Bitcoin is one of the oldest, trendiest, and highest-valued cryptocurrencies. However, all the cryptocurrencies have major issues, drawbacks, or negative factors discussed in this article. Some of the issues of cryptocurrencies are well-known and discussed, but not all of them are spoken of, and it is important to discuss those factors or issues. The problems also apply to permissionless, public, and pseudo-anonymous cryptocurrencies like Ethereum, Bitcoin, Zcash, Monero, and more.
Through this article, you will learn what cryptocurrencies are being built and they will help the world grow and become a better place.
Most of cryptocurrencies are based on blockchain technology, and are decentralized, transparent, and anonymous. The design of most permissionless cryptocurrencies is almost similar, but these cryptocurrencies work differently. Bitcoins are created through the process of bitcoin mining, and this allows anybody with computers to mine bitcoin. Also, users can create an unlimited number of accounts to store and transfer bitcoins whenever and from wherever they want. This was the main feature of bitcoin, but this decision has been made to decrease the censorship that can only be applied to individuals who use the system. It will help in improving privacy and will provide great anonymity. If you want to know more about the bitcoin network, you can visit an app like this.
But the decision to reduce censorship has created thousands of devastating problems in the bitcoin system that we will read here in this article.
No social accountability or reputation
Bitcoin and other cryptocurrencies allow users to create unlimited accounts, but the users must never rely on the reputation behind any account. With the design of cryptocurrencies, there isn’t any built-in capacity for human accountability that arrives with systems’ reputations. Accountability is important and is the only foundation of human society that people have learned in all these years.
Financial incentive to normalize good behavior
In the Bitcoin network, only bitcoins or money can be used to provide incentives to people because it is digital money that cannot be replicated over multiple different accounts. Earlier, people or institutions used to think that financial incentives are a great way to attract users and were considered a way to create or regulate good behavior. Still, financial incentives are ineffective in creating or normalizing good behavior. People today cannot trust a system or network where only money or incentives are used to implement good behavior.
Financial incentives are scalable and simpler than non-financial incentives, and today people majorly consider the social sustainability that financial incentive systems like cryptocurrencies would have with society. Now also many people argue that cryptocurrencies aren’t developed to be the foundation of society or economy.
As we have read, the bitcoin network lacks accountability, and it is challenging to regulate good behavior for pure financial incentives. There are multiple consequences of this issue that have been witnessed in past years in the crypto space that include:
· Hacks in the crypto space have inundated the industry, and there has been around $1.8 billion worth of bitcoins that have been stolen in past years.
· Around 20% of all bitcoins are irretrievable because many wallet users have lost their private keys. Nobody can be held responsible for such things as bitcoin is a decentralized currency, and users or investors have to secure their digital keys. The protocol allows bitcoin users and provides them with the responsibility to manage their private keys. Once bitcoins are lost, investors are left with no options.
It didn’t enhance existing trust
People have trusted the government in fiat currencies, and today also people are trusting and cooperating with other people that they haven’t met before. Well, this completely depends on multiple factors about individuals, environment, and culture. Bitcoin is an anonymous currency, and it doesn’t require users to trust financial institutions or the government for transferring or funds or incentives. Bitcoin removed the trust that existed in all these years and has replaced trust with anonymous financial incentives.
In reality, bitcoin consensus is highly secure, but the application layer on top of public blockchain that is anonymity is unsafe for the mainstream. Bitcoin is anonymous and unregulated, and it is highly used for purchasing drugs and weapons; therefore, people majorly use bitcoin for investment speculation.