Analyst warns 3 reasons not to invest in Bitcoin
People often call Bitcoin digital gold because it is a superior system for storing and transferring assets. The market capitalization of this currency has grown strongly since its inception in 2009 with its custody structure, exchange and strong growth potential.
However, a cryptocurrency analyst named cryptocomicon recently listed a series of compelling reasons why not to invest in Bitcoin. The 3 most prominent reasons are limited privacy, centralized mining, and poor scalability.
Although it makes people think, these characteristics are also advantages of Bitcoin. Find out with Primexbt in the following article:
1. No privacy: both beneficial and harmful
Until 2018, governments and many financial institutions were still criticizing Bitcoin's anonymity, arguing that it would threaten the global financial system. However, just this month, South Korea cracked down on a large-scale sex crime network called the "nth chat room" by tracking Bitcoin addresses.
It can be said that the lack of privacy protections in the Bitcoin network also improves the image of this market leader.
Before that, the public and government considered Bitcoin as the cryptocurrency most used in criminal activities and terrorist financing. But this view seems to have changed in recent years with the emergence of Blockchain analytics firms that specialize in tracking cryptocurrency transactions.
After the International Financial Task Force (FATF) revised its regulations on crypto assets on February 22, 2020, it became even more difficult for criminals to carry out the act of using Bitcoin to launder money.
As such, being non-private also means more transparency and restricts governments from placing strict regulations on companies with Bitcoin-related activities.
2. Poor scalability promotes second layer scaling
Bitcoin's poor scalability is similar to its duality of "no privacy": it makes transactions expensive when the network is overloaded, while also encouraging scaling. second class.
Some argue that the relatively high transaction fees on the Bitcoin network are the driving force behind second-layer scaling solutions. This is an inevitable consequence because public blockchain networks will sooner or later be used by billions of people around the world.
Large, highly scalable Blockchain networks like Ethereum are also implementing second-layer scaling solutions like Plasma, showing that second-layer scaling is necessary for any business. any major Blockchain network.
3. The problem of centralized mining will gradually improve
As reported by CoinShares Research, nearly 65% of the hashpower on the Bitcoin network comes from China, the highest level since 2017. Although currently concentrated in China, over time, Mining capacity will be dispersed to other regions of the world.
In the past, large mining centers in China could use cheap electricity in mountainous areas of the country and operate ASIC machines with low cost and natural heat dissipation. As a result, the degree of centralization of Bitcoin mining in China reached its peak in December 2019.
CoinShares also commented after looking at other metrics:
While we expect this ratio to decline, as the latest devices increasingly enter markets outside of China, at this point, almost 65% of Bitcoin mining capacity is still coming from China. Country – the highest level since we started monitoring this network in late 2017.
The team also shared:
We find that the majority of new devices that appear are used mainly in China. There are many reasons for that, but according to Occam's Razor principle, the relationship and close distance with the manufacturer also partly reduce the barriers of enterprises.
Hashrate in China
The mining sector in China has two obvious advantages over other parts of the world, cheap electricity and access to new mining equipment. It follows that if electricity is cheaper and access to new mining equipment increases, there will be an incentive for the global mining industry to expand beyond China in the coming years and concentration will decrease. .
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