A decade ago the foremost public ledger, Bitcoin came into existence. Many saw in it a beacon of hope and a means to break the stronghold of centralized, government backed fiat money. This feature of centralization by government is the main cause for hyperinflation of fiat currencies.
Ten years down the lane, Bitcoin and other cryptocurrencies have undoubtedly passed the acid test of being a viable decentralized means of value storage; albeit they aren’t without shortcomings of their own. The unprecedented growth rate of blockchain technology (the technology which backs bitcoin) however suggests that these shortcomings could become a thing of the past soon. The huge futuristic prospects of its parent technology hands cryptocurrencies a lifeline; an opportunity to rubber stamp its place as the ideal money that fully illuminates the process of value storage and wealth creation. What new features do you think would set bitcoin on the path to achieving this?
1. Inheriting crypto wealth
Chainanalysis, a digital forensics firm reported recently that about 3.79 million bitcoins are gone forever. This figure encompasses lost transactional coins, those out of circulation, bitcoin belonging to strategic investors etc. Interestingly, ‘out of circulation’ bitcoins accounts for 50% of the total haul. This brings one question to mind: What plausible reason could lead to bitcoins being out of circulation permanently? Mortality is one.
The interesting feature of ‘dead’ Bitcoins
In February this year, the CEO of Quadriga, Canada’s biggest cryptocurrency exchange died suddenly while travelling. He had sole custody and access to cold wallets containing $145 million worth of bitcoins and altcoins. The exchange’s inability to retrieve the funds plunged it into a financial abyss, with over 100,000 users seeking refunds. Other low profile cases occur where people die, leaving a pile of inaccessible digital asset. Only a tiny fraction of digital asset holders consider cryptocurrency inheritance in their legacy planning. For the select few who do, complications of legal factors such as the Computer Fraud and Abuse Act (CFAA) may prohibit beneficiaries from claiming cryptocurrencies despite having access.
A viable legal means of passing on crypto wealth could provide the boost the industry needs. Already, laudable attempts are being made by Trustverse, Safe Haven and DigiPulse. Hopefully, this box will be ticked in the near future.
2. Seamless Tax Collection
Although Bitcoin transactions are publicly accessible, it is impossible to trace the actual owners or identity of transacting parties. This has unfortunately facilitated an era of tax evasion and other financial crimes. Government authorities have worked tirelessly to clamp down on tax evaders. As a result, dishing orders and striking partnerships where necessary with crypto exchanges to handover details of tax defaulters.
This built-in privacy feature, proved to be efficient only in tracking down traders and investors transacting with public blockchains. Privacy coins such as Monero, Verge and Zcash present another escape clause for tax defaulters. Furthermore, not to mention loopholes in lending laws that allow traders to ‘legally’ avoid paying tax.
Curbing tax evasion may finally erase cryptocurrencies from the government’s bad books. This will lead to less stiff regulations which favors the goal of crypto mass adoption.
3. Chargebacks and refunds on failed transactions
Crypto transactions may fail to complete for several reasons. If such a transaction involves a transfer, the amount in question will remain intact, though the same cannot be said about the transaction or gas fee. Losing this fee might be inconsequential to many crypto traders, (especially in transactions involving smaller amounts) but definitely not this guy who lost $80,000 gas fee on a failed transaction.
Refunding gas fees for failed transactions will strongly signal efforts to bridge the gap between cryptocurrencies and conventional payment processors. Though there is no clear path to achieving this yet, it is one that would interest many traders if it actualizes.
4. Less environmental effects from bitcoin mining
Minting new paper currencies pose no threat to humanity, why should bitcoin? Research shows that about 70 terawatt hours of power is consumed annually on mining bitcoin. The CO2 emitted from bitcoin mining electricity sources has been proven to contribute largely to global warming threats. With the increasing growth and popularity of bitcoin, it is expected to get even worse.
Experts propose a migration from the traditional Proof-Of-Work to the environmentally friendly Proof of Stake consensus protocol. In addition, some say that renewable energy may nip in the bud. Either way, this feature of mining bitcoin without risks of environmental hazards is a welcome development.
As the quest for mass cryptocurrency adoption heightens, so does the need to address bottlenecks and proffer innovative solutions. These four interesting features could set the ball rolling, as we approach an era dominated by digital assets.
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