For the past months there is a huge hype around cryptocurrency as it is a new technology that promises to disrupt the financial industry. It promises a new way of paying for stuff, in a more secure way and without any bank or government dictating hows and whats.
But, as I started to dig more into this subject, the more I realized that, at least in the current state, no cryptocurrency is a viable choice to real currency. And I’ll tell you why.
Bitcoin is able to process somewhere around 7 transactions per second because of its protocol design. Just imagine that at any moment is time, only 7 people can send or receive money. This is just unacceptable.
Altough there are various alternative coins that kind of resolve this problem, it is just not feasable to build a blockchain that can handle a large enough quantity of transactions fast enough to provide a real alternative to the actual payment services.
Although the core focus of the blockchain based cryptocurrency is to be descentralized such that no government or bank can intervene, people still came up with something that can imbalance the balance of power when it comes to blockchain.
This threatening invention is called Application Specific Integrated Circuit, or ASIC. This basically is a hardware appliance created with the sole purpose to mine cryptocurrency (mining is required in order to increase the security of the blockchain and process transactions while producing more currency units). But this kind of appliance is very expensive to design and very expensive to manufacture and usually is not accessible to regular people like me and you.
But to who is ASIC accessible to? To the institutions that have that kind of money: corporations such as banks and governments. For Bitcoin at least, this is already happening: a large part of the total Bitcoin mining is done in China. If the Chinese government decides to ban Bitcoin or intervene, the entire history of Bitcoin transactions could be just modified.
Everything is public
Altough crypto currency promises anonymity, it fails to provide it. What it provides is in fact called pseudonimity as each person can have one or more wallets and have somewhat exclusive access to it. Once you pay to somebody known from your own wallet, your identity can instantly be associated with that wallet.
For example, I have to pay 5 USD to my sister. I send them from my wallet to hers and the transaction that appears on the blockchain has both wallets shown publicly and now my sister knows for sure that that wallet is mine.
Imagine that instead of my sister, I play my taxes to the local tax office. Now my tax office knows that the payment was made in my name from some wallet. And once you associate the identity of somebody to a wallet, you can trace all past and future transactions of that wallet.
In some cases, especially if you are a public figure, you would basically have no way of having privacy regarding your expenses. While some would argue that this is a good thing, I strongly believe that everybody should have the right to privacy. I consder that this is a major drawback in the design of the blockchain technology that needs to be addressed before taking blockchain seriously as a replacement for money.
Although some alternative coins started working on mitigating this issue with Stealth Addresses and other methods, there is still a long way before coming resolving this.
Cryptocurrency has many problems that need to be addressed before becoming a viable solution to traditional currency. Before that, in my oppinion, there is no way any country will and should adopt cryptocurrency because issues regarding mainly privacy and security.