If you have invested directly in Bitcoins or other cryptocurrencies, now is the time to take your feet off the table and thoroughly reconsider your decision. Initially called a hopeful but idealistic experiment by its developers, hyped by the trade press, first smiled at by the financial autocracy - now feared and watched greedily by investors. Since late 2015, Bitcoin has had two problems growing dangerously. One is called Brussels, the other is called Bitcoin.
Brussels has a problem with Bitcoin
The EU Parliament lets its estimated 50,000 officials drift between Brussels, Strasbourg and Luxembourg like a huge swarm of fire jellyfish. Like poisonous tentacles, the officials crawl between the creative bodies of Europe with their vile regulations, declarations, directives, guidelines, paragraphs and proclamations. They cauterize, cripple, stun! And for young start-ups, new technologies and original minds, the lethal dose of laws is quickly reached. The current attack of the bureaucratic monster swarm is the so-called "Fourth Directive". It defines a package of measures that the EU states have to work through between June 2015 and June 2017. It is an extension of the "Third Directive". This has already been in force for some time and is still intended to combat "money laundering". The following individual measures belong to this "fight" of the European "Gauleiter Finanzen":
- Cash payments with legal limit only up to 15,000 euros;
- Defining the tasks of "obligated entities" (informers) - such as financial service providers, lawyers, notaries, brokers and casinos;
- The sniffing tasks include:
- Identify customers and verify identification
- Spying on citizens' money transactions, spying, spying, tailing;
- Blacken the name, file charges and report to authorities if money laundering or terrorist financing is suspected;
Only the Stasi knew so much "transparency", but the "Fourth Directive" can do it even better. It lowers the amount of permitted cash payments to 7,500 euros, it also declares tax avoidance to be a "reportable suspicious case" and expands the "obligated entities" to include the entire gambling industry - and, according to the latest plans, also Bitcoin companies.
This "Fourth Directive" will trigger a mass death of cryptocurrency companies in the EU. A deadly paragraph bite! Particularly affected are the "virtual currency custodian wallet providers". In a press release, the EU jellyfish get more specific:
"...(the Wallet Providers)...hold virtual currency accounts on behalf of their customers...In the world of 'virtual currencies,' they are the equivalent of a bank or other payment institution offering payment accounts."
Almost the entire European crypto startup scene is affected. They exchange Euros for Bitcoins, manage crypto units on behalf of users or work with cryptocurrencies. This is YOUR business model! If you want to stay in this business, you have to go to Switzerland or Singapore. Probably not the worst solution for startups, but the project has more bad news:
Bitcoin has a problem with bitcoin
Greatly simplified, blockchains are a linked chain of encrypted (hence cryptocurrency) data blocks in which transactions are stored. The transactions can either contain the content of a financial transaction or just a secured reference to a fact (so-called smart contracts). Bitcoin works with a proof-of-work procedure, a proof of performance in the form of a solved computationally intensive mathematical task.
These transactions are combined in groups to form blocks. This process is called mining and is rewarded with credited Bitcoins. Unfortunately, the terms "bitcoin" and "blockchain", which are often used synonymously, lead to confusion, because bitcoin is only one of many possible applications and proof-of-work is only one of many possible processes of blockchain technology.
Unclear fees
One of the most influential, long-time Bitcoin developers Mike Hearn recently left the open source project team, bringing the internal problems out into the open.
The transaction speed is not up to date and not even remotely competitive. Due to increasing user numbers, Bitcoin payouts or transactions are becoming more difficult or, in some cases, hardly possible. The existing Bitcoin blockchain currently processes only three transactions per second. By comparison, the VISA card system alone processes an estimated 2000 to 4000 transactions per second.
An increasingly confusing jungle of fees makes currency costs intransparent. Depending on the trading center, trading volume, buy or sell offer, the fee level often depends on many other parameters.
Bitcoin Core version 0.12 has been active since the beginning of 2016, although the majority of the Bitcoin community has rejected this implementation, this protocol change makes it possible to reverse a payment unilaterally. The end for Bitcoin payments in retail and mail order.
Urgently needed changes to the software protocol are not implemented due to a lack of decision-making ability, a consensus dogma within the development team, and political influence. A small group of Chinese miners control over 50 percent of the mining computing power. They in particular benefit from an unstable and tenacious Bitcoin system. Thus, the urgently needed increase in block size has been postponed indefinitely. And through the great "state firewall", the Chinese leadership successfully prevents capital outflows abroad with capacity limits.
Programmers Disagreed
The original idealistic open source experiment Bitcoin has lost its youthful innocence. The developer community is incapable of action, quarrelsome, and migrating. The ideals have been thrown overboard. Decentralization, innovativeness, decisiveness, reliability and anonymity are gone.
While Bitcoin may be nearing its end, blockchain technology is just getting started. In the past 12 months alone, more than 10 billion greenbacks in venture capital has flowed into the new fintech startups in Silicon Valley. Blockchain technology is seen as the "next big thing" on the Internet. The next Google, Facebook, YouTube, Amazon or Facebook. The big boys of the financial and high-tech industries are all in on it. The only ones who haven't figured it out yet are the torturous swarms of officials from Brussels. Europe urgently needs a Silicon Valley - but you are busy with blue cheese regulations, hairdryer bans, lead-free wild boar ammunition, gender-neutral urinals, landscape regulations for Greek goat herders, groundbreaking eco-standards for shower heads, and so on. A snotty, spineless, toxic slimeball - that's European bureaucracy. Every plague of jellyfish ends in a sudden, natural suicide of short life, after which the waters are clean again.
This article first appeared on: Jewels the Magazine.Houston, Bitcoin has a problem!
