This is the first opinion piece in a four-part series that explores the advent of bitcoin as a store of value and the implications of valuing the cryptocurrency in fiat. Read the first part here.
Exchange: the second bottleneck
Go to an exchange like conify , coinbase or gdax register a profile, pass the KYC (by verifying your identity) and connect your credit card or bank account to it. Because so many people entered the cryptocurrencies market in a short spam, some of these exchanges couldn’t cope with the amount of requests. So what happened? Massive delays in profiles verification, money transfers, bitcoin deposits & withdrawals. In a way, people couldn’t really buy bitcoin, which seems to be a huge problem with cryptocurrency in general: how you exchange fiat-currency for cryptocurrency. And this only gets worse: the exact same thing happened when you exchanged bitcoin for altcoins. As most cryptocurrency exchanges (bittrex , bitfinex or binance for example) aren’t accepting new user profile registrations.
Eventually yes, but don’t think it will be all fun and games. So far we’re still able to buy bitcoin through bank transfers and credit card payments. I’m sure this will eventually become increasingly difficult as new regulation arises (KYC and bitcoin bans were just the beginning).
Again, I’m not sure. Many tech developments might eventually facilitate payments and the exchange of fiat-currency for cryptocurrency. Potential solutions are:
Although this is quite helpful, how does it fix the second bottleneck: exchanging fiat-currency for bitcoin? Currently no mainstream DEXs has that capability. Any other options?
Buying cryptocurrency is still in its early stages. Hordes of people have already entered the market, but not quite enough for a massive change in currency adoption. I will discuss the Lightning Network, SegWit and other features that will enable easier bitcoin payments and incentive usage, during the scalability discussion (a current bitcoin hot-topic).
My macro view regarding future regulation is something like:
Exchanges are currently a bottleneck but not a major one; for most technologies there is an initial centralization phase . Accepting the hypothesis that bitcoin will only rise in price, as long as
I’m sure there will come a time when currency will be detached from central institutions. As long as we have a distributed way of communicating value and a distributed way of storing consensus, the only purpose remaining for fiat-currency, I personally see fit, is to be exchanged into cryptocurrency. No more, no less .