Bitcoin's price has seen a rollercoaster ride recently, first declining and then surging, now surpassing $19,000. The significant increase in Bitcoin's value over the past year has fueled the rise of various digital currencies through Initial Coin Offerings (ICOs), similar to traditional IPOs. This surge in market enthusiasm has raised concerns among Chinese authorities, leading them to shut down all public digital currency trading platforms, including Bitcoin exchanges. As a result, Bitcoin's price plummeted sharply. However, the positive stance of Japan and the United States toward Bitcoin helped its value rebound quickly, reaching impressive heights once again.
The growing strength of Bitcoin has made many people envision the emergence of a new type of currency that is independent of national credit and central authority. So, will cryptocurrencies like Bitcoin become the future currency of humanity?
In fact, digital currencies have existed for a long time. From electronic treasury bonds issued by central banks in the 1990s to modern mobile payments and even virtual currencies like Tencent Q coins used in gaming, all are forms of digital money. However, these are merely digital representations of existing legal tender. Their credit foundation and centralized distribution model remain unchanged. It was only with the advent of decentralized, encrypted digital currencies such as Bitcoin that people began to seriously consider the possibility of a new kind of currency in the future. Therefore, the digital currencies discussed in this article mainly refer to encrypted, distributed currencies represented by Bitcoin.
Using a simple analytical framework, for a currency to become the future, it must at least fulfill all the core functions of traditional money: serving as a medium of exchange, a store of value, a unit of account, and a means of circulation. On top of that, it should address weaknesses in current systems or offer additional features to support future economic needs. If it lacks functionality compared to existing currencies or performs worse, it cannot take on the role of future money. However, most existing encrypted digital currencies, especially those based on Bitcoin and blockchain technology, still face challenges in addressing some long-standing issues.
Firstly, from the perspective of payment methods, using existing encrypted digital currencies as a tool for daily transactions and replacing the current currency system still presents numerous technical hurdles.
The previous debate over Bitcoin's scalability highlighted this issue globally. Bitcoin "scaling" refers not to increasing the total number of Bitcoins, but rather expanding the capacity of the blockchain itself. Each Bitcoin transaction is like a single page in a ledger, and each block is a collection of pages. Every ten minutes, a new "book" is created and encrypted by miners, forming the blockchain. Initially, each block had a capacity of 1MB, which was sufficient when Bitcoin transactions were infrequent. But as Bitcoin gained popularity, the number of transactions surged, leading to congestion. With limited transaction capacity every 10 minutes, many transactions had to wait for inclusion in the next block. To solve this, some teams proposed increasing the block size, such as upgrading to 2MB. This would allow more transactions to be processed per block, easing congestion.
Transaction speed and reliability are essential for any payment system. In terms of security, Bitcoin transactions use hash algorithms, and each transaction is broadcast across the entire network. Tampering with the system would require controlling more than 50% of the network’s computing power, making it nearly impossible. Thus, Bitcoin is relatively secure. However, in terms of speed, human payment systems have evolved from physical coins to banknotes, credit cards, and mobile payments—each completed almost instantly. Imagine if paying via credit card or WeChat required 10 minutes for confirmation, and even after waiting, the payment might fail. This poor user experience would make the system obsolete. To get priority in processing, users often pay higher fees, increasing costs and violating the principle of neutrality in transactions.
Currently, due to the massive profits involved for Bitcoin miners, reaching a consensus on increasing block size to 2MB remains challenging. Looking ahead, if 7 billion people worldwide made 500 Bitcoin transactions annually, each block would need to hold 3GB of data. Considering today’s limitations, this seems like just the beginning of a long journey.
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