Bitcoin is currently soaring up the charts as if Justin Bieber had just released a single with One Direction on a continent made up of around two-billion teenage girls. If one doubts the popularity and pervasiveness of Bitcoins in today’s market, simply view a day-to-day stock listing of the currency. As of 18 November, a single Bitcoin was worth around US$600 (it’s now passed US$1000). Only three months ago, that number was around US$100.
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The trend is predicted to continue for as long as Bitcoin can remain a tangible currency that’s limited in creation (unlike, say, the Federal Reverse) and that’s based on a more tangible counterbalance (unlike, say, 90% of all nations’ currencies).
It’s not all sunshine and rainbows with the delightful data though. Any currency faces problem on the regular, and Bitcoin is certainly not exempt from problems ranging from minor pesky annoyances to powerful forces of domination looking to control the currency.
Even with all the problems, sites like KnCMiner.com are continuing to do incredibly well, and Bitcoin miners from Alaska to Zimbabwe are still making money, with some striking it rich. Let’s have a look at a few of the issues Bitcoins face.
1. Angry governments
Uh oh. Looks like Bitcoin is making career politicians around the globe awfully angry. Especially in the Congress of the United States, where money that doesn’t slip through the greasy fingers of the old guard causes much anguish, politicians are in a frenzy trying to get a handle on Bitcoins. Wishing to control everything Bitcoin does, out of one part paranoia and one part greed, Congressional hearings were held for the first time regarding the matter only a few weeks ago.
Congress — as well as other governments around the globe — play with fire when they go up against a currency they can’t understand. The regulatory forces in no way threaten the extinction of Bitcoins. Instead, they only risk sending it further underground and driving the popularity up.
2. The surge
Another problem for the Bitcoin market in general is that the prices are soaring far too high, some might even claim it’s artificial interest that will die out quickly and send the market crashing. Though it could quickly recover, Bitcoins topping out would cause a lot of legitimate investment firms and other businesses to eat massive losses.
The surge in price also affects the average user who has been dealing with Bitcoins for years now (since 2009 in some cases). The market competition makes mining Bitcoins a lot more difficult, as now there are big-time players using expensive, incredibly powerful computers to solve blocks to create coins.
3. Lost in translation
The pervasiveness of Bitcoins today is also causing a few problems for people who were using this currency to do business online. Poker players, for example, created a community around sites like Seals with Clubs, where Bitcoin trading for chips often took place. There were many other sites and forums where people could deal with Bitcoin trading, Bitcoin mining, and other aspects of the market.
As Bitcoins become more popular and fall under heavier scrutiny, the layman is pushed out. Just like the real gold rush back in the 1800s, the little guy eventually has to move over for the fat cats with heavy machinery and more money to invest. So, if you were a small-time player, it’s more difficult now to navigate the Bitcoin market.
4. Hackers
Little hackers, economy-sized hackers, mid-level hackers, and the few almost mythical mega hackers – they’re all trying to outdo the algorithmic process to participate in easier Bitcoin mining. Just recently, the Mt Gox website — a huge Bitcoin trading platform — fell under attack from a hacker whose “brilliance” led him or her to hack into the system with an HK-based IP, steal a horde of coins, sell them all (at the same place!), and then use the money in an attempt to legitimately buy them back.
While this hacker was easily caught, the reality is that this is only a random scout with an entire army following behind. Other sites have had to increase their security measures exponentially, and even hackers that aren’t looking to steal could still throw a monkey wrench in the system (i.e. mad governments, big-wig investors, do-gooder advocates, etc.).
These are only a few of the many problems Bitcoins face going forward. If you’re a Bitcoin miner, or someone who’s thinking about getting involved, just be very aware that this isn’t a dream scenario. Things will get more complicated. Government will keep poking its nose in. Hackers will forever be waiting in the shadows.
Yes, you can find some great hardware, solve algorithm blocks, and earn substantial money by creating Bitcoins. But don’t confuse it with a get-rich-quick scheme. There are real issues you should be aware of, and a lot of competition looking to control the wealth.
