There are lots of problems with Bitcoin, but to my thinking by far the biggest is that widespread use would actually remove the few purported value propositions.
There are basically four value propositions for Bitcoin, that I've been able to discern:
1) It has "no" (really: fixed) monetary policy; I view this as a weakness, but I will treat it as a strength for the purpose of this post.
2) It does something of an end-run around banking systems, at least democratizing transaction fees
3) There are ways of obtaining bitcoin that are largely untraceable (mining), which make it usable for black-market activities
4) Novelty
#4 obviously goes away with time, but nobody is suggesting that as a serious long-term value proposition so that's not a big deal.
It's well-documented that #2 goes away when the transaction volume gets high enough: the solution to the protocol-inherent transaction volume limit is to move most transactions off the blockchain, which means using something that at least parallels the modern banking system.
Arguably, this also defeats #3, but #3 has the greater problem that it is actively undesirable to most people.
#1 thus remains as the only value proposition, but this value proposition is fundamentally based on a lie. The monetary policy of Bitcoin is not set in stone; it is in fact controlled by a quorum of the existing mining capacity.
If Bitcoin becomes popular with the general populace, however, at some point a large enough coalition of actors will emerge who can adjust monetary policy to their advantage -- specifically, by increasing block rewards, making their hardware more valuable. The incentives actively encourage this manipulation in the long term, and the group to which the incentives apply (mining hardware owners) are precisely the group empowered to do the manipulation.
There are only two things preventing this from happening right now: first, many hardware owners are either in it for the ideology or have substantial speculative positions in Bitcoin that would be endangered by manipulation of monetary policy, and second, that such a shift in monetary policy would discourage adoption (after all, this is one of the purported benefits of Bitcoin). Both of these impediments go away with widespread adoption.
Government central banks may do this now, sure, but they generally have a little more accountability than an anonymous coalition of hardware owners.
There are basically four value propositions for Bitcoin, that I've been able to discern:
1) It has "no" (really: fixed) monetary policy; I view this as a weakness, but I will treat it as a strength for the purpose of this post.
2) It does something of an end-run around banking systems, at least democratizing transaction fees
3) There are ways of obtaining bitcoin that are largely untraceable (mining), which make it usable for black-market activities
4) Novelty
#4 obviously goes away with time, but nobody is suggesting that as a serious long-term value proposition so that's not a big deal.
It's well-documented that #2 goes away when the transaction volume gets high enough: the solution to the protocol-inherent transaction volume limit is to move most transactions off the blockchain, which means using something that at least parallels the modern banking system.
Arguably, this also defeats #3, but #3 has the greater problem that it is actively undesirable to most people.
#1 thus remains as the only value proposition, but this value proposition is fundamentally based on a lie. The monetary policy of Bitcoin is not set in stone; it is in fact controlled by a quorum of the existing mining capacity.
If Bitcoin becomes popular with the general populace, however, at some point a large enough coalition of actors will emerge who can adjust monetary policy to their advantage -- specifically, by increasing block rewards, making their hardware more valuable. The incentives actively encourage this manipulation in the long term, and the group to which the incentives apply (mining hardware owners) are precisely the group empowered to do the manipulation.
There are only two things preventing this from happening right now: first, many hardware owners are either in it for the ideology or have substantial speculative positions in Bitcoin that would be endangered by manipulation of monetary policy, and second, that such a shift in monetary policy would discourage adoption (after all, this is one of the purported benefits of Bitcoin). Both of these impediments go away with widespread adoption.
Government central banks may do this now, sure, but they generally have a little more accountability than an anonymous coalition of hardware owners.