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Bitcoin has not replaced cash, but investors do not care



But disagreements within the Bitcoin community are being watched closely by central bankers and executives in the financial industry. The titans of finance are monitoring the successes and failures of Bitcoin while experimenting with their technological concepts, such as the book to record virtual currency transactions, known as blockchain.

Many large institutions have said they hope to integrate blockchain technology into their designs for the future financial infrastructure of the world, and those designs will likely be influenced by what is learned from Bitcoin.

"People are seeing this in part because they see the beginning of a new financial system, a financial system that has a very different structure from what we have now," said Neha Narula, director of the Digital Currency Initiative at the Massachusetts Institute of Technology.

Mr. Lee and others hope that Bitcoin can be used for payments someday, but believes that it most likely comes from software built on Bitcoin, not the Bitcoin network itself.

Not everyone agrees with Mr. Lee's position. Many entrepreneurs and academics think that virtual currencies will gain traction only if they are easy and cheap to send. The disagreement has led to a large number of Bitcoin competitors, including a separate virtual currency known as Bitcoin Cash.

But the community that has developed around the original Bitcoin has increasingly come together around a vision focused on its golden qualities, rather than its ability to compete with PayPal or Western Union.

"The reason why people own Bitcoin is because it is a great store of value, possibly the best that has ever existed," said Jimmy Song, a developer who has contributed to the Bitcoin Software. "You can send money to Africa in 10 minutes, but that's not the main reason why people buy it. "

When Bitcoin was introduced in 2008, the title of the article written by its creator, the mysterious Satoshi Nakamoto, called the coin an "electronic cash system".

Bitcoin software created a decentralized network of computers that anyone with access to the Internet could join, making it easier to send Bitcoins between addresses. And Bitcoin first gained public notoriety due to its use as anonymous digital cash in black market websites such as the Silk Road.

The New York Times explains …

But the amount of people who used Bitcoin to buy things always small compared to the number of speculators who buy it for its shortage. This was something that the original software behind Bitcoin had also encouraged, setting a limit of 21 million in the amount of Bitcoins that would be released sometime.

The rising value of Bitcoin made it even less attractive as a way to pay for things. Most people do not want to pay now with a dollar that could be worth double next week.

There are also limits on the capacity of the Bitcoin system. A rule written in the Bitcoin software had established that the network could process only about five transactions per second, compared to the 25,000 transactions handled by Visa every second.

This bottleneck caused a fight between people who are looking for Bitcoin for different purposes. Many of the early followers believed that the system could be expanded to handle more transactions without sacrificing their status as a virtual product. This field proposed a change in the Bitcoin rules that would double the capacity of the system in November.

But Mr. Lee and other investors and programmers feared that the rapid expansion of the Bitcoin network would jeopardize Bitcoin's independence.

be a global money, you can not have a bank or a country that controls money, not even a handful of countries or banks, "Lee said." If decentralization is jeopardized, most things they fall apart with Bitcoin. "

Decentralization is the result of the unusual design of Bitcoin, which allows users to maintain and monitor the records of each Bitcoin transaction without any central authority.

If the number of transactions increased rapidly, many Bitcoin enthusiasts believed that only large companies could keep records. In addition, they believed that the Bitcoin design was not suitable to compete with PayPal and Visa, since each transaction must be recorded on thousands of computers worldwide.

"Anyone who looked at Bitcoin and saw" cheap payments "probably does not have much computer experience," said Ben Davenport, co-founder of BitGo, a virtual currency launch company, and an opponent of duplicating the network. ] This argument prevailed and, in early November, the plan to double the capacity of the network was suspended.

Since then, people interested in using virtual currency to make payments have considered Bitcoin's competitors. The executive director of Bitpay, an emerging company that helps companies make virtual cash payments, said his customers were looking to go beyond Bitcoin.

"If people can not trade, it's hard to imagine why. what "I would like to store your money in Bitcoin in the first place," said Mr. Pair.

Mr. Pair believes it is irresponsible to suggest that a virtual currency that has existed for less than a decade could represent a credible challenge for gold. Bitcoin's conceit as a good place to store money, he added, will be less convincing when Bitcoin's price falls, as it has done in the past.

An alternative is Bitcoin Cash, which was created in August. The price of Bitcoin Cash has risen more than 125 percent since the plan was canceled to double the capacity of the original Bitcoin.

But there is no shortage of investors who have voted with their pockets for the more prudent approach of the original Bitcoin.

The price of a Bitcoin has risen 70 percent in the last month, more than 10 times the price of an ounce of gold.

"I do not think most people will treat Bitcoin as something to buy because they will receive characteristic X, Y and Z in the future," Song said. "Mostly, people invest because they believe it is a good store of value."

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