Last week a former Bitcoin developer Mark Hearn stated in his blog that Bitcoin is broken. This resulted in a $80 price drop. He predicts a downtrend from now on. Let’s have a look at if this is true and whether we should keep hold of our coins or start selling in panic. I will explain it all below. But simply put. Is Bitcoin dead? The answer lies here.
Why is Bitcoin dead according to Mark Hearn?
He makes numerous claims in his blog. I will bring out some statements and try to find out is they are true or not.
- The Bitcoin community has failed
- Bitcoin is controlled by China
- The block chain is full
- Totally controlled by a small circle of people
The first argument that he brings up is that the Bitcoin community has failed.
Why has Bitcoin failed? It has failed because the community has failed. What was meant to be a new, decentralised form of money that lacked “systemically important institutions” and “too big to fail” has become something even worse: a system completely controlled by just a handful of people. Worse still, the network is on the brink of technical collapse. The mechanisms that should have prevented this outcome have broken down, and as a result there’s no longer much reason to think Bitcoin can actually be better than the existing financial system.
I can sort of see where he is coming from here. It does seem that right now a very small group are making decisions and “playing the game” as it were. However I cannot agree that Bitcoin is no better than the existing financial system. The technologies and systems currently in place in the financial sector are ancient. Why are we still using a credit card as one of the main payment options? This system was developed in the fifties and is unsafe and outdated.
I don’t think that associating Bitcoin with banks is a bad thing myself. Why can’t we revolutionise the banks with this new technology as well? I get the whole “banks are bad” point of view and I do believe that there needs to be a disruption. Banks however aren’t gonna go anywhere anytime soon so how about instead of trying to get rid of them we try and make them better. Likewise if there’s something rotten in the community, take action! Mark didn’t, he threw a tantrum and ran into the arms of R3. Makes you wonder.
Bitcoin is controlled by China
This is somewhat true – the majority of hashing power is in China. Why? Cheap electricity and opportunities for huge mining farms. China is still very corrupt, because you know, communism. However it is also the world’s largest economy. They do have their censorship issues
The Chinese government got wind of the financial shift in the markets and countered, making Bitcoin persona non grata when it came to banking and regulatory authority. They have also censored Bitcoin rallies and conferences, to keep a lid on Bitcoin’s publicity and level of interest nationwide. Coupled with the Mt. Gox collapse, this started a financial market crash that only now Bitcoin is starting to recover from. This is just a taste of the power China can exert on ANY financial market within a matter of months. CCN
This has now shifted. China sees Bitcoin not as a threat but rather an opportunity. Mainly for trading. According to Goldman Sachs 80% of Bitcoin is traded with the Chinese Yuan. I think China in many ways is being cleverer than the West again. Whilst we are arguing about regulations and they are literally raking in the coins.
The block chain is full
Wait what? No Mark, it really isn’t. This reminds me a statement from an Estonian politician who deleted an embarrassing post and later on said that the internet ran out of space.
The peak level in July was reached during a denial-of-service attack in which someone flooded the network with transactions in an attempt to break things, calling it a “stress test”. So that level, about 700 kilobytes of transactions (or less than 3 payments per second), is probably about the limit of what Bitcoin can actually achieve in practice.
He brings on some valid points in his blog. And does make you wonder that maybe he is right. He does have credibility to his name. So is this true? Nope. He says in his blog that the blocks are smaller because China controls it and they are creating smaller blocks. He also states that the capacity has not been risen because the Chinese miners don’t let it grow. It actually turns out that the block sizes have been voted to be larger than 1 MB just not with the XT fork. Hang on, Mark was working on the XT fork. His annoyance is becoming clearer.
Bitcoin is totally controlled by a small group
It tends to be like this in many areas. Is this bad? Perhaps. What to do about it? More people need to step up and do something about it. In general the whole world is run by a small group. The top 1% now earn more than the rest of the people in the world combined. Insane, I know. The thing is it’s not always a conspiracy. Many people do not want to lead the want to be led. This is easier and this way you have less responsibility. If Mark didn’t like this, why did he run away crying and selling all his coins. Let’s be honest, the man is a lot smarter than that. This in my view is a publicity stunt, it has worked. And we needed it.
Is Bitcoin Dead?
Nope. But this clever outcry has started a conversation. Out of this great things can happen. Whether or not this was his intention or not, it doesn’t matter. Fred Wilson puts it rather bluntly but brilliantly
Sometimes it takes a crisis to get everyone in a room. That’s how the federal budget has been settled for many years now. And that may be how the blocksize debate gets settled to. So if we are going to have a crisis, let’s get on with it. No better time than the present.
And I agree.
This is actually the 89th time that Bitcoin has been declared dead. Financial speculation is rather easy sometimes. Someone comes out with damaging info from a credible source. Traders and investors panic and sell. The price drops. Mark might be laughing right now and purchasing coins as we speak. What has happened tradingwise is we have a new opportunity to buy. And if you’ve been trading Bitcoin for some time now you’d know that it is very volatile and these kinds of drops are almost the norm for Bitcoin. If we look back at the beginning of 2015 the price also dropped over $80. And it rose to heights of $500 later on in the year. Financial experts are still very confident in Bitcoin and the technology it has provided us with. Yes in the future something better might replace it. But surely this is a good thing. The world is forever evolving.
So to conclude: Bitcoin is not dead. Not even slightly. Not at all.