The Future of Bitcoin: Transaction Fees, NFTs, and Market Advantage

2023-12-20 18:12:33

This year, 21% of all Bitcoin transaction fees are the so-called inscriptions, i.e. “inscriptions” assigned to individual satoshis. According to true Bitcoin maximalists, Bitcoin was invented as a means of payment, not to store works of art. Of course, the miners are happy, because the halving is coming, and they also have to make a living.

On December 19, Taras Kulyk, a Bitcoin miner, appeared as the CEO of the SunnySide Digital data center. article on CoinDesk. In it, after the plowing of Ethereum, he wrote about how good it is that Bitcoin can already be used to create NFTs, because the miners do not have to worry about the effects of the halving from the extra fees that come in this way.

Recently, the question has been raised more and more frequently: if Bitcoin block rewards (from which miners receive most of their “salary”) continue to decline exponentially, then what will be the motivating factor that will make miners maintain the network? Many see the solution to the problem in transaction costs. Let’s face it: there really isn’t any other alternative at the moment.

One dog, another eb?

According to the author, Proof-of-Stake is the realization of what is currently wrong with the traditional financial system. In other words, those with capital have more power than those with less. However, he forgets to mention that Bitcoin is not much different in this regard, since those with greater mining capacity also have greater power over the network.

Paralleling the development of society, Bitcoin is reminiscent of a feudalistic system, in which the security of the network (state) can be ensured by miners (landlords) more efficiently than stake holders (capitalists in the bourgeoisie), who try to protect the network from attacks with money.

Miners are obviously limited by resources, that is, how many mining machines (land) are available. Stakeholders, on the other hand, seem to see no limit to the expansion of their power: if someone simply has more money, they can take over more than half of the network. In the digital world, feudalism therefore means greater security – but ordinary users of the network (Pór people) “suffer” due to higher transaction costs (taxes).

The feudalist society did not stand the test of time, and the suffrage tied to capital was even more ephemeral. The only question is when the age of truly decentralized networks (universal suffrage) will come, whether it can be realized at all, and if so, whether it will be able to exist in parallel with Bitcoin and Ethereum.

Bitcoin was originally created by Satoshi Nakamoto to offer an alternative to the monopoly of fiat money. At the time, it also enjoyed an advantage compared to the banking system due to low transaction costs and fast payments.

Bitcoin has less and less competitive advantage

However, today, when we can handle our cross-border transfers at zero cost and instantly, this market advantage has disappeared. Bitcoin is still the winner for large cross-border payments. But let’s face it, ordinary people don’t transfer millions to Nigeria and Venezuela every day. If the fees continue to increase, it will almost only be in this case that it will be more beneficial to use bitcoin. And, of course, if we want to remain relatively hidden from the eyes of the authorities.

However, the author paradoxically argues that with the positive attitude of El Salvador and Brazil, more and more people will be able to use bitcoin freely. He adds that Oman recently invested $1.1 billion in Bitcoin mining, and Bhutan has also started similar activities. States want to state mine bitcoin – very nice idea (I just don’t know how it differs from the concept of fiat money).

If we want bitcoin to truly be a means of payment for everyone, then the “NFT innovation” is clearly not for global expansion. And bitcoin remains what most people use it for today: as an investment tool. It becomes what it fought against and came into being.

Of course, Lightning transactions are forward-looking, but here too we can encounter childhood diseases. The Phoenix Lightning wallet, for example, recently charges a higher fee for transactions of a few tens of dollars (my own experience) than if we were using the bitcoin network.

There is no doubt that Bitcoin is still ahead of Ethereum and other cryptocurrencies in terms of security. However, the question is how long it will be able to maintain its market advantage if the above-mentioned problems are not resolved.

I am not saying that there is no need to reward miners, as they play a key role in securing the network. However, when you have to pay $5 for a $100 transaction, people are rightfully discouraged from using it. Transactions should not be unnecessarily expensive with tools that are not suitable for Bitcoin.

The value of the leading cryptocurrency was boosted by the realization that it offered a unique financial solution. If the community is not able to return to the original vision, this value-adding factor will disappear, and the mass adoption and spread of bitcoin will become an increasingly distant dream.

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#Bitcoin #Feudalism #Ethereum #Bourgeoisie #Whats

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