Recently, I have heard several people comparing the popularity of Bitcoin and other cryptocurrencies with the Dutch Tulip Mania. In my opinion, this comparison really makes no sense. As the title of my post says: You can’t just grow as many Bitcoins as you want.
The only thing the Tulip Mania and Bitcoin have in common is that the prices of both suddenly soared sharply. But if that's the definition of a bubble, I can show you a lot more bubbles from history that eventually turned out not to be a bubble.
The tulip failed on its way to becoming a currency
The Dutch Tulip Mania is to this day one of the most famous market bubbles of all time. Speculation drove the price of tulips and tulip bulbs to extremes during the early 1600s. After a couple of colourfull years the bubble bursted in 1637 and many people suffered severe losses.
It bursted because the tulips had not enough intrinsic value. The attribites of a tulip could never meet the requirements of being a good store of value or a medium of exchange. As a beautiful flower it has value, but a tulip is perishable whereby it loses all of its beauty and value. Another attribute of a tulip is that it is undividable. Therefore, a tulip could never become a currency. Just like stones, seashells and horns which were defeated by gold and silver.
Bitcoin
Bitcoin, on the other hand, has all the attributes required to be a useful currency. It is easy to divide (Satoshis), It is imperishable (Cannot be hacked), it is transportable (online, faster than anything else.) and the available amount can not be controlled by anyone (21 million is the limit).
And unlike a dead tulip, Bitcoin has a lot of value due to the underlaying blockchain technology.
Bitcoin's future
The price of Bitcoin will probably have its ups and downs in the months ahead, but I believe we are still in the early days of this entire movement. Bitcoin is not in a bubble, because there are heaps of innovation coming in the months and years ahead.
- Segwit - Recently, we had SegWit implemented into the code of Bitcoin.
- Lightning Network - Which will scale Bitcoin to VISA/MasterCard levels and beyond.
- Rootstock - Which is a smart contract platform that is connected to the Bitcoin blockchain. It will basically enable us to do anything we can do on Ethereum on Bitcoin as well.
- Schnorr signatures - Which will reduce the use of storage and bandwidth.
- Cross-chain atomic swaps - The technology to take out an exchange to be the middleman when trading one cryptocurrency to another. A peer-to-peer exchange of two different coins.
And I believe there's so much more I don't even know about yet. Like the birth of the internet, we could never know how the internet was going to look like exactly. There are heaps of innovation coming and we don't even know where this is actually heading. We live in exciting times!
