A lot of specialists are observing and studying the crypto-industry actively as the industry boom continues and of course, its flaws are not difficult to see. Those few faults have become the main reason why people are working on creating better alternatives that will not have the same disadvantages as BTC has.
Professor of economics Eswar Prasad commented on CNBC that the advantages that we all think BTC has might not be true, especially in terms of anonymity and the environmental problems that are caused by bitcoin mining is something that should not be neglected. Other cryptocurrencies on the market have worked to solve the problems that are caused by BTC transactions.
Anonymity is under the threat
At the beginning of June, US law enforcement officials said that they had been able to retrieve the $2.3 million bitcoin paid to the perpetrators as ransomware on a Colonial Pipeline. According to the FBI, its agents were able to trace down a virtual wallet, commonly known as an e-wallet, that the hackers used to accept money from Colonial Pipeline. The primary idea behind Bitcoin was to allow for anonymity.
However, it turns out that if you use Bitcoin regularly, especially when buying real products and services it becomes very straightforward to link your physical location or identity to your digital identity over time. Other cryptocurrencies, for example, are seeking to address this issue by giving additional privacy when it is fascinating.
As a result, bitcoin has prompted a search for a better alternative, with people searching for a means of trade that does not need them to deal with government or bank officials. The fundamental benefit of bitcoin transactions, which is guaranteed anonymity, is in doubt in this situation.
The FBI was able to follow the transaction from start to finish. This indicates that officials were able to identify the proprietors of the e-wallet and password, which raises further questions and worries at the same time. On the other hand, it gives hope against fraudulent operations and money laundering because it was previously difficult to identify the criminals who were conducting the crime, but they no longer have that guarantee following this research.
The anonymity of the whole process was one of the reasons why BTC was massively implemented in the entertainment industry. According to the Bitcoin Casinos Reviews website, the majority of the depositors’ transactions and private information stays anonymous as the main reason why they engage in the online casinos, after what comes to the easy and quick transaction process. Since the reality might not be exactly the way we imagined, the process and the tendency might change.
Mining Effect on the environment
Bitcoin mining is a time-consuming and energy-intensive method for generating new currency while also maintaining the security and dependability of the payment network. The amount of energy required to confirm bitcoin transactions, as well as the mining process, is not good for the environment.
Due to environmental concerns, Elon Musk, the CEO of Tesla said in the last comment, that his electric vehicle firm will no longer accept bitcoin as a form of payment, causing bitcoin’s price to fall by 5 % in a matter of minutes.
He also stated that Tesla would accept bitcoin in the transaction if it can verify that minors are using reasonable and clean energy. Crypto miners use specifically built computers to tackle complex mathematical problems that enable money transactions. As a reward for their efforts, the miners are paid in bitcoin. According to Prasad, Ethereum, the second-largest cryptocurrency and a potential rival to bitcoin, is working on a new mining technique that requires less energy.
Because there is such a high demand for cryptocurrencies and the globe is attempting to completely adapt to the green economy, more and more efforts are being made to mine bitcoin using renewable energy. After some time, we will even be able to observe the outcome.
The proof of stake technique that underpins Ethereum, activates validators in the network if they can prove that they hold ether. According to the Ethereum foundation, it should reduce the need for huge amounts of computing power to validate transactions and it will use 99.95 % less energy than previously.
The new innovation is made in order to make the transaction process cheaper and quicker, which is also considered to be more profitable than BTC. The energy consumption of BTC mining is a major source of worry since official data reveals that bitcoin mining consumes more energy globally than countries like Argentina, the Netherlands, and many others. It was originally unexpected that Tesla began taking bitcoin because the firm emphasized renewable energy usage, which subsequently looked to be the reason for the company’s decision to cease accepting bitcoin.
Not the real currency
In theory, bitcoin was supposed to give an anonymous and efficient way to trade but it has not worked out that way, according to the economist. Rather, paying for goods and services with bitcoin is time-consuming and difficult, and the market is extremely volatile. As seen by its recent 30% loss in a single day, bitcoin is subject to huge swings in volatility. Bitcoin may be used to buy and keep a cup of coffee one day, and then to treat yourself to a lavish lunch the next day.
As a result, the medium of exchange is ineffective. Rather than being used as a payment mechanism, Bitcoin has developed into a speculative asset for individuals who profit from its growth in value.
One of the primary reasons for this is that there is no consensus on what bitcoin’s purpose is. There is no such consensus on the usage of bitcoin as there is on the use of money as a means of exchanging goods and services. People acquire bitcoin for a variety of reasons, such as valuable assets for the future in the hopes that it will gain momentum and become the money of the future, or for making short-term investments in the hopes that the price will grow and they will benefit.
The major benefits were thought to be the simple and rapid transaction procedure as well as the assured anonymity, but as we can see, both of these are in doubt. First, because the transactions have a greater impact on the environment than in many other countries, officials have already been able to track down the transactions and even gain access to the electronic wallet. As a result, the crypto-industry will undergo some changes over time.