Just the other day, Ted Bauman took made some damning revelations about bitcoin’s capability to be used as a currency if its underlying technological infrastructure is not fundamentally improved in the near future. As currently formulated, bitcoin leaves a lot to be desired especially when it comes to the unreasonably long transaction processing time. He openly shared his reservations about the capability of bitcoin being used as a currency considering that users have to wait for an average of 10 minutes for a single transaction to complete processing successfully. According to him, this is made even worse with reports of some users who have had to wait for up to more than 40 minutes to process a single transaction as one user reported.
Basically defined, Bitcoin is a digital encrypted currency that only exists within a network of computers. This network is decentralized; meaning each computer on the network contains all the information about all transactions happening on the system and it updates in real-time. This decentralized approach is what makes bitcoin private, secure and also free from manipulation from governmental agencies such as the central bank.
Ted explains that the basic and fundamental use of any given currency is to basically process transactions in a secure and timely manner. He compares it with other transaction methods such as Visa which processes up to 1,700 transactions per second. Bitcoin fairs very poorly against this standards as it currently processes 6.5 transactions per second and it actually expected to worsen as more people adopt the use of bitcoin.
Efforts have been made to help curb this challenge but things are yet to look up. This is because of the tradeoff between the speed of processing transactions and the security and stability of the system as a currency. An increase in the speed of processing transactions can only be achieved by either reducing the amount of data being processed in each bitcoin mining block or increasing the size of the blocks of data being processed so that a lot more information can be processed at once. Both of these methods require some movement of data out of the blockchain which potentially reduces the security and stability of the currency.
About Ted Bauman
Ted Bauman is the Editorial Director at Banyan Hill Publishing. He is also the editor of Plan B Club, The Bauman Letter, and Alpha Stock Alert. His expertise is in asset protection, privacy issues, international migration and low-risk investment.