Bitcoin’s lack of energy efficiency is catching up with it. In a few more days, the Bitcoin network difficulty will increase about 40%.
So what? It has done this before, no problem!
[i]But this time it's different! [/i] ::)
No, seriously, this time it really could be different…
We are approaching the crossover point between price and mining efficiency, but this time, it is not just a cool little idea, fun hobby, this time serious value and invesments are at stake. Bitcoin has changed a lot over the last year. And it is time people start to wake up to what is going on and what is inevitably going to happen. The earlier we can make the switch, the earlier we can make the transition, the better.
At this rate of difficulty increase, many miners will be or soon be mining at a loss. This is not a sustainable business plan. Mining for a loss is not rational, it requires you to speculate on future prices increasing enough to offset it.
This is just STARTING to get absurd. It is about to get a whole lot worse! Look at the long-term (which is fast approaching).
It is absolutely illogical to think that Bitcoin will still be viable for any long-term sustainable period of time. The amount of energy that is being wasted is increasing at astronomical levels, which is completely unnecessary. Once this finally dawns on people, I see a title-wave flood coming, such a massive transfer of value away from Bitcoin and into Peercoin.
Bitcoin is good for micro-payments and small transactions. This is what it is perfect for. But what Bitcoin is not good for is for hoarding and saving. Bitcoin is about the worst possible thing I can think of as a safe-haven. Think it is bad now? Think about 10 years from now how much computers, time, energy, natural resources will have been wasted on keeping the bitcoin engine going. Bitcoin is not a good replacement for gold as a reserve currency at all, because it requires more and more energy to keep the system going. There is no end to it. It is like going deeper and deeper into debt and trying to quantitatively ease your way out of it. Once you start going down that road, you need more and more and more, to be pumped into the system to keep it going. Bitcoin needs more and more and more energy to be pumped in to keep the system going. This Bitcoin “experiment” is going the wrong direction, fast, and the whole thing can switch gears EXTREMELY FAST. You could see 50% drop in BTC in a week. At the very least we should all diversify away from Bitcoin alone because it is becoming too big to fail…and yet has very real risk of systemic failure.
The way I see it unfolding is this:
Bitcoin is and will continue to be good for smaller/micro transactions, but not for savings, and NOT as a reserve currency.
Peercoin is and will be good for bigger transactions, and much better suited for savings, but NOT so much for smaller/micro transactions.
