The bitcoin world is in disarray. Again. Although total disaster seems to have been averted for now, the value of a bitcoin has swung to highs around $3000 and lows around $1800 in recent weeks.
This is the behaviour of a pure investment instrument, not a stable global currency alternative, which is what I hope at least one cryptocurrency will one day become. That said, the value of the pound hasn’t exactly been stable recently.
The disaster I spoke of is a split in the community over the need to make technical changes to speed transactions and cut their cost. Today, the network can process a maximum of seven transactions per second and at a cost per transaction of around $0.83. This is a long way short of the processing rate of a global currency alternative, and too expensive to fulfil its promise.
But, put this into context. If I use my debit card on the Visa or MasterCard networks while travelling, on top of the 1–3% fees paid by the seller for taking the card transaction, I pay 2.75% plus up to £1.50 in transaction fees.
This is a huge overhead on the movement of money for consumers and businesses in our current system. And it’s why I’m interested in a global currency alternative that replaces it. Imagine bypassing the banks, not because you are a criminal — the only bitcoin users often reported on by the media — but because the tax on transactions created by a sclerotic and over-centralised financial system is pretty criminal in its own right.
If bitcoin or one of the other cryptocurrencies can fulfil its promise, there will be no more minimum spend for card transactions. No more 50p charge for using a card at your corner shop. In theory a crypto transaction could cost around 1p and it would be the same for every size of transaction — no more percentage fees either.
There will still be exchange rates, at least for the time being, as we trade back and forth between our own national or regional currency and whatever crypto wins out. But how long will that even last, if the crypto currencies can fulfil their promise.