The bitcoin experiment has failed, according to a leading supporter and developer of the community
Over the last couple of days, the financial press was full of articles proclaiming “the end of bitcoin”. After so much bitcoin hype over the last year or so, in a way the news came as a surprise to me. How did this sudden death come about? Mike Hearn, one of the digital currency’s long-time supporters and developers has decided to leave the venture behind entirely. His reason: bitcoin has failed.
Bitcoin is both a virtual currency and an online payment system. It was invented by a person (or a group of persons) using the pseudonym Satoshi Nakamoto. Bitcoin was released as open-source software in 2009. The details of this new technology have remained a mystery to most. So how does it actually work?
Bitcoin is a peer-to-peer network where users can transact directly without an intermediary. Transactions are verified by network nodes and recorded in a public distributed ledger called the block chain. The ledger uses bitcoin as its unit of account. The system works without a central repository or single administrator. It is a decentralized virtual currency.
Bitcoins are created as a reward for payment processing work in which users offer their computing power to verify and record payments into a public ledger. This activity is called mining and miners are rewarded with transaction fees and newly created bitcoins. Apart from creating them by mining, bitcoins can be acquired by exchanging them for other currencies, products, and services.
Mike Hearn, one of the most prominent leaders of the bitcoin project, quit bitcoin on Thursday. A nasty fight has torn apart the small community of bitcoin developers. The dispute which arose out of a question about the number of transactions the bitcoin network can handle – may sound like a pure technological question. However, it has exposed a disagreement over a fundamental question on how online communities should be governed.
What made bitcoin so fascinating has been its promise to provide a more reliable and trustworthy alternative to existing currencies. Unlike central and commercial banks – institutions that are managed by humans – bitcoin was supposed to rest on the infallible logic of math and computer code. This is obviously not the case. According to Mike Hearn bitcoin is now controlled by China.
Let’s see what will happen. The internal power struggles come at a time when the bitcoin technology has gained credibility both on Wall Street and in Silicon Valley. Many large financial groups are now seeking to use this new technology to make payment systems and capital market transactions faster and cheaper. The value of all outstanding bitcoins amounts to above $ 6 billion. There is a lot of money to be made… or lost.
see Mike Hearn’s blog post on Medium: https://medium.com/@octskyward/the-resolution-of-the-bitcoin-experiment-dabb30201f7#.giaxwkqvk