Your Bitcoin Is Unusable Unless You Do One of These Things
10 years after the invention of Bitcoin, they currency has still not gained mainstream adoption. Low transaction fees, fast processing and a decentralized structure were very promising, but the volatile price and increasingly heavy mining costs keeps the coin back. Is Bitcoin a real currency, and it is really usable? Or is it only good for long term investment?
Bitcoin as a currency
Once, it took 10,000 Bitcoins to buy two pizzas. Of course, this is the first known transaction using Bitcoin. Since then, the price of Bitcoin has magnified enormously. Nowadays, you can make “better” use of your crypto such as buying a Lambo or travelling to space. You can even get a hair transplant and pay for that in crypto! But making real-life use of Bitcoin remains a problem.
Not every place has a Bitcoin ATM, and the volatile price adds to the complexity of getting mainstream Bitcoin adoption. In December 2017, Bitcoin’s price peaked to $20,000. Now, it has plummeted to nearly $6,000.
Bitcoin as an investment
Bitcoin made many people millionaires, but their wealth also dropped when the cryptocurrencies price crashed. Thus, some crypto holders seek to reuse their cryptos by investing them in Initial Coin Offerings and hope for multiplied returns when that project succeeds. ICOs, which raised $5.6 billion in 2017, are already sitting at $6.3 billion in 2018 despite the increasing bans and regulations. Unfortunately, many of these projects failed.
Another emerging problem is the crypto tax. Governments are being more and more aware of the wealth stored as crypto, and they are imposing new laws and regulations to tax on that wealth. Ironically, trading with crypto (and the volatile price) has left some with more debt in taxes than they have earned.
Crypto finds a way
Hard-core Bitcoin fans still “HODL” on to their coins. They believe the price will eventually go up. According to John McAfee’s predictions, Bitcoin would sit at $1 million in 2020. For these “bullish” fans, the alternative is “crypto-lending.”
Under this model, the client uses digital currency for collateral and receives payment in fiat (or crypto) in return. This was an important innovation, especially as banks have traditionally refused from accepting digital currencies as collateral. “We have had people borrow for all sorts of purposes from buying a car and going on a vacation to purchasing a new home, which are pretty significant events in people’s lives” explains Antoni Trenchev, CEO of crypto lending platform Nexo. Crypto lending not only paved the way for a $400 billion market, but it also offered a solution to the tax problem.
This is a tactic used by some of the wealthiest people on earth. Steve Jobs reportedly never sold any of his Apple stock (worth over $2 billion at the time he died), and Oracle’s chief executive Lawrence J. Ellison borrowed more than $1 billion against his shares in the company to finance his lavish lifestyle. By holding the shares and borrowing against it, there are less transactions. By implementing the same model to crypto, we gain two advantages:
- No sale occurs, so there are much fewer tax events
- The crypto wealth would be considered a long term investment, and as such can result in savings up to 39.6 percent
The downside to lending would be the interest that has to be paid back. Some platforms like Nexo tackle this problem by offering dividends to their token holders. But when it comes to crypto, the real reason for holding is the gains when the prices go up – which makes up for the losses in interests.