If You Wanted to Kill Bitcoin, You’d Pump Up Its Price

Cast your mind back to Bitcoin in 2017. It was the calm before the storm. In January of that year, one BTC was priced at $1,000 for the last time in its existence thus far.

Hitting $1,000 was a major achievement, and it was only the second time Bitcoin had done so. And by the end of that year, Bitcoin was priced at an all-time high of $20,000 – at which point the network became overloaded and fees skyrocketed to unuseable levels.

But get this: some of the best rates of visible, every-day adoption came when Bitcoin was priced at $1,000, not at $20,000. In fact, Bitcoin’s meteoric rise actually hurt every-day adoption in very visible ways.

Ground-Level Bitcoin Adoption

In the years immediately following Bitcoin’s creation, long before the mainstream media got on board, one of the most common ways of spreading Bitcoin adoption was through faucets. Faucets are web pages set up to grant visitors free Bitcoin. Enter an email address, pass a CAPTCHA, and you get some free BTC.

The first ever Bitcoin faucet handed out 5 BTC per person. Today, faucets are a lot less prominent, and hand out only a few satoshis at a time. That’s partly because the fees associated with sending small amounts of Bitcoin became unreasonably high (higher than the sent amount itself). And partly because it’s easy to give away 5 BTC when they’re worth pennies; and harder to give away 5 BTC when they’re worth more than your car or house.

Underage Gamers

Another visible way Bitcoin was gaining usage was through gaming portals like Steam. Users could purchase video games using Bitcoin – an option that became particularly popular with underage players who wanted to buy age-restricted games. Such people weren’t at all interested in the ideology of cryptocurrency, they just saw it as a quick means to an end.

But if the goal is global adoption, that’s hardly an issue. Few look into the ideology behind smartphones (one does exist), but we all still use them.

However, Bitcoin purchases on Steam came to an abrupt end in December 2017 – the same month Bitcoin climbed to $20,000. In the UK, gaming store CeX once paid out BTC in return for traded in CD’s and games. That too came to an abrupt halt as Bitcoin soared.

The methods of adoption listed here are small in scale, and slow in gaining momentum. But it’s grass-roots methods like this which create a fairly distributed currency. What we have now is a situation where just 0.023% of BTC wallets own 50% of the total coin supply. Ripple is even worse, with just 14 wallets holding 50% of the funds.

Death Blow Disguised as a Kiss

The unspoken subtext here is that someone would want to harm Bitcoin by pumping its price and breaking its methods of common adoption. Well, what if they did?

The Bitcoin which exists today can’t handle the micropayments that Satoshi Nakamoto envisioned it eventually would. From Satoshi’s writings on Bitcointalk:

“While I don’t think Bitcoin is practical for smaller micropayments right now (2010), it will eventually be as storage and bandwidth costs continue to fall. If Bitcoin catches on on a big scale, it may already be the case by that time.”

Storage and bandwidth costs have indeed continued to fall since 2010, but the micropayments on Bitcoin failed to emerge. Instead, third-party, off-chain solutions like Lightning Network, SegWit, and Liquid – some of which are owned or influenced by private companies.

When Bitcoin Cash (BCH) hardforked to continue Bitcoin’s vision on its own blockchain without the third-party influences, Ethereum founder Vitalik Buterin suggested the sudden change in Bitcoin’s (BTC) plans was morally tantamount to the real hardfork:

“I consider BCH a legitimate contender for the bitcoin name. I consider bitcoin’s *failure* to raise block sizes to keep fees reasonable to be a large (non-consensual) change to the “original plan”, morally tantamount to a hard fork.”

Bitcoin: A Threat Turned Friend to the Institutions

If Bitcoin had remained out of the media spotlight and down in the $1,000 range, its adoption would have been slow but steady. Instead, it was thrust into the spotlight before it was ready.

Furthermore, the direction that Bitcoin was pushed in by private companies like Blockstream means micropayments will never be a possibility. You may have heard all the talk about “store of value” recently. This is what it refers to; fans of the current state of BTC claim it was never meant for micropayments, and that it should be treated like gold – as a store of value.

What they neglect to take into account is that the only reason gold has value is because of its utility. And the way for a currency to gain utility is for it to be used.

Here we arrive at the logical conclusion that, by their own admission, the people in control of BTC don’t want it to be used. “Old Money” financial institutions will invest, sure. But any threat to the established debt-riddled, fractional reserve banking system is gone.

So maybe it’s not so crazy to suggest that if you wanted to kill Bitcoin, you’d be best off pumping its price.

Disclaimer: The author owns Bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock. 

Author:
Greg Thomson is a freelance writer who contributes to leading cryptocurrency and blockchain publications like CCN, Hacked, and others.