Bitcoin is a very popular coin in the world of cryptocurrency. It is a coin that constantly fluctuates when it comes to its value. Every time Bitcoin faces many challenges, why not? After all, it represents many opportunities, and it is natural for it to face technical and social challenges in the world of cryptocurrency. Bitcoin is just a tool. Well, as we speak of Bitcoin being a tool, it is time to explore the different dimensions of this tool. Let’s get started!
Why is Bitcoin a Tool?
Bitcoin is a tool, and its impact (good or bad) depends on how most people use it. In the same way, it has its strong and weak points, some of which I will analyze in this article. Chances are that if you’re a toxic maximalist (is there any other kind of maximalist?), a lot of the stuff would make you feel uncomfortable in this article. However, my analysis is based on the characteristics of Bitcoin and its current operation. If you do not like it, then you can always start a Bitcoin Improvement Proposal (BIP); if the community supports you, you can change these features.
But you have to keep in mind that improving something in Bitcoin can result in the worsening of other things and/or new problems. Among other things, that is why it becomes difficult to implement a major change in the BTC network.
Now that you have got a good understanding of Bitcoin as a tool. It is now time to look at some of the social failures that Bitcoin has to face. Head to the next section of the article to know more.
Bitcoin and Social Failures:
Before we get to the details, let me tell you briefly about BIP. It is nothing but the development of Bitcoin Core(the most used client for nodes in the entire Bitcoin network) that occurs with BIPs. When one of these has got enough support, it will be formalized with the creation of a document to share the idea and obtain feedback from the Bitcoin community.
If you have trouble understanding Bitcoin core, let me tell you that it is a reference on which other clients rely; this is why it carries the weight and the singing voice of the development of the Bitcoin protocol. You must know that each node chooses which client as well as which version to use. The above also represents one of the keys when deciding on the network protocol. This is why, unlike other networks, it is difficult for Bitcoin to have a hard fork that does not create a new coin.
Bitcoin represents 95% of all the nodes being connected to the network. But the most positive thing is that most nodes speak a homogeneous protocol. But the negative thing is the centralization of something so important and the ability to control and influence the developers of that client. Centralization is a real threat even for Bitcoin, the tool that seeks to decentralize the economy.
Centralization and Bitcoin Mining:
This is another problem where centralization has attacked after the introduction of mining ASICs. New, expensive, more powerful, and energy-consuming equipment made CPU mining that any user at home could do with their computer virtually unfeasible. However, if you are into crypto, you would know that the incentives for mining are great. Although it is impossible for simple users with a pc, more than the proportion of miners and pools of Mining diversified is needed to avoid centralization.
The only hope is that Bitcoin will continue to increase so that even with a reward of less than 1 BTC (which will happen in the next 10 years) per block, it will be profitable for miners. This can happen, and it may not. But let us consider the positive aspect of it, and the time will still be coming when the fees must cover the incentive for miners to provide security to the network.
Lighting Network:
If you have never heard about this term, let me tell you that the lighting network works by creating payment channels between the people, and a node has created more payment channels, the easier it becomes to make instant payments and low (or no) commissions. The problem is that this network tends to be centralized. Opening a payment channel will require paying the corresponding commission in the blockchain. You must know that when opening and closing a channel, you must register it in the blockchain, which also costs liquidity to block it.
Hence, ordinary people prefer to open a single payment channel with a Hub (large centralized entities with many open payment channels and a lot of liquidity) than open 10 or more channels with other people. Or simply use non-custodial applications to work with the Lightning Network. It is currently for convenience, but it may be the case in the future that it is also due to the high cost to pay in fees when opening or closing a channel.
Another thing with LN nodes is that it needs to be online all the time. The risk of not doing so will result in the channel being closed unilaterally and this makes it possible for one of the channel’s members to do so to steal funds (fraudulent closure).
While it is not that serious because there is a period to contest this shutdown, it can turn out to be fatal if the node is offline for a long time.
Conclusion:
Bitcoin is just the tool for making significant profits in the crypto business, no matter how many technical and social challenges it goes through. In this article, we have briefly discussed Bitcoin, its social failures, and the Lightning network that can be a drawback for Bitcoin transactions. That’s all, folks; I hope the article helped you get all the information you needed.
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