It's very simple: Bitcoin pays too much for proof-of-work mining. It consumes lots of energy. If Bitcoin continues to grow, someday there will be a point when governments and environmental organizations say that it has to stop.
The problem is that there is no way to adjust block reward. It has been decided in the beginning and it can't be changed. This means that when the price of bitcoin goes up, the value of block reward goes also up.
Currently Bitcoin network is paying about 1,750,000 dollars per day for miners – quite a lot of money! Because Bitcoin mining is global and very competitive industry – there is no regulation – nobody is getting big profits. So most of the reward will go to running the business. And of course the biggest cost of mining is the electricity. It has been estimated that even 90-95% of mining costs can go to electricity.
Making more energy efficient mining hardware doesn't help. Efficiency is not the thing that Bitcoin is paying for. Bitcoin is paying for hashes and making hashes requires energy. When you pay for energy consumption, you will get energy consumption.
Let's do a little thought experiment. Current block reward is 1800 btc per day or 657,000 btc per year (we'll forget transaction fees for simplicity). Electricity consumption of the whole world is about 20,000 TWh. Mining happens in countries with cheap electricity, so let's assume it will cost 0,05 $/KWh. And let's assume that 80 % of block reward will go to paying the electricity bill.
If price of bitcoin goes to $50,000, Bitcoin network will consume 526 TWh per year which is 2.63% of the world's electricity consumption. If it goes only $10,000, it's still more than half percent. That is shitload of energy.
Of course everything will change when more and more electricity is consumed, but you get the idea. In some point there will be consequences.
Maybe price of electricity will go up because there is so much more demand. This will piss off people in poor countries where electricity is cheapest. Maybe there will be lots of more electricity production. This will piss off environmental organizations.
Centralization of mining is also very probable result. Because the need for electricity is growing, mining will be only done near power plants. Then it will be easy target for governments.
If we want the financial revolution that Bitcoin was supposed to bring us, I can see two solutions:
- Change the block reward. I'd say this is pretty much impossible.
- Wait for many years until the block reward goes very small. We have to ask everybody not to buy bitcoins so the price will stay low.
Or we could just admit that Bitcoin won't work. If the price goes up, there will be serious problems. If the price won't go up, it means nobody is using it and we can't get our financial revolution.
When this has been admitted, we can focus on systems that can serve the whole world without causing senseless energy wasting and all the problems related to it – like Steem or Bitshares.