Imagine that you are in the airport’s parking lot, and you are searching for your vehicle. It’s late, and you’re cold, and you can’t wait to get home.
The year is 2020, and it has become the custom to pay for everything with your bitcoin wallet. This trip, you misplaced your other wallet, so you couldn’t pay with cash or your credit cards even if you had wanted to do so. Then, you put one of your cyber-currencies into a machine. Your intention is to pay your fee, but nothing happens. You wait one minute and then you wait two minutes. After five minutes have gone by, your ticket still has not appeared.
After 20 minutes, the transaction is finally successfully submitted.
The above-described scenario is what can be expected if the underlying technology of bitcoin remains the same as it is today. As a matter of fact, if things do not change for bitcoin, bitcoin will no longer exist in a few years as a currency.
Bitcoin is known as a “cryptocurrency.” It is a decentralized network that only exists inside of the world’s computers. Because it is decentralized, the cryptocurrency can be private. That means that the government is unable to manipulate it.
Bitcoins are created by a computerized process known as “mining.” When bitcoins are being created, bitcoin transactions are also going on at the same time. If you are sending bitcoins or receiving bitcoins, you have to first wait for the mining process to be complete before your transaction can be processed.
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— Ted Bauman Guru (@Ted_B_Guru) December 4, 2017
As you can imagine, it could take a long time to process a bitcoin transaction, so if you compare it to credit cards, it looks very bad for bitcoin. A total of 150 million Visa credit card transactions take place each day. That’s 1,700 transactions every second, but it is possible to complete 24,000 transactions per second.
In contrast, bitcoin’s network only processes 6.5 transactions per second, and most of these transactions take about 10 minutes to complete. Some transactions have even been known to take more than 42 minutes to be executed. With more people deciding to use bitcoins, wait times are going to be even longer.
Bitcoin is a currency now, but it will cease to be one if people cannot make transactions when they use it. In fact, if the wait times are unbearably long, people will opt not to use it. This issue has to be resolved. Until it is, bitcoin will continue to be a speculative product that remains unstable.
One thing can be done to help this situation. Decrease the amount of data that is being processed in a mining block. The industry can also increase the data blocks so that an increased amount of information can be processed at one time.
One group of people has tried to reduce the bitcoin block so that transactions can speed up. They needed to use a new technology, and it is called “segregated witness.” This technology reduces the data by moving a portion of it to another area where it isn’t verified. The problem with doing this is that bitcoin becomes less secure.
Some users are wary of the segregated witness technology, so they began to use “hard fork.” Hard fork uses the chain of previous transactions that is known as the “blockchain” to create new transactions under a new system, and the new system is much larger. With this technology, the block size has been increased to eight megabytes, and this speeds up the verification process.
Since the technology is different under this new system, it was given a new name. This new cryptocurrency is called “Bitcoin Cash.” The blockchain contains all previous bitcoins, so everyone who owned bitcoins before the new blockchain came into being received one Bitcoin Cash for every bitcoin in their possession.
Bitcoin has been traveling up the charts, but last week, it started to decline. In contrast, Bitcoin Cash has just been rising. Around August 1, one Bitcoin Cash didn’t have any value, but today, it is worth $1,400. Apparently, Bitcoin Cash gained value at the expense of bitcoin.
Last week, the segregated witness technology was cancelled. That is the reason that bitcoin lost value and Bitcoin Cash increased. Because bitcoin is having problems with making transactions, people started to turn to Bitcoin Cash.
Right now, all that investors can do is invest in Bitcoin Cash, but another fork will appear because no one can agree on what the fix should be to speed up bitcoin transactions. It could be that owners of bitcoins will receive an equal amount of the next currency that forks off. If it is received well by the market, it could be an easy payday.
I have to say that I am skeptical about this, so I will not be taking this bet. However, it’s possible that this could be the next big thing to blow up.
Ted Bauman was born in Washington, D.C. and grew up in Maryland. He moved to South Africa to attend the University of Cape Town where he received postgraduate degrees in History and Economics. The time that he spent in South Africa was dedicated to executive roles with non-profit organizations. While there, he was one of the founders of “Slum Dwellers,” an organization that has aided more than 14 million people in 35 countries. Visit his website for more information: https://tedbaumanguru.com/