And as people continue to buy Lambos with it, it also seems to have an intrinsic value that merchants are willing to pay for too. Its speculative value to so high, that John McAfee, another attendee at the Blockchain Cruise Asia, said that he would go on a limb if BTC doesn’t hit a million dollars in 4-5 year’s time.

When you come back to the original question, it sure does look like the market is nowhere close to rendering BTC irrelevant. It is still the benchmark cryptocurrency and will continue to be for a long time to come. But with competitors hot on its heels, it is only a matter of time before existing and future players might stake a claim to the throne.

But until then, Bitcoin it is.

South African Tax Services Researching Ways to Track BTC Transactions

Regulators, governments and tax men alike have been stumped as to how to keep up with the rapidly growing cryptocurrency market. It has seen a large grey area appear over the market in which incidents are usually handled as they come.

To this end, the South African Revenue Service, the taxation body of the country, is seeking help from top technology companies from around the world in order to try and track Bitcoin transactions.

This attempt by the South African Revenue Service (SARS) could potentially open up a can of worms as the right to privacy is instilled deeply in Bitcoins transparent, yet anonymous, transactions.

How it works currently
It was reported that only 802 people paid taxes on their Bitcoin gains in the US back in September as the IRS had little option but to ask for people to be honest in their tax returns.

This extends to most countries as it stands as there is still no precedent for forcing people to reveal their transactions.

Banks are required to supply SARS, and other tax institutions across other countries, with information on the investments of their clients for verification purposes, but in a crypto environment such information is lacking.

Difficult battle
This leaves the revenue service in a tight spot that is only getting tighter as more people enter the cryptomarket.

Dr. Randall Carolissen, SARS group executive for research, admits that they are looking into options to track Bitcoin transactions.

“As you can imagine it is very difficult – the Blockchain technology. Without revealing too much – we are talking to some of the top technology companies in the world that are doing similar work for Canada and the UK and we are hoping to get that technology.”

Tightrope
The issue really is that there is a right to privacy that is enshrined in Bitcoin, and that will be hard for any institution to break into - legally. Bitcoin’s transactions are transparent, yet anonymous, but that anonymity is not total.

With no set precedent available yet on how to monitor transactions on this decentralized system, tax services and other regulators will need to come up with a solution on their own.

The problem is that because it is decentralized, no one can come to their aide from the side of Bitcoin. Transactions are maintained openly on the Blockchain, but when it comes to tying those transactions to a person and enforcing taxation on it, it is still a very dark area for regulators.