BITCOIN WILL CRASH AND FAIL. Here's why.

Many people believe in Bitcoin. I did too when I first heard about it. A cheap anonymous peer-to-peer value exchange system that is censorship resistance. A system where you trusted mathematics (cryptography) instead of intermediaries (banks, VISA/MasterCard). An unforgeable ledger distributed all over the world.

Bitcoin is the Napster of Blockchains. Napster was the first and changed the music industry with peer-to-peer file exchange (sharing) of MP3 audio. But most people today don't use Napster for music. Do you?

Like Napster, Bitcoin is first peer-to-peer value exchange system and is changing the financial industry. However, like Napster, it will be relegated to history as a pioneer and be replaced by other better, more advanced and usable Blockchains. Here are 10 reasons why.

1. Bitcoin cannot scale.
There are many proposals to scale Bitcoin to handle more transactions. Two major proposals are increasing block size (like Bitcoin Cash) and Off-chain processing (like Lightning Network). Increasing block sizes will not solve the underlying issue. Bigger blocks means more transactions per block, but also MORE time spent processing them.

Lightning Network has a lot of promise, but this seems to go against the original reason early adopters touted...that all transactions can be independently verified. With Lightning, only the final balances are broadcast to the network. All sidechain transactions, no matter how many, are not.

The bigger problem to scale is the amount of electricity consumed by miners. With the current consensus algorithm, miners use a lot of electricity to secure the network. It is already consuming more power than entire countries with millions of households and projected to grow. Some local governments with cheap power are already banning miners.

2. Bitcoin is slow
Payments networks require 20,000+ transactions per second. Bitcoin network needs more than the current 7 transactions per second to be useful as a payment network. Lightning Network and other Off-chain transactions can help, but they are still being developed and tested. Other solutions like increasing block sizes are a mere "Band-Aids on a bullet wound".

3. Bitcoin is expensive
Early adopters touted Bitcoin as a currency with low fees compared to banks issued currency, but the reality is high transaction fees for Bitcoin cannot justify its daily usage. You cannot buy coffee with it, unless you are willing to pay over $30 for a cup of coffee ($2 for coffee and $30 transaction fees). The masses will not adopt such a system...and Lightening Network is still a concept.

It is estimated that miners use over $3 billion in electricity per year. That is one expensive network to maintain.

4. Bitcoin is NOT unique
It is the first, but there are over 1000 digital currencies now, some with better features than Bitcoin. Bitcoin has forked a few times (Bitcoin Gold, Bitcoin Cash) and with greed, nothing prevents more forking. My wealth magically increased when I got "free money" in form of Bitcoin Cash.

5. Bitcoin is NOT gold
I hear people refer to Bitcoin as "digital gold". This is a false statement. Gold has characteristics that make it desirable. Gold has been desirable for thousands of years across continents and cultures, through good times and war times. It has been used as money for centuries. If the price drops to zero, at least you can make beautiful jewelry, medals, sculptures, decorations, electronics, medicine etc.

Bitcoin is a 10 year old experiment. It has not endured market crashes or war. Bitcoin has no intrinsic value. You cannot do anything with it except trade it. What use are your Bitcoin keys if the value goes to zero? A distributed ledger network may have value, but only if more people adopt it and use it for more than trading its token to other buyers.

6. Bitcoin is NOT an investment or store of wealth
Bitcoin is a currency to facilitate trade like USD or Euro. Wild swings in price make it unusable as currency. You cannot value anything in Bitcoin. It cannot be used to measure wealth, let alone preserve wealth. You go to bed rich, and wake up 30% poorer, with no real change in world events, except peoples' sentiment.

7. No mass adoption and usage
Most people buying Bitcoin are holding it as investments, in the hope that someday they will sell it for a higher price. There is virtually no usage, circulation, adoption or acceptance among the general public. Most people are not getting it to pay for taxis or coffee. Also, many businesses that initially accepted it are removing it as a payment method. A business must convert Bitcoin to fiat in order to buy supplies.

Less than 1% of the world population owns Bitcoin, 40% of all Bitcoin is owned by 1000 people and only 20 percent of all Bitcoins remain to be mined. What is the incentive for the late comers to join? The system is already "rigged" in favor of early adopters.

It is also complicated to use. Most Grandmas cannot use the clunky addresses and keys that must be secured with a multi-sig offline hardware wallet...blah blah blah. Mass adoption requires simplicity.

8. Bitcoin cannot change...easily
In the digital world, you must quickly adapt and change to remain relevant and competitive, including adding new features and scaling to meet demand. Bitcoin is very slow to add or change features because it has no governance model, therefore, implementing changes requires consensus. Disagreements and resistance to changes in the past led to Bitcoin to fork and with the current incentive model, the people with the most to lose resist the most, like miners making a killing on high transaction fees on the current system.

9. Bitcoin exchanges can be shut
Since Bitcoin is not widely accepted, most people must sell Bitcoin for fiat currency to buy real goods and services. This is done via exchanges. Exchanges that take money from peoples' credit cards and bank accounts must comply with laws. Governments can shut down such exchanges, freeze accounts and prevent people from cashing out to fiat.

Some exchanges have been shutdown by hacks.

10. Bitcoin is NOT anonymous*
If you bought your Bitcoin through an exchange using a bank account or credit card, your information is associated with your Bitcoin address. Transfers can be traced by authorities and computer experts. Yes, there are ways to make it hard to trace, but moving Bitcoin around with the current fees can cost you. Others are too geeky for average folks to understand.

11. Bitcoin can be hacked*
Bitcoin mining is now more centralized than ever with some big mining pools. Most hashing power is in China (estimates of about 60%) where electricity is cheap. Therefore, collusion among mining pools IS possible. If 4 or 5 mining pools with 51% of hashing power agree on a block, that is final. Others smaller miners can accept the new block or hard fork to form their own chain and lose their coins.

12. Bitcoin can be censored*
Bitcoin uses the Internet for global consensus of the distributed ledger. Internet companies follow government regulations. Entire mining pools can be taken offline by loss of connectivity, should governments decide to crack down. Also, governments know where the datacenters are. They can do more with physical facilities...disconnect power, disconnect water and block roads. Expect more centralization in the future as Bitcoin mining becomes unprofitable.

Blockchains are the future. They are here to stay. They solve many problems and introduce many new possibilities. As new Blockchains emerge aiming to solve Bitcoin's scaling, speed, cost, governance and electric consumption problems, Bitcoin must adapt or die.