Not only that, but it's shown that it doesn't have the ability to make the changes necessary to innovate and stay current.
If you step back and look at any kind of "libertarian" driven project this becomes a problem. When everybody who makes something inherently distrusts authority or having anybody "in charge", you can never really build anything big. I'd say bitcoin provides good evidence that to make any big change in a system the buck always has to stop with some individual.
With nobody in charge, you'll just drift around at the same local maximum--sometimes going up a bit, sometimes going down a bit, but never moving to an even larger but different source of value.
I dunno... just a thought....
As a deflationary currency, bitcoin would be a hypothetically good store of value if a bitcoin actually had any intrinsic or even just de facto value. But it clearly doesn’t: it’s only the conversion to and from USD (and others) that has given it any value at all as an investment vehicle to some. And _that_ value isn’t guaranteed preserved one bit.
The crux of the matter lies with your last sentence: "They simply need to be desired by the market"
Ergo, the quality of an asset as a "store of value" (the point of contention I was addressing in my comment) is directly mapped to the desire. BTC's desire is insanely volatile, automatically making it a poor store of value.
My point is precisely that all assets used as currency are oftentimes intrinsically worthless. It's the demand - and the liquidity it provides converting to and fro said currency from other goods or currencies - that makes it a value storage vehicle. BTC, as a "value storage vehicle," is a very poor choice. Gold isn't.
So taking this into account, when the shackles of Bitcoin's simplicity and limitations become unbearable, the network will evolve through protocol upgrades or through a contentious fork where the hash power and development resources will move to. In either case your coins and value are retained.
Linux vs Windows allover, in fintech infrastructure and protocolls.
That is the reason why anyone can't just create a new coin and expect everyone else to value it, but that doesn't mean there can't be any viable competitors. And if a competitor with a sufficient advantage got popular enough, it could take the lead.
For example, the hack Bitcoin used to become popular was to be deflationary, which encourages speculation. That got the value up before it was cool, but it stays deflationary -- even gets more so -- once it's popular, and the consequent speculation causes high volatility. Once you're popular, being deflationary becomes a liability instead of an asset.
It's possible for a coin not to be deflationary and have the supply set by computing costs. If the value of the coin falls below the energy cost of creating them, people stop creating more of them and the value stabilizes there (so it doesn't keep going down). But as demand for the coin increases the value rises above the threshold and people start mining again (so it doesn't keep going up).
That stability would be a huge advantage. But it's not possible to convert Bitcoin to that because its deflationary nature is priced into its value. Making it non-deflationary would make it worthless to speculators, which would eliminate most of its current valuation.
So all it would take is for a non-deflationary coin to become popular enough for people to trust it not to disappear overnight and the people using it for transactions rather than speculation would prefer it over Bitcoin.
Mining isn’t used to validate transactions. You can validate transactions without mining. It’s purpose is to secure the network. The network validates transactions using asynchronous cryptography and nodes only transmit valid transactions. Mining secures those transactions from being overwritten.
It's possible to validate transactions with proof of work and compensate the work with transaction fees rather than the creation of new coins.
If your crypto-coin starts life with all the coins instantly sprung into existence, that means everybody gets to buy their coins from you--the founder. There is a name for this--it is a pre-mine scam. All you do is mine most of the coins yourself, then go pimp your coin so it gets some buyers, and sell them all off for a sweet profit.
But the amount of work required to validate a transaction need not be as much as it takes to create a coin, and people will continue to be willing to pay someone 5c to do 4c worth of computation to validate their transaction.
My guess is that this is less of factor than you think. I don't think that HTML/CSS/JS is the best technical solution for creating websites, and yet that is what all browsers use and there are few signs that that is changing anytime soon.
Right now, the top 3 crypto-tokens are Ethereum-based, as are 89 of the Top 100:
https://coinmarketcap.com/tokens/
Word-find "token" here to see what the word means in this context:
There's what I call the "football" effect. The player jumps on the football after a fumble, and while he's the first to grab it, there's a handful of 250 pound guys about to jump on top of him.
Bitcoin is the first to the football, but over the long term I think it's going to get inevitably crushed.
Perhaps Bitcoin will fail at some point in the distant future, but for the time being it is absolutely the most influential cryptocurrency, this can easily be seen by all altcoins' value being pegged to their BTC conversion rate.
Whatever technology replaces Bitcoin is likely something you can buy with Bitcoin. That's why people rush to buy something which obviously isn't "ready" (but maybe "good enough"). It's speculative, but do not think that people who invested a lot in this didn't think this through at least as much as you have.
Yeah, it's not like I can go on to /r/bitcoin and read multiple dedicated screeds along the lines of "I'm recommending my friends to invest savings in BTC for retirement". Whereupon someone replies "They should keep something in a Roth IRA for diversity", and the OP comments, "What's a Roth IRA?"
Yes, there are sophisticated investors.
But in a lot of cases, the only thoughts going through peoples heads is "Get Rich Quick". There's more discussion of "what color Lamborghini am I buying?" than anything else on those forums right now than anything else. Well, beside 'HODL! HODL! Even if the market corrects $10,000 tomorrow, HODL!'.
Most of the time it feels like these discussions are stuck rehashing old arguments in circles, but this was truly innovative. Thank you for not being predictable.
As for the argument itself, I think you are correct not to make any investment decisions based on what you described.
Now THAT is the speculation to end all speculations.
https://bitcoin.org/en/release/v0.12.0#signature-validation-...
If superior technology comes along, what will prevent Bitcoin from adopting this, and using its network effect to outmaneuver a competing blockchain?
A couple of months ago, the Bitcoin network adopted the SegWit protocol change, which could be considered a minor fix (no major improvements to scalability). If the Bitcoin network can agree to adopt a minor fix, why wouldn’t it be able to agree to adopt a major scalability improvement as well?
Changing consensus rules is only easy if the network is centralized. That's not something I want to have in my money.
If new technology demonstrates it's value beyond doubt, upgrading the network will have vast consensus.
Just curious here: What would you say are technically better solutions than bitcoin?
Why didn't these technologies succeed? Because none of those properties have any business advantage over boring, simple, centralized credit-card processing and back then everything was sealed up in patents until it missed the boat.
It was the first. It was the genesis idea. But good lord, do we think it's the actual solution? What would be the odds?
I imagine that Bitcoin will play its part as the public face of the blockchain revolution, but something else - or many other somethings - will be the successors that we actually use in the future. (Pick your own alt-coin as the successor; good luck.)
If I had a large holding in Bitcoin now I would be cashing out or I'd be nervous. I'm not saying it won't go higher, I'm saying that at some point its demise is inevitable. Might be quick, might be slow, but it'll happen because Bitcoin is not the technically best solution in this incredibly exciting field. It's not even close.