Continuing from our previous discussion on the disadvantages of Bitcoin, we delve further into the intricate challenges plaguing the world’s leading cryptocurrency. In our ongoing exploration, we uncover additional layers of complexity surrounding Bitcoin’s instability, transparency issues, and susceptibility to manipulation. As we dissect these shortcomings, we aim to provide a comprehensive understanding of the obstacles hindering Bitcoin’s widespread adoption and its implications for the future of digital currencies.

To begin with, it is unlikely that each country will discard its own currency. Even if Bitcoin were widely used and reached the status of a reserve currency, currencies like the Korean won or the US dollar are likely to continue to be used steadily in domestic transactions. In other words, it is improbable that Bitcoin would entirely replace all fiat currencies worldwide.

One fortunate aspect is that if Bitcoin were widely adopted, the issue of exchange fees would diminish. In other words, its widespread adoption is crucial to reducing the problem of exchange fees. However, whether Bitcoin will be widely distributed enough to warrant such recognition remains uncertain. If it were widely used to the extent of replacing fiat currencies in a particular country, then at least within that country, individuals would no longer have to worry about exchange fees when converting to Bitcoin. However, in properly functioning economies where fiat currencies dominate, exchange fees are inevitable. Even considering just the issue of exchange fees, the likelihood of Bitcoin being widely adopted is slim. Who would willingly pay higher fees to use Bitcoin? Moreover, there are other complex issues besides exchange fees. Terms like “exchange” and “wallet” being implemented digitally mean that unless individuals have a strong interest in Bitcoin or a compelling reason to use it, the general public is unlikely to adopt it. Considering the myriad of challenges and obstacles mentioned in this document alone, it’s beyond doubtful that Bitcoin could replace the fiat currency of a properly functioning economy. Once a currency establishes its position, it is exceedingly difficult to replace it. Think of messenger apps like LINE and KakaoTalk, which, in countries where one is prevalent, the other struggles to gain traction. Just as with messenger apps, once a currency is established, replacing it is extremely challenging. Even if we generously assume that Bitcoin has competitive advantages compared to physical currencies, starting from a significantly disadvantaged position as a latecomer, how could it gain widespread adoption? The reality is that Bitcoin faces far more drawbacks than advantages.

Even if we imagine a scenario where Bitcoin stabilizes and replaces the US dollar as a globally accepted reserve currency, will transactions and operations truly be free and stable, as some dream? Instead of the independence and public service of central banks, a few with financial interests in controlling mining pools could seize power. While it’s highly unlikely that Bitcoin would assume the role of a reserve currency, the possibility of certain individuals establishing dominance within the Bitcoin realm cannot be ruled out.

The serious lack of security and stability in exchanges is also a significant issue. The fundamental flaws in the current Bitcoin system were glaringly revealed when one of the world’s largest Bitcoin exchanges, Mt. Gox, collapsed due to hacking in 2014, resulting in the loss of all Bitcoins held by the exchange. If Bitcoin cannot address its inherent vulnerabilities, such as the lack of proper control mechanisms and reliance solely on market logic, it will never be able to serve as a proper currency.

Additionally, Bitcoin faces problems if circulated coins are lost or destroyed. For example, if the total supply is 100 BTC and 50 BTC are lost, the overall BTC issuance remains fixed at 50 BTC. With Bitcoin’s issuance unable to be arbitrarily adjusted, the total issued Bitcoin would start at 50 BTC. Furthermore, being a digital currency, it is susceptible to accidental shortages, such as hard drive formatting.

Another problem is the significant delay in transaction approval. While using Bitcoin for international transfers is faster compared to traditional systems like SWIFT or Western Union, with 30 minutes required for 5 confirmations, it is subtly slower for domestic electronic payments or cash transactions. Particularly in countries like South Korea, where banking systems are well-developed and interbank transfers take seconds, this disadvantage becomes more pronounced.

The significant consumption of computing resources can also be considered a disadvantage. Bitcoin relies on countless hash operations conducted on the blockchain network. Since all these operations are computer or electronic circuit-based, they consume enormous amounts of electricity. This is a far more serious problem than commonly perceived. As of the end of 2017, the electricity used worldwide for Bitcoin mining exceeded that consumed by the entire nation of Serbia, and by 2020, it is expected to surpass the electricity used by the entire United States. Moreover, since Bitcoin mining operations are concentrated in China, this electricity is predominantly produced by China’s coal-fired power plants. Consequently, Bitcoin could become a major contributor to global warming. Additionally, the issue of mining machines is problematic. Apart from Bitcoin mining, virtually useless mining-specific hardware is being produced in large quantities. With Bitcoin mining difficulty increasing steeply, these devices become electronic waste within just a few years. Moreover, one of Bitcoin’s significant problems is that Bitcoin miners consume computing resources and electricity without creating any value for humanity, except for the newly generated money that accrues to them.

Some Bitcoin advocates argue that such computations provide a secure trading environment, but as evidenced by the Mt. Gox incident, even if Bitcoin itself is secure, flaws in systems that handle it, such as web wallets and exchanges, can result in hacking.

Overall, the current Bitcoin system faces a multitude of challenges and limitations that cast serious doubt on its viability as a proper currency or a replacement for traditional financial systems.