Bitcoin is a distributed ledger accessible by anyone, anywhere. The bitcoin ledger, also known as the bitcoin blockchain, contains every transaction that has taken place in bitcoin’s eleven year history. This means that everyone can see everyone else’s transactions, which is obviously bad for privacy. It is possible, but difficult, to use bitcoin privately. While the ledger’s transparency is an integral part of the bitcoin network, it often reveals transaction history that users would rather stay private.
Another technical feature of bitcoin sometimes seen as a flaw is its irreversible nature. Once a bitcoin transaction is confirmed by the network, it cannot be reversed. This is the opposite of the traditional financial system. Generally, banks and governments can reverse payments for reasons such as fraud or sanctions, but with bitcoin the payments are permanent.
One of the biggest problems with bitcoin isn’t bitcoin itself, but the public’s perception of bitcoin. Over the years, both the government and media have painted an image of bitcoin as being a digital cash that is only used by criminals such as money launderers and terrorists. On the contrary, a 2019 study showed that only 2% of bitcoin transactions could be classified as being used for illegal activities. Clearly bitcoin isn’t as “bad” as many claim, but it’s difficult to change the public’s perception of it when leaders of countries are some of the loudest critics.
Bitcoin’s price has appreciated rapidly over the past decade, and many people have made fortunes from it. This has attracted “get-rich-quick” types of investors to the bitcoin space, who are trying to repeat the financial gains that have taken place in the past. People often associate bitcoin with get-rich-quick schemes, which stops them from digging deeper and understanding the true purpose and value of bitcoin.
There is a fair amount to learn before using bitcoin for the first time, which is unappealing to those who are not desperately in need of a reliable form of currency. Over the eleven years that bitcoin has existed, it has become apparent that the steep learning curve can prevent some people from ever being interested in the digital currency. The unfamiliar user experience of setting up a wallet, creating and storing a private key, and so on, can seem intimidating to those who are not technically savvy. Not to mention, people in developing countries who do not have access to computers and educational resources on bitcoin are even less likely to learn how to use it. In general with technological advancements, the more complicated the process is, the less likely people are to change their current ways to incorporate the new. And for those who don’t have a keen interest in the benefits of a decentralized currency, the pros just don’t outweigh the cons.
Once people have gone through the effort of learning about bitcoin and getting started, they are soon met with the realization that bitcoin payments can be very slow and clunky compared to payment systems such as credit cards and cash. This can easily turn people away from bitcoin, which has led developers to create thousands of other cryptocurrencies. It is important, however, for people to remember that bitcoin’s value comes from it’s “trust-minimized” nature and its censorship-resistance, and thus it is not competing with payment networks such as credit cards. Still, new bitcoin technologies like the Lightning Network are making it possible for bitcoin payments to be even faster, cheaper, and easier than credit card payments.
The lack of public uptake is the largest impediment to bitcoin advancing as a predominant form of currency. If a large number of people are not using the currency, it makes it difficult, if not impossible, to complete day-to-day transactions. In addition, people in areas of economic collapse are the most in need of a decentralized, inflation-resistant currency. People in these areas are also less likely to learn the technical details required to use bitcoin.
If bitcoin is to fulfill its purpose as a currency resistant to government intervention, it is imperative that the user experience be improved so these people can still use the currency. In order to overcome this barrier, there is a strong need to make the process of buying, storing, and transacting with bitcoin easier and more accommodating for people of all backgrounds.